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IN THE FIELDS OF ARBITRATION AND INTERNATIONAL PRIVATE LAW, ANNULMENT DECISIONS HANDED DOWN BY THE COUR DE CASSATION ARE SCARCE AND OFTEN INSTRUCTIVE
Article | 29/07/13 | 9 min. | Marie Danis
The three judgments rendered on March 28, 2013 and published in the Court Bulletin are no exception to the rule. The first civil chamber, under the presidency of Dean Gérard Pluyette, faces questions relating notably to the extent of the right to access to justice in arbitration and to the nature of the arbitrator contract. By doing so, the Supreme Court specifies the boundaries of the rules applicable to arbitral justice, a contractual institution, originating from the will of the parties, with jurisdictional powers, therefore subject to the fundamental principles of court proceedings.
Judgment No. 11-2770 handed down on March 28, 2013 by the First Civil Chamber of the Cour de cassation
In this judgment, long awaited by arbitration professionals, the Cour de Cassation sheds new light on the scope of the right to access to justice and the principle of equality between the parties, when one of them has its claims withdrawn as a result of the failure to remit the advance payment of arbitration fees.
Arbitration being a private jurisdiction - and the parties having to pay for it - there is a risk that a party to an arbitration under bankruptcy proceeding may be denied access to an arbitral tribunal if such party is not capable of paying the costs arising from the proceedings. Such situation could therefore be considered as a breach of Article 6 paragraph 1 of the European Convention on Human Rights. Whereas several law systems have come up with very strict solutions - some deem the arbitration clause as non-applicable in such case - French case law remained relatively silent on the matter. The Cour de Cassation therefore had to determine whether the claims brought by an insolvent party had to be accepted nonetheless by the arbitral tribunal, in the name of the right to access to justice, notwithstanding the lack of payment of arbitration costs by such party.
In this case, Italian company Pirelli had terminated its trademark license agreement with Spanish company Licensing Projects and exercised a few months later the arbitration clause in order to obtain the payment of various debts from the Spanish company. The latter had, at the time, been facing insolvency proceedings and was then placed under judicial liquidation. At the first stages of the proceedings, it had however filed counterclaims with the tribunal.
The Spanish company having no means to remit its advance payments for the arbitration proceedings, the ICC International Court of Arbitration had informed both parties and the arbitral tribunal that the counterclaims shall be deemed withdrawn, pursuant to article 30(4) of the ICC Rules of Arbitration.
An action for annulment on this count having been referred to the Court of Appeals of Paris, the latter quashed the arbitral award on the grounds of infringement of the right to access to justice and on the principle of equality between the parties. The Court ruled that the Spanish company, under judicial liquidation, was not in a position to pay the advance on the arbitration fees and therefore, the dismissal of its counterclaims was deemed “a disproportionate measure depriving it of its right to have its claims discussed in court”. We commented on the judgment which generated considerable debate.
The Cour de cassation in its decision clearly acknowledges that arbitration is no exception to the right to access to justice, but still overrules the Court of Appeals by adding that “if the refusal by the arbitral tribunal to examine the counterclaims can infringe the right to access to justice and the principle of equality between the parties, it is subject to these counterclaims being inseparable from the main claims”. Hence, only the counterclaims, deemed inseparable from the main claims, are guaranteed to be examined by the arbitral tribunal, even though the interested party is insolvent.
The Supreme Court reiterates that arbitral justice, which is a judicial institution, is therefore subject to the guiding principles of Court proceedings. Oddly enough, the Court however adds a specific condition to the counterclaims, in addition to those provided in Article 70 paragraph 1 of the French Code of Civil Procedure that states that counterclaims have to be sufficiently related to the main claim. From now on in arbitration, counterclaims put forward by an insolvent party will not only have to be sufficiently related, but also inseparable from the main claim.
In any case, we have still not reached a practical solution: it is up to the Court of Appeals of Versailles, to which the case has been referred, to specify what the difference is between a sufficiently related and an inseparable counterclaim.
Judgments No.11-23801 and 11-25123 handed down on March 28, 2013 by the first civil chamber of the Cour de cassation
In this second judgment, the Cour de cassation rules that a judge, to whom a request for enforcement of a foreign judgment is submitted, must verify that such request does not conflict with the effect of res judicata attached to an agreement previously concluded between the parties.
Emirati company Etisalat and its subsidiary Atlantique Télécom had transferred to Planor Afrique a significant amount of shares in the capital of Burkinabe telephone network operator Telecel Faso. After a few changes in the company’s capital, on September 5, 2007, Etisalat and Planor Afrique entered into a settlement agreement, under the terms of which they agreed, on the one hand, to put an end to their disputes with Telecel Faso and, on the other hand, to a mutual sale of shares. Any dispute arising from this agreement was to be settled according to the ICC Rules of Arbitration.
Planor Afrique referred the matter to the First instance Court of Ouagadougou which, on April 9, 2008, ordered the forced sale of the shares owned by Etisalat and Atlantique Télécom to Planor Afrique. This ruling was upheld by the Court of Appeals of Ouagadougou in a judgment dated June 19, 2009 (“the Burkinabe judgments”).
Etisalat exercised the arbitration clause and obtained, from an arbitral award rendered in Paris on September 9, 2010, that Planor Afrique be held responsible for breach of its contractual obligations. Planor Afrique simultaneously submitted a request for enforcement of the Burkinabe judgments - they were in its favor - to the President of the First instance Court of Paris - a procedural curiosity from the French-Burkinabe Agreement on judicial cooperation dated April 24, 1961 (“the French-Burkinabe Agreement”).
The provisions of the French-Burkinabe Agreement relating to the examination of the regularity of foreign judgments being very similar to the common rules set forth by French case law, the President of the First instance Court of Paris examined (i) the indirect jurisdiction of the Burkinabe judge, (ii) the conformity of the Burkinabe judgments to international public order and (iii) the absence of conflict with any previously rendered judicial decision and therefore granted with the effect of res judicata. By an order rendered on June 29, 2011, the First instance Court of Paris ruled that the Burkinabe judgments were enforceable in France.
Etisalat and Atlantique Telecom objected to the admissibility of the request for enforcement of the Burkinabe judgments and lodged final appeals to the Cour de cassation. The Cour de cassation overruled the order of the First instance Court of Paris, as it deemed the request for enforcement of the Burkinabe judgments admissible “without seeking, as requested by the claimants, if the request for enforcement was not contrary to the effect of res judicata with regard to the agreement dated September 5, 2007”. Hence, the Cour de cassation upholds that the existence of an agreement between parties, as set forth in Article 2052 of the French Civil Code, must necessarily give rise to the verification, upon examination of the request for enforcement of a foreign judgment, that res judicata attached to said agreement does not render the request inadmissible.
Judgment No.11-11320 handed down on March 20, 2013 by the 1st civil chamber of the Cour de cassation
In this third judgment, the first civil chamber of the Cour de cassation rules that the judge who is competent for the contract appointing the arbitrator has jurisdiction – and not the judge assisting the arbitral proceedings (“juge d’appui”), when it comes to the validity of such contract, even when the arbitral tribunal has been definitely constituted.
Even if this judgment - much awaited by the doctrine - concerns the competence of the judge, who must examine the validity of the arbitrator contract, in our opinion, itis in keeping with a larger autonomy of the arbitrator contract in relation to the arbitral tribunal. This trend is similar to the current emancipation of the arbitration clause.
In this case, a French company and a Russian company had agreed on resorting to arbitration to settle any dispute arising from their commercial contract and had chosen Stockholm as seat of arbitration and the UNCITRAL Rules as procedural rules. So as to represent the French company, which had been liquidated five years before, in the arbitration proceedings commenced by its co-contracting party, the President of the Commercial Court of Nanterre appointed an ad hoc agent (“mandataire ad hoc”), by an order dated July 28, 2009.
Each party thus designated its arbitrator and the arbitrators in turn appointed the president. The arbitral tribunal was eventually constituted on September 4, 2009.
However, two weeks later, the President of the Commercial Court of Nanterre retracted his judgment appointing the ad hoc agent, due to a mere procedural irregularity i.e. that the name of the judge was missing from the order. A new ad hoc agent was eventually appointed by the Court.
The Court of Appeals of Paris had to rule on the claim brought by the French company on the validity of the contract between the arbitrator and the French company represented by the ad hoc agent. In a judgment dated January 6, 2011 , the Court ruled that the French judge has no jurisdiction “over the legality of the constitution of the arbitral tribunal”, from the moment the arbitral tribunal “does not sit in France and does not apply French procedural rules”.
It was clear that the arbitral tribunal could not rule on the matter, despite the principle of competence-competence. This principle indeed only grants competence to the arbitral tribunal to rule on the arbitration agreement and not on the arbitrator contract; otherwise the arbitrator would be both judge and party, as part of the doctrine had already pointed out.
The Court of Appeals therefore gave competence to the Swedish national judge insofar as the French judge was not, in this case, the judge assisting the arbitration proceeding. Indeed, the two criteria for international jurisdiction, as set forth in former Article 1493 paragraph 2 of the French Code of Civil Procedure-i.e. localization in France of the seat of arbitration or enforcement of French procedural rules - were not met.
This reasoning is quashed by the Cour de cassation on the ground that “the Court of the place of residence of the [arbitrator] has exclusive jurisdiction to examine an invalidity action on his designation”. In other words, the Cour de cassation confirms that the French judge has jurisdiction, not as an assisting judge to arbitration proceedings but as the judge of the appointment contract, and pursuant to the rules applying in the place of residence of the defendant to the action, as the arbitrator resides in France.
In the end, the Cour de Cassation puts forward the contractual nature of the arbitrator contract and its growing autonomy from the common arbitral jurisdictions. Some may very well consider that the Cour de Cassation hereby gives another example of the increasing competence of the French national judge regarding international arbitration matters, to which the Supreme Court has been very favorable since the NIOC case law in 2005.