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Partner Flore Poloni and Associate Kimberley Bazelais examine trends from the Paris Court of Appeal on arbitrators’ duty of disclosure and highlight lessons from the PRIDE and the Billionaire cases.

This article was published in LexisNexis, 1 July 2022, here.

In two decisions dated 17 May 2022, RG 20/15162 (the PRIDE case) and RG 20/18020 (the Billionaire Case) the Paris Court of Appeal dismissed two claims for annulment of an award, which were based on an arbitrator’s alleged breach of its duty of disclosure – a component of the arbitral tribunal’s duty of independence and impartiality.

This outcome is not surprising, since the French courts rarely annul awards, and even more so on the basis of an arbitrator’s lack of independence and impartiality. However, these two decisions provide insights into the ever-evolving position of the Paris Court on the conditions to challenge an award on this basis.

Read together with other recent decisions of the Court, they will provide helpful guidance to navigate the arbitral tribunal’s duties, but give little hope for parties wishing to challenge an arbitrator for lack of independence, if the alleged circumstances go back in time and are deemed academic.

What are the practical implications of this case?

The Paris Court of Appeal is continuing to shape a new framework of analysis concerning the arbitrator’s duty of disclosure, with a plethora of decisions. Under French law, the breach of this duty may constitute an annulment ground, based on Article 1520 2° of the French Code of Civil Procedure (irregularity in the constitution of the arbitral tribunal). However, very few of the recent decisions have annulled an award on that ground.

The threshold for annulment is very high. The Court considers that a party must prove that, first, the arbitrator breached his duty of disclosure, and second, that the undisclosed information was likely to create in the parties’ mind a “reasonable doubt” as to the arbitrator’s independence or impartiality. The Court nonetheless has long held that the notoriety of the circumstances alleviates the arbitrator’s duty of disclosure.

For several years now, the Court has relied on various documents emanating from the ICC Court of Arbitration, when applicable, as sources for these requirements. The ICC arbitration rules, first, Article 11.2 of which states that “The prospective arbitrator shall disclose in writing to the Secretariat any facts or circumstances which might be of such a nature as to call into question the arbitrator’s independence in the eyes of the parties, as well as any circumstances that could give rise to reasonable doubts as to the arbitrator’s impartiality”. Perhaps more surprisingly than the Rules – which after all undoubtedly bound the parties, the Court of Appeal has, since the Vidatel decision (Paris, 26 January 2021. RG No. 19/10666), consistently made reference to the ICC Guidance Note on conflict disclosures by arbitrators, which provides a list of these circumstances which might call into question the independence or impartiality of arbitrators in the eyes of the parties.

In the Bestful decision, (Paris, 22 February 2022, RG No. 20/05869), the Court has confirmed the order of its prongs of analysis. First, it examines whether the facts alleged by the party seeking annulment were notorious, which would place them outside the scope of the arbitrator’s duty of disclosure. Second, if the facts were not notorious, the Court considers whether the arbitrator breached his duty of disclosure, and finally, whether the circumstance was likely to create a reasonable doubt as to the arbitrator’s independence or impartiality.

In the PRIDE case, based on Article 1466 of the French Code of Civil Procedure, the Court used the notoriety of the relevant facts as the starting point of the time limitation set in Article 14 of the ICC Rules for a party to challenge an arbitrator based on lack of independence or impartiality. The Court thus confirms, although not quite completely clearly yet – what could be inferred from the Bestful decision[1] i.e., that the Court approaches the notoriety element mainly as an admissibility requirement of the annulment claim.

In both this decision and the Billionaire case, the Court continues to require a high threshold for the likelihood of the creation of a reasonable doubt in the parties’ mind. It is all the more evident – and noteworthy – in the latter decision, where the Court did not give significance to the aggregation of the various alleged circumstances.

What was the background?

In the Paris Court of Appeal’s PRIDE decision, the annulment claims concerned an award rendered by a three-member tribunal on 4 May 2020. The dispute was between a Saudi engineering and construction company, STCL, and another Saudi company, PRIDE.

Following a call for tender, the parties were jointly awarded a construction project, as project owner (STLC) and subcontractor (PRIDE). Several delays in the work, as well as several payment delays ensued, culminating in PRIDE initiating an ICC arbitration procedure, which resulted in PRIDE winning most of its claims.

STLC sought annulment of the award and its addendum on various grounds, only the first of which will be analysed here: the irregularity in the constitution of the arbitral tribunal, and particularly one arbitrator’s violation of its duty of disclosure.

In the Billionaire decision of the same day, the parties were a Swiss company, Billionaire, and a French company, T., both specializing in luxury menswear retail, who in 2017 entered into a fixed-term, exclusive distribution agreement containing an ICC arbitration clause.

After the French company notified Billionaire of its intention to terminate the agreement, the latter initiated an arbitration procedure to challenge the validity of the termination, and to claim breaches of contract on the former’s part.

The arbitral tribunal, composed of a sole arbitrator rejected all of Billionaire’s claims and awarded T its entire arbitration costs and legal fees. Billionaire challenged the award before the Paris Court of Appeal, alleging the sole arbitrator’s lack of independence.

What did the court decide?

In both decisions, the Paris Court of Appeal considered whether specific undisclosed information constituted a breach of the arbitrator’s duty of disclosure, and whether that was likely to create for the parties a reasonable doubt as to the arbitrator’s independence and impartiality. In the Billionaire decision, the judges also examined the issue of the notoriety of the relevant facts.

Notoriety

The respondent asserted that the claimant’s annulment claim was inadmissible because the latter did not raise any issue relating to the arbitrator’s lack of independence or impartiality at the outset of the arbitral proceedings. The claimant argued that the 30-day time limit provided by the ICC Rules only begins from the moment that the concerned party is made aware of the irregularity, which the claimant alleges was after the award was rendered.

In this case, the relevant facts were the membership of both the sole arbitrator and T.’s counsel to the Geneva Bar Association foreign lawyers’ committee, and their co-presiding a conference organised by said committee.

After confirming that the claimant had indeed not raised this in the course of the arbitration, the Court cited Article 1466, which provides that a party who does not raise a procedural irregularity – which has been interpreted by French courts to include any ground for annulment of an award, except for international public policy which may be raised at any time – is presumed to have waived it.

The Court then examined the notoriety of the facts invoked to determine whether the claimant should have been aware of them before the start of the proceedings. As to the bar association membership, the judges found that this information was easily accessible, hence the notoriety of the situation. As to co-presiding the conference however, the Court considered that, although the information could be found on publicly accessible websites, it still necessitated “careful investigations” to be found five years later. Therefore, the information was not notorious such that the claimant should be deemed to have been aware of it before the arbitration and thus to have waived it.

As a result, based on the notoriety criteria, the Court found the claim admissible.

Reasonable doubt

After ruling on the admissibility, the Court ruled that co-presiding a conference five years prior to the arbitration, without any additional, more recent element, did not entail the existence of a close professional relationship within the meaning of the ICC Guidance Note, and in turn a lack of independence or impartiality. As a consequence, the Court rejected the annulment claim.

In the PRIDE decision, the Court did not address the notoriety of the facts alleged, but rather reiterated the well-settled principle according to which an arbitrator’s breach of its duty of disclosure is not sufficient to characterise a lack of independence or impartiality, unless the circumstances are also likely to create a reasonable doubt in the parties’ mind as to the arbitrator’s independence or impartiality, and directly delved into the latter point.

The Court considered a number of facts that were alleged to call into question the independence and impartiality of one arbitrator: his employment at the Milan Arbitration Chamber during the same time period as a party’s counsel, their common activity as “visiting professor” in the same university, their alleged joint preparation of students as part of a moot competition, their joint participation in several conferences and their taking part in a football match as part of the same team.

The Court did not see here any circumstance that could qualify as a close professional or personal relationship likely to create a reasonable doubt in the parties’ mind as to that arbitrator’s independence and impartiality, thus confirming the Court’s narrow view of this annulment ground.

The Court did not consider either that the arbitrator breached its duty of disclosure by not mentioning the success fee accepted by the concerned party’s counsel, as the claimant did not demonstrate how the arbitrator could have been made aware of such information before providing its declaration of independence.

What could be significant, given the several mentions of it by the Court, in both decisions, is the time elapsed between the facts and the start of the arbitration, years that, according to the Court, decrease the likelihood of the circumstances having a meaningful impact on the arbitrator’s independence and impartiality.

Case details

• Court: International Commercial Chamber at the Paris Court of Appeal (ICCP-CA)
• Judges: Mr F. Ancel (President), Ms. F. Schaller, Ms. M.-C. Gaffinel (RG No. 20/15162), Ms. L. Aldebert (RG No. 20/18020)
• Date of judgments: 17/5/2022

[1] J. Jourdan-Marques, « Chronique d’arbitrage : la Cour de cassation crève l’abcès sur l’ordre public international », Dalloz Actualité 20 May 2022