French Cour de cassation Reaffirms Pro-Arbitration Policy in Cengiz and Nurol v. Libya

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THE AUTHORS:

Eglantine Canale Jamet, Associate at Sygna Partners
Dayane Darwich, Jurist and Trainee Lawyer at Sygna Partners

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As a leading Paris-based firm in international law and dispute resolution, Sygna Partners brings its legal insight to Daily Jus. Through this collaboration, we feature select articles from Sygna’s biannual International Arbitration Newsletter, offering sharp analysis of key French court decisions and their broader relevance to the global arbitration community.

Summary

Two Turkish contractors, Cengiz and Nurol, won Libyan public‑works tenders. Cengiz created a joint venture with ICDI (“Cengiz Libya”) and, in 2008‑09, signed two infrastructure‑and‑housing contracts with the Housing and Infrastructure Board. Nurol partnered with AEPC for a road‑maintenance project for the General Authority for Roads and Bridges and separately agreed to build university facilities for the Organization for Development of Administrative Centres.

Following the outbreak of war in Libya in February 2011, the project sites operated by both Cengiz Libya and Nurol were attacked, resulting in significant damage and the suspension of works. Despite the interruption, both companies signed agreements in 2013 with the relevant Libyan public authorities to resume the projects. These agreements included timelines for recommencement and partial payment commitments on outstanding invoices. Nevertheless, the projects remained suspended due to ongoing insecurity and continued non-payment.  

Subsequently, the two Turkish companies initiated arbitration proceedings in 2015 and 2016, respectively, under the Libya – Turkey BIT (2009).

In the Cengiz v. Libya arbitration, the tribunal issued its award in 2018, finding that Libya had breached the standard of full protection and security under the BIT. Libya was ordered to pay USD 51.2 million in compensation, reflecting the net value of the investment assets. However, the tribunal dismissed Cengiz’s claims for lost profits and other treaty breaches. Libya challenged the award before the Paris Court of Appeal. In the Nurol v. Libya case, the tribunal rendered a partial award on jurisdiction in 2018. It upheld jurisdiction over some of Nurol’s claims, but dismissed others as falling outside its temporal jurisdiction, noting that the BIT only entered into force on 22 April 2011. Libya also challenged this partial award before the Paris Court of Appeal.

A key legal issue in both proceedings concerns whether the legality of the investment is a question of jurisdiction or of merits—particularly relevant in BITs that limit protection to investments made in accordance with the host State’s laws. The Turkey–Libya BIT states that it “shall apply to investments made in the territory of a Contracting Party in accordance with its laws and regulations,” and defines “investments” broadly as encompassing “every kind of asset in accordance with the laws and regulations of the host Contracting Party, including but not limited to…”.

On 25 May 2021, the Paris Court of Appeal held that the legality of the investment is a question of merits, not jurisdiction, and thus falls outside the scope of the court’s annulment review.

The Court has since reaffirmed this position in subsequent rulings. In its reasoning, the Court found that the offer to arbitrate was autonomous and not conditional upon the validity of the investment operation. It held that the tribunal’s jurisdiction was established by the investor’s acceptance of that offer through the filing of the request for arbitration, allowing the arbitral tribunal to assess both the investment’s legality and the investor’s claims. The Court emphasised the broad drafting of the arbitration clause and the BIT’s non-restrictive definition of “investment”, concluding that the treaty does not condition its applicability on the investment’s qualification under Libyan law. Instead, it merely conditions the substantive protection under the treaty on the investment’s legality.

The Cour de cassation upheld this interpretation, confirming that the Court of Appeal had properly “rejected the argument that the arbitral tribunal lacked jurisdiction to rule on investments alleged to be non-compliant with Libyan law.”

Analysis

The Autonomy of the Arbitration Offer and Its Implications

In its Cengiz and Nurol rulings, the Cour de cassation reaffirmed a fundamental principle of investment arbitration: the autonomy of the offer to arbitrate contained in a BIT. According to the court, the arbitration clause operates independently of the legality of the investment that gives rise to the dispute. Accordingly, once the investor has accepted the offer to arbitrate, typically by filing a request for arbitration, the tribunal’s jurisdiction is established. The tribunal’s competence is not contingent upon a prior determination that the investment was made in accordance with the host State’s legal framework.

The court ruled that accusations of investment illegality do not remove the tribunal’s jurisdiction; they are matters the tribunal considers later, on the merits. In short, the BIT’s legality clause is not a jurisdictional gatekeeper but a substantive condition for treaty protection.

This position is consistent with longstanding French arbitral jurisprudence, which draws a clear distinction between the agreement and the underlying contractual or economic transaction. This ruling builds on Dalico v. Khoms El Mergeb, another Libyan case that confirmed the arbitration agreement’s international autonomy, and on Gosset v. Carapelli and Hecht v. Buisman, which held that the clause is independent of the main contract. It also resonates with jurisprudence on arbitrability and public policy, notably in Société Ganz v. Société Nationale des chemins de fers tunisiens and Labinal v. Mors & Westland Aerospace.

Jurisdictional Control and Its Limits

The rulings clarify how courts may review jurisdiction under Article 1520(1) FCCP. In annulment cases, courts re‑examine jurisdiction from scratch, for both commercial and investment arbitrations. But their review is limited to the facts and law that define the arbitration clause; they cannot revisit the merits of the dispute.

Accordingly, the legality of the investment, whether allegedly affected by corruption, fraud, or regulatory non-compliance, falls outside the scope of judicial review at the jurisdictional stage, and must instead be addressed by the arbitral tribunal during the merits phase of the proceedings.

The Court agreed with the Paris Court of Appeal that the Turkey‑Libya BIT’s legality clause is not a jurisdictional gatekeeper but a substantive condition for protection under the treaty. This view draws a sharp line: courts review jurisdiction, while questions of admissibility or merits belong solely to the tribunal. The rule now applies uniformly to both investment and commercial arbitration.

Harmonisation of Investment and Commercial Arbitration Regimes

The French approach, as crystallized in these rulings, contributes to the harmonisation of the legal framework governing both commercial and investment arbitration. By applying to investment arbitration the same core principles that govern international commercial arbitration, particularly the autonomy of the arbitration agreement and the scope of judicial review, France reaffirms its commitment to a unified and coherent arbitral regime.

This jurisprudential evolution also positions the French judiciary within the broader international debate on the competence of arbitral tribunals to hear disputes involving investments that may be void or voidable under the domestic law of the host State. The rulings thus offer a response to the pressing question circulating in major arbitral forums: may tribunals adjudicate claims arising from allegedly unlawful or non-compliant investments?

French courts dismiss corruption or law‑compliance objections unless they undermine the arbitration agreement itself, streamlining proceedings and blocking delay tactics. Applying the same rule to investor‑state cases, the Cour de cassation confirms a coherent arbitration system and makes France an even safer, more predictable seat for both commercial and investment disputes. Notably the Cengiz decision marks a significant development in recognising the powers of investment tribunals: the Cour de cassation confirmed that arbitrators may order the lifting of bank guarantees as a form of reparation. This is particularly impactful in the context of infrastructure and construction projects in high-risk jurisdictions.  

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ABOUT THE AUTHORS

Eglantine Canale Jamet joined Sygna Partners‘ International Litigation and Arbitration Department in 2022 as an Associate. She holds a Master’s in Public International Law (Paris Nanterre) and an Advanced LL.M. in International Criminal Law (Leiden). She has gained experience with international courts (ICC and ICJ) as well as in the Legal Affairs Division of France’s Ministry of Foreign Affairs. Her practice focuses on immunities and international disputes, with a particular interest in evidence, open-source investigations, and procedural issues.

Dayane Darwich joined Sygna Partners’ International Litigation and Arbitration Department in 2022 as a Jurist and Trainee Lawyer. She holds a Master’s degree in International Law and International Organizations (Paris 1 Panthéon-Sorbonne). She has worked on numerous contentious and advisory proceedings before the International Court of Justice, and has also gained experience at UNESCO. Her work spans a broad spectrum of issues in international law, with a primary focus on international disputes. She has a particular intellectual interest in questions relating to sanctions, territorial matters, the use of force, statehood, and human rights. 

The authors thank Inès Pilpré, Legal Intern, for her valuable work.

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*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.