Flore Poloni and Kimberley Bazelais discuss challenging and appealing arbitral awards in France in LexisPSL Arbitration

By Flore Poloni & Kimberley Bazelais

Partner Flore Poloni and Associate Kimberley Bazelais examine the French legal framework with regards to challenging and appealing arbitral awards.

Flore and Kimberley’s article was published in LexisPSL Arbitration and can be found here

French legal framework

France has historically been well-known as an arbitration-friendly jurisdiction, as conditions for challenging arbitral awards are particularly restrictive, although some may see in recent decisions a trend towards increased control of awards by courts in respect of international public policy.

The relevant legal framework is found in the Decree No 2011–48 of 13 January 2011, which came into force on 1st May 2011, and is incorporated in Book IV of the French Code of Civil Procedure (CCP).

The legal regimes applicable to domestic and international arbitral awards are different. Both types of arbitral awards may be set aside on limited grounds, but only domestic arbitral awards may be subject to an appeal. Other forms of recourse against arbitral awards are also available under certain conditions.

Domestic arbitral awards

International arbitration is defined under French law at Article 1504 CCP as that which involves the interests of international commerce. By contrast, arbitration proceedings are considered domestic when they do not involve the interests of international commerce.

French courts have consistently held that an arbitral award is deemed international when the dispute arises out of a transaction which occurs not in a single country but rather in several countries. Essentially, this is an economic definition, which disregards the nationality of the parties, the law applicable to the arbitration procedure or the merits of the dispute, and the seat of the arbitration (‘HSO 31’, Paris Court of Appeal, 7 February 2023, No 20/08604).

Appealing a domestic award on the merits

Under French law, only domestic awards may be appealed. Indeed, CCP, Article 1518 provides that an international arbitral award rendered in France may only be set aside (and not appealed).

As opposed to an action to set aside the award, an appeal procedure implies that the court of appeal will be able to revisit both points of law and the facts of the case. The use of the negative form in CCP, Article 1489, ,shows that the default position is the exclusion of appeals. Indeed, it provides that: ‘The arbitral award may not be appealed unless the parties have agreed otherwise’.

A domestic arbitral award may be appealed before the court of appeal under which jurisdiction the award was rendered. The appeal may be brought as soon the award has been rendered, and up to one month following the award’s notification (CCP, Article 1494). In addition, there is no need to exhaust any other available remedies, nor is the appeal conditional upon payment of security for costs or a payment of security in the amount of the award.

Setting aside a domestic award (action for annulment)

In line with the French courts’ pro-arbitration stance, the grounds to set aside a domestic award are limited, so that the court of appeal is not allowed to review the merits of the dispute. In addition, errors of facts or of law are not in themselves grounds on which the award can be set aside. However, the court of appeal is entitled to consider facts and law when carrying out its review (Southern Pacific Properties v General Organization for Tourism and Hotels, Cour de cassation, 6 January 1987, MK Group v Onix, Paris Court of Appeal, 16 January 2018 and Etat du Cameroun v SPRL Projet Pilote Garoubé, Paris Court of Appeal, 20 December 2018)—see French courts redefine new test for violations of international public policy to set aside arbitral awards (Société MK Group c v S.A.R.L. Onix et Société Financial Initiative).

The six grounds to set aside a domestic award are as follows (CCP, Article 1492):

  • the tribunal wrongly upheld or declined jurisdiction
  • the tribunal was not properly constituted
  • the tribunal ruled without complying with its mandate
  • the principles of due process and fair trial were not respected
  • the award is contrary to public policy, and
  • the award is not reasoned, or does not indicate either the date on which it was rendered nor the identity of the arbitrators, or is not signed, or is not rendered by majority (this last ground is only applicable to domestic awards)

Actions to set aside are available to the parties only in the event that they have not explicitly agreed that an appeal will be available (CCP, Article 1491). They must be brought before the court of appeal under which jurisdiction the award was rendered, in the same time limit as an appeal, ie up to one month following the award’s notification. In the event of such action being brought, the enforcement of a domestic award will be suspended (CCP, Article 1496), unless the arbitral tribunal decided that the award should be provisionally enforced. In which case, the first president of the court of appeal or the ‘conseiller de la mise en état’ (a magistrate in charge of the procedural aspects) may suspend the provisional enforcement of the award on the basis that the enforcement would trigger manifestly excessive consequences (CCP, Article 1497). On the other hand, if the award is not to be enforced on a provisional basis, the first president of the court of appeal or the ‘conseiller de la mise en état’ may order the provisional enforcement of the award. For example, the monies due under an award may be placed into an escrow account under judicial supervision, or a restraint order may be issued against the award-debtor’s bank accounts and assets pending the resolution of the set aside action.

Finally, an action to set aside a domestic award will result either in the award being confirmed and automatically granted exequatur (CCP, Article 1498, para. 2), or in the award being annulled (partially or entirely).

When a domestic award is set aside, CCP, Article 1493 provides that the court of appeal which annulled said award may render a judgment on the merits, unless the parties have otherwise agreed. If a party is dissatisfied with the court of appeal’s decision, it may bring its case before the French Supreme Court under the ordinary rules of procedure applicable to litigation.

Challenging a domestic award as a third party (‘tierce opposition’)

Third-party action is available for domestic awards only. This recourse against domestic awards allows the courts, upon request by third parties whose interests have been adversely affected by an arbitral award, to review the merits of a dispute (CCP, Article 1501).

Third-party action is heard under the ordinary rules of procedure applicable to litigation (CCP, Article 588).

Revising a domestic award for fraud (‘action en révision’)

Prior to the Decree No. 2011–48 of 13 January 2011, the action in revision for fraud was only admissible for domestic awards, which proved controversial. It may be recalled that some commentators argued that the fraudulent Tapie arbitration was considered a domestic arbitration with the sole intent to allow the French courts to review the merits of this dispute. See News Analysis: France’s Cour de Cassation upholds annulment of Tapie arbitration award. This action is now admissible for both domestic and international awards if the arbitral tribunal was constituted after 1 May 2011.

For domestic awards, the action to revise the award for fraud should be submitted before the arbitral tribunal. In the event that the tribunal cannot reconvene, the court of appeal, which has jurisdiction for an appeal or setting aside of this award, will also have jurisdiction over this action (CCP, Article 1502).

The action to revise the award for fraud is heard under the ordinary rules of procedure applicable to litigation. A party may bring the action when any of the following criteria is met (CCP, Article 595):

  • following the award, it is discovered that the party benefitting from the award had perpetrated a fraud
  • following the award, it is discovered that key evidence had been retained by a party
  • the award was rendered on the basis of certain pieces of evidence that have been held to be forged since the award was rendered, or
  • the award was rendered on the basis of testimonies that have been held false since the award was rendered

In any event, the action to revise the award for fraud is only admissible if the applicant, through no fault of their own, could not have raised any of the above criteria, before the award became final. The burden of proof rests upon the applicant.

This type of action is quite rare in practice, and reserved for exceptional fact patterns (for instance, parties conspiring to obtain an undue award by simulating arbitration proceedings: Paris Court of Appeal, 27 May 2014, No 12/18165).

International arbitral awards

As stated above, international arbitration proceedings are those which involve the interests of international commerce.

No appeal on the merits of an international award

No appeal is possible before French courts against an international award. Therefore, any provision in the arbitration agreement of a right to appeal an international award before state courts will be considered null and void, the arbitration agreement remaining enforceable nonetheless (Cour de cassation, 1st Civil Chamber, 13 March 2007, No 04-10.970).

Setting aside an international award

Pursuant to CCP, Article 1519, the action to set aside an international arbitral award made in France is brought before the Court of Appeal of the place where the award is made (most often Paris).

Applications must be made within one month following the notification of the award (time limits are extended by two months when the party to take action is domiciled outside of France). The decision of the court to refuse to set aside an award will automatically grant the exequatur to the award (CCP, Article 1527).

There are five grounds to set aside an international award, comprehensively listed in CCP, Article 1520.

All of these grounds, save for the fifth (violation of international public policy), are subject to the French arbitration law principle of procedural estoppel (CCP, Article 1466), according to which parties who have not objected or raised the issue during the arbitral proceedings are deemed to have waived their right to challenge the award on these grounds. In this respect, a decision of the French Supreme Court (‘CNAN Group SPA and Bulk Carrier SPA v CTI Group Inc and others”, Cour de Cassation, 1st Civil Chamber, 7 June 2023, No Y 21-24.968) held that the fact that a challenge against an arbitrator had been raised before the arbitral institution and was rejected did not prevent the parties from raising the same objection before the arbitral tribunal which they should have done to maintain the right to challenge the arbitral award.

First ground: the tribunal wrongly upheld or declined jurisdiction

French courts will review the arbitral tribunal’s ruling as to its jurisdiction, whether it accepted or declined it.

An award will for example be set aside if the arbitration clause never existed or lapsed (Paris Court of Appeal, 23 November 2000, No 23-11–2000). In another case, the Paris Court of Appeal held that an arbitration agreement which refers dispute resolution to a jurisdictional authority which no longer exists is inapplicable and that therefore the arbitral tribunal wrongly upheld jurisdiction (‘Government of Malaysia v Others’, Paris Court of Appeal, 6 June 2023, RG No 21/21386 ).

In many instances, the Court of Appeal will decline altogether to review an award by stating that the issue is not of jurisdiction but of admissibility (for example the violation of a multi-tiered dispute resolution clause), which cannot be grounds to an action to set aside under Art. 1520(1). It is therefore important to be aware of the distinction between these two concepts, which is often recalled by the courts (‘Rusoro’, Paris Court of Appeal, 7 June 2022, No 21/10427, ‘HD Holding’, Cour de cassation, 1st Civil Chamber, 1 February 2023, No 21-25.024). Finally, the courts’ scope of review is quite extensive, as judges will review all elements of fact and law allowing them to assess the scope of the arbitration agreement, including new arguments from the parties (‘Schooner’, Cour de cassation, 1st Civil Chamber, 2 December 2020, No 19-15.396, ‘Ukravtodor’, Paris Court of Appeal, 9 March 2021, No 18/21326, ‘Oschadbank’, Paris Court of Appeal, 30 March 2021, No 19/04161).

Second ground: the tribunal was not properly constituted

This ground relates to the appointment and capacity of the arbitral tribunal.

French courts will notably consider an arbitral tribunal to be improperly constituted when there are issues of independence and impartiality, and in particular when an arbitrator has failed to comply with his/her disclosure obligations should this give rise to reasonable doubts as to his/her independence or impartiality.

It is commonly accepted that, upon nomination, arbitrators have a duty to disclose any circumstances that may affect their independence and impartiality with respect to any of the parties, notably when such circumstances are connected to the dispute or may impact the arbitrator’s judgment (Paris Court of Appeal, 25 February 2020, No 19/07575). The arbitrators’ disclosure obligation however does not apply in relation to well-known or ‘notorious’ facts (Paris Court of Appeal, 13 March 2008, No 06/12878). As such, up until the commencement of the arbitration, parties are said to have a duty of ‘curiosity’ (E. Loquin, RTD com. 2017.842): They ought to have known all the circumstances that were generally well known at the time of the arbitrator’s nomination.

From recent case law, it appears that French courts approach the notoriety element mainly as an admissibility requirement of the annulment claim (Paris Court of Appeal, 22 February 2022, No 20/05869 and see News Analysis: Trends from the Paris Court of Appeal on arbitrators’ duty of disclosure—lessons from the PRIDE case and the Billionaire case).

In a decision of the Cour de cassation (‘Société Saad Buzwair Automotive v Audi Volkswagen Middle East’, 3 October 2019, No18-15.756), it was made clear that, subsequent to the constitution of the arbitral tribunal, there exists no ongoing duty of ‘curiosity’. In other words, when circumstances that may affect the arbitrator’s independence or impartiality arise in the course of the arbitration, the arbitrator must reveal them regardless of whether such circumstances are well known or not—see News Analysis: French Supreme Court clarifies scope of arbitrators’ duty to disclose (Saad Buzwair Automotive v. Audi Volkswagen Middle East).

Failure to disclose on the part of the arbitrator is not sufficient to justify the annulment of the award. The facts which the arbitrator failed to disclose ‘must give rise to reasonable doubt in the minds of the parties as to the arbitrator’s impartiality and independence’, given for instance, their link with the dispute, or the conflicts of interest it gives rise to (Paris Court of Appeal, 25 February 2020, No 19/07575).

For several years now, French courts have relied on various documents emanating from arbitral institutions to shed light on the circumstances of the challenge. In the Orange v Equatorial Guinea decision (Cour de cassation, 15 June 2017, No 16–17.108), the court dismissed the action to set aside the award, based on the fact that the Republic of Equatorial Guinea was made aware of the facts on which the challenge was based during the course of the arbitration, but had failed to raise the objection within the 30-day time limit provided for in the applicable institutional arbitration rules. The courts also frequently make reference to the ICC arbitration rules and the ICC Guidance Note on conflict disclosures by arbitrators, to assess both the arbitrators’ duty of disclosure and the circumstances which might call into question the independence or impartiality of arbitrators in the eyes of the parties (‘Vidatel’ decision, Paris Court of Appeal, 26 January 2021, No 19/10666, more recently ‘PAD’ decision, Paris Court of Appeal, Paris, 10 January 2023, No 20/18330)—see News Analyses: In brief: French Supreme Court rejects late challenge to arbitrator (Orange Middle East and Africa v Equatorial Guinea) and French Court of Cassation renders landmark decision on appointment and duty of disclosure of arbitrators in multi-party arbitrations seated in France (Vidatel v PT Ventures).

Nevertheless, in a decision of the Paris Court of Appeal, an arbitral award was annulled due to the revelation of personal ties between a party’s external counsel and an arbitrator which were not originally disclosed posing again the question of the scope of the arbitrators’ duty to disclose (“Paris Cour d’Appel, 10 Janvier 2023, (‘PAD’) v Douala International Terminal (‘DIT’)”, No 20/18330)

Nonetheless, it is still quite rare that facts rise to the standard of legitimately giving rise to reasonable doubts in the parties’ mind.

Third ground: the tribunal ruled without complying with its mandate

An award will be set aside if the tribunal did not apply the law governing the merits of the dispute as stipulated in the contract (Paris Court of Appeal, 10 March 1988). An award will also be set aside if the tribunal ruled in law, despite its obligation to rule as an amiable compositeur as provided in the arbitration agreement (French Supreme Court, 24 May 2018, Mr and Mrs X v Toulouse Investment Company Leroux, n° 17–18796), or on the contrary as amiable compositeur without being empowered to by the parties. This ground may also be invoked in cases where the arbitral tribunal ruled ultra petita, ie on more or different issues or claims than those brought by the parties (‘Swiss Re’, Paris Court of Appeal, 7 February 2023, No 21/19243). However, an infra petita ruling may not be challenged under Article 1520(3) as the arbitral tribunal may add to its award upon request from a party (CCP, Article 1485)—see News Analysis: A reminder to arbitrators of dos and don’ts according to the Paris Court of Appeal (H and M v Swiss Re).

Fourth ground: the adversarial principle was violated

Under French law, the adversarial principle means in practice that the parties have the right to both state their case in full and be given the opportunity to respond to all aspects of the opposing party’s case, without going so far as to require a strictly equal time allocation at the hearing (Gold Reserve Inc v Venezuela, Paris Court of Appeal, 7 February 2017, No 15/00496).

This principle also means that the legal grounds on which the arbitral tribunal bases its decision need to have been debated by the parties or submitted to the parties’ consideration (Cour de cassation, 1st Civil Chamber, 1 June 2017, No 16-13.729, ‘Aersud’, Paris Court of Appeal, 21 June 2022, No 21/00473). Of course, this does not mean that the arbitral tribunal must submit its reasoning to the parties’ consideration before rendering the award (‘Tetronics’, Paris Court of Appeal, 25 January 2022, No 20/06487).

Fifth and final ground: the recognition or enforcement of the award would be contrary to international public policy

At the outset, it must be noted that the concept of ‘international public policy’, although defined on a case-by-case basis, is more restrictive than that of ‘domestic’ public policy.

French case law has seen various developments in regard to its apprehension of international public policy. From a semantic point of view, French courts previously considered that awards could be annulled for violations of international public policy that were ‘flagrant, effective and concrete’ (Thalès v Euromissile, Paris Court of Appeal, 18 November 2004), then later ‘manifest, effective, and concrete’ (Kirghizstan v Belokon, Court of Appeal of Paris, 21 February 2017, No 18/01650)—see News Analysis: Award set aside for money laundering (Belokon v Kyrgyz Republic, Paris Court of Appeal).

In the same Belokon case, the Cour de cassation changed course in its 23 March 2022 decision (No 17-17.981), abandoning the triptych and requiring a ‘characterised violation’ of international public policy. The Paris Court of Appeal has mainly followed suit (‘Santullo’, 5 April 2022, No 20/03242, ‘Privinvest’, 31 January 2023, No 21/07383)—see News Analyses: French Cour de cassation upholds decision of Paris Court of Appeal to set aside award for money laundering (Republic of Kyrgyzstan v Valeriy Belokon) and Paris Court of Appeal sets aside ICC award on grounds of corruption (La République gabonaise v Société Groupement Santullo Sericom Gabon).

The scope of review on grounds of international public policy is extensive and seemingly only getting broader, with some commentators likening it to a de novo review. In the Sorelec case (Paris Court of Appeal, 17 November 2020, No 18/02568, Cour de cassation, 1st Civil Chamber, 7 September 2022, No 20-22.118) French courts confirmed that, notwithstanding the French arbitration principle of procedural loyalty (of which ensues procedural estoppel), parties may raise corruption allegations, as well as submit new exhibits in relation to these allegations, for the first time before the annulment judge.

The courts appear to have also opened the door to a similarly extensive review of facts and law under Article 1520(5) for grievances other than corruption or money laundering, under the same condition that a ‘characterised’ violation is established (‘Privinvest’ decision cited above)—see News Analyses: France—Paris Court of Appeal annuls ICC award against Libya (Libya v Sorelec) and French Court of Cassation refuses to revive annulled award against Libya (Sorelec v Libya).

Appealing the exequatur decision

The parties to an international award may waive their right to set aside the award, in which case they are left with only one means of recourse against the award, the appeal against the enforcement order (‘ordonnance d’exequatur’) (CCP, Article 1522).

This action is also available against foreign awards rendered abroad (either domestic or international), for which it is not possible to seek annulment.

The grounds to appeal the enforcement order are the same as those to set aside an international award, and under the same procedural conditions (CCP, Articles 1522 and 1525).

A decision from the court to strike out the order does not however annul the award.See Practice Note: Enforcing arbitral awards in France.

Challenging an international award as a third party

Third-party action (‘tierce opposition’) is not available for international awards.It is theoretically possible for a third party to challenge an enforcement (exequatur) order, under the condition that the third party demonstrates that it has standing (‘intérêt à agir’). This has however proven difficult, not to say impossible, to establish (“Central Bank of Libya”, Cour de cassation 1st Civil Chamber, 26 May 2021 No 19-23.996 and Paris Court of Appeal, 3 January 2023, No 21/14388)—see News Analysis: Central Bank of Libya barred from challenging the enforcement of an international arbitral award rendered against the Libyan State by way of third party proceedings (Central Bank of Libya v Mohamed Abdel Mohsen Al-Kharafi).

Revising an international award for fraud (‘action en révision’)Since the entry into force of the Decree No 2011–48 of 13 January 2011, the action in revision for fraud is admissible for international awards as well as domestic awards (for a recent example see: Cour d’Appel de Paris, ‘Republic of the Congo v Commisimpex’, 10 November 2022, N° RG 21/21942).The conditions for this action are the same as for domestic awards (CCP, Article 1502, applicable to international arbitration pursuant to CCP, Article 1506).

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