THE AUTHORS:<\/strong> 2022 proved to be another critical year for arbitration in France. Despite some concerning decisions, the pro-arbitration stance of the French courts remains undisputable, while the ICC<\/a>\u202f\u2013\u202fheadquartered in Paris \u2013 still stands out as the most preferred arbitral institution. This report reviews noteworthy arbitration-related developments and provides a round-up of decisions related to French arbitration over the past year.<\/p>\n\n\n\n One of the peculiarities of <\/span>French international arbitration law<\/span><\/a> is the recognition of and the scope granted to the negative effect of the <\/span>Comp\u00e9tence-Comp\u00e9tence<\/span><\/i> principle.<\/span> <\/span><\/p>\n\n\n\n If proceedings are brought before a State court despite the existence of an arbitration clause that is not manifestly void or manifestly inapplicable, the negative effect of the <\/span>Comp\u00e9tence-Comp\u00e9tence<\/span><\/i> principle prohibits the State court from ruling on the jurisdiction of the arbitral tribunal before the latter has had the opportunity to do so, and requires the court to find that it lacks jurisdiction.<\/span> <\/span><\/p>\n\n\n\n Despite the fact that the negative effect of <\/span>Comp\u00e9tence-Comp\u00e9tence<\/span><\/i> occupies a fundamental place in French arbitration law, the Court of Cassation ruled in <\/span>Marioff Corporation<\/span><\/i><\/a> that, while parties may not waive the negative effect of <\/span>Comp\u00e9tence-Comp\u00e9tence<\/span><\/i> in domestic arbitrations, they may do so in international arbitrations. Consequently, signatories of an international arbitration agreement may authorize the State court to rule on the validity and efficiency of the arbitration agreement before or while the arbitral tribunal does so. However, in its decision, the court emphasized on the need for such derogation to be expressed and unequivocal.\u00a0<\/span><\/p>\n\n\n\n The Paris Court of Appeal, in a brief but informative excerpt, reflected upon the possibility for a third-party funder to be brought into \u2013 and elevated to the status of a party to \u2013 arbitration proceedings.<\/span> <\/span><\/p>\n\n\n\n The leading decision on the extension of the arbitration agreement in French arbitration law is the so-called <\/span>\u201cABS\u201d decision<\/span><\/i><\/a> of the Court of Cassation, according to which \u201cthe effect of the international arbitration clause extends to the parties directly involved in the performance of the contract and the disputes that may arise therefrom\u201d.<\/span> <\/span><\/p>\n\n\n\n In <\/span>Privinvest<\/span><\/i><\/a>, far from categorically ruling out the prospect of an arbitration agreement extending to a third-party funder, the Paris Court of Appeal recognized this possibility, provided that the appellants not only establish the involvement of the third-party funder in the proceedings, but also prove that such involvement is not inherent to the operation of a third-party funder. The court emphasized that only exceptional circumstances could allow a similar extension to occur.\u00a0<\/span><\/p>\n\n\n\n Under <\/span>French law<\/span><\/a>, the negative effect of the <\/span>Comp\u00e9tence-Comp\u00e9tence<\/span><\/i> principle does not apply if the arbitration clause is manifestly void or manifestly inapplicable. <\/span> <\/span> <\/span><\/p>\n\n\n\n In <\/span>Carrefour Proximit\u00e9 France<\/span><\/i><\/a>, the Court of Cassation decided that, when it is not demonstrated that a prior attempt to initiate arbitration proceedings had failed due to the lack of financial resources of a party, the latter\u2019s impecuniosity cannot, in itself, characterize the manifest inapplicability of the arbitration clause. <\/span> <\/span><\/p>\n\n\n\n In other words, impecunious parties bound by an arbitration agreement must attempt to resolve their disputes through arbitration first. It is only if such an attempt fails due to a party\u2019s lack of financial resources that French State courts may accept to hear the dispute, thus protecting the impecunious party from a denial of justice.\u00a0<\/span><\/p>\n\n\n\n In <\/span>Tagli\u2019Apau<\/span><\/i><\/a>, to further ensure that financial issues do not result in a denial of justice, the Court of Cassation decided, on the basis of the principle of procedural fairness, that a party that paralyzes the arbitral proceedings by refusing to pay its share of the advance on costs is not entitled, when summoned to appear before State courts, to invoke the jurisdiction of an arbitral tribunal and challenge that of the State court.\u00a0\u00a0<\/span><\/p>\n\n\n\n The Court of Cassation has reiterated the well-established principle according to which arbitration agreements are subject to the so-called \u201csubstantive rules\u201d (\u201c<\/span>r\u00e8gles mat\u00e9rielles<\/span><\/i>\u201d), among which the rule specifying that the existence and efficiency of an arbitration agreement are to be assessed \u2013 subject to the mandatory rules of <\/span>French law<\/span><\/a> and international public policy \u2013 on the basis of the parties\u2019 common intention, without it being necessary to refer to any national law.<\/span> <\/span> <\/span><\/p>\n\n\n\n However, in <\/span>Kout Food<\/span><\/i><\/a>, the court innovates by adding an exception to the application of this substantive rule where the parties have expressly submitted the validity and effects of the arbitration agreement to a particular national law. <\/span> <\/span><\/p>\n\n\n\n Absent an express choice by the parties as to the law applicable to the arbitration agreement <\/span>per se<\/span><\/i>, French courts will assess the validity and efficiency of the arbitration agreement without a reference to any national law, including that of the underlying contract.<\/span> <\/span><\/p>\n\n\n\n <\/span><\/p>\n\n\n\n Under French law, an award can be set aside if the arbitral tribunal \u201c<\/span>wrongly upheld or declined jurisdiction<\/span><\/i>\u201d. The distinction between jurisdiction and admissibility is therefore paramount. In two decisions, the Paris Court of Appeal favored admissibility over jurisdiction, therefore limiting its control.<\/span> <\/span><\/p>\n\n\n\n In <\/span>Aktor<\/span><\/i><\/a>, the Court considered that whether an arbitral tribunal deciding on the alleged non-compliance of a party with a decision of a dispute adjudication board (DAB) may rule on other claims than those ruled upon by the DAB is a matter pertaining to admissibility, not jurisdiction. <\/span> <\/span><\/p>\n\n\n\n Similarly, the Court ruled in <\/span>Rusoro<\/span><\/i><\/a> that the investor\u2019s compliance with time limitation and amicable settlement of the dispute provisions under the <\/span>Canada-Venezuela BIT<\/span><\/a> does not affect the arbitral tribunal\u2019s jurisdiction under this treaty. <\/span> <\/span><\/p>\n\n\n\n Despite these remarkable restrictions to its power of review, the Court confirmed in <\/span>Schooner<\/span><\/i><\/a> that arguments pertaining to the arbitral tribunal\u2019s jurisdiction can be raised for the first time during setting-aside proceedings as long as the party raised objections to jurisdiction during the arbitration proceedings, in full line with the heavily criticized <\/span>decision<\/span><\/i><\/a> of the Court of Cassation of 2020 in the same matter.<\/span> <\/span> <\/span><\/p>\n\n\n\n In view of the current war in <\/span>Ukraine<\/span><\/a>, it is also worth mentioning that the Court of Cassation has <\/span>reinstated<\/span><\/i><\/a> a USD 1.1 billion investment treaty award against <\/span>Russia<\/span><\/a> in favor of Oschadbank (a Ukrainian State-owned bank), which had its Crimean assets expropriated. The French Supreme Court considered that the temporal condition set out in Article 12 of the <\/span>Russia-Ukraine BIT<\/span><\/a> pertained to the merits of the case and thus was not reviewable in an action to set aside. <\/span> <\/span><\/p>\n\n\n\n <\/span><\/p>\n\n\n\n A number of decisions rendered by the Paris Court of Appeal make it clear that the court now considers arbitration rules as the primary source to assess an arbitrator\u2019s duty of disclosure. As such, the Paris Court of Appeal will refer primarily to the criteria set out in the arbitration rules rather than those set out in the Code of Civil Procedure to assess whether an arbitrator has violated their duty of disclosure.<\/span> <\/span><\/p>\n\n\n\n For instance, the Paris Court of Appeal has referred several times to a criterion provided in the <\/span>ICC Note to parties and arbitral tribunals on the conduct of the arbitration under the <\/span><\/i>ICC Rules of Arbitration<\/span><\/i><\/a>, according to which the arbitrator or prospective arbitrator may need to disclose a \u201c<\/span>professional or close personal relationship with counsel to one of the parties or the counsel\u2019s law firm<\/span><\/i>.\u201d It concluded that: <\/span> <\/span><\/p>\n\n\n\n <\/span><\/p>\n\n\n\n On 23 March 2022, the Court of Cassation finally delivered its opinion on what should be the intensity of French courts\u2019 control of international public policy. Following years of heated debates, the French Supreme Court ruled in <\/span>Belokon<\/span><\/i><\/a> that an award must be set aside if the violation of international public policy that would result from its recognition or enforcement is \u201c<\/span>
Florian Renaux<\/span><\/strong><\/a>, international arbitration associate at <\/span>TALMA Dispute Resolution <\/a><\/span><\/strong><\/span>
Karim Zein<\/a><\/strong>, international arbitration associate at<\/span> Simmons & Simmons<\/a><\/strong><\/span><\/span><\/p>\n\n\n\n
\n\n\n\nThe Arbitration Agreement and its Implementation<\/strong><\/span><\/b>\u00a0<\/span><\/h2>\n\n\n\n
The Principle of <\/strong><\/span>Comp\u00e9tence-Comp\u00e9tence<\/span><\/strong><\/i>\u00a0<\/strong><\/span><\/h3>\n\n\n\n
Extension of the Arbitration Agreement to Third-Party Funders <\/strong><\/span><\/h3>\n\n\n\n
The Impecuniosity of a Party to the Arbitration Agreement\u00a0<\/strong><\/span><\/h3>\n\n\n\n
The Refusal by a Party to Pay its Share of the Advance on Costs\u00a0<\/strong><\/span><\/h3>\n\n\n\n
The Law Applicable to the Arbitration Agreement\u00a0<\/strong><\/span><\/h3>\n\n\n\n
Enforcement and Annulment Proceedings<\/span><\/b>\u00a0<\/span><\/h2>\n\n\n\n
Jurisdiction of the Arbitral Tribunal\u00a0<\/strong><\/span><\/h3>\n\n\n\n
Arbitrators\u2019 Independence and Impartiality\u00a0<\/strong><\/span><\/h3>\n\n\n\n
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International Public Policy\u00a0<\/strong><\/span><\/h3>\n\n\n\n