Contributed By Dechert LLP
Arbitration is a common way of resolving international disputes in France, and the country's historic reputation as an arbitration-friendly jurisdiction has not faded. French law as interpreted by courts provides a strong and stable framework for international arbitration: arbitration agreements are easily enforced, arbitral proceedings are flexible and suffer little interference from national courts, and awards are quickly enforced and rarely set aside. The presence in Paris of the International Court of Arbitration of the International Chamber of Commerce (ICC), along with other arbitral institutions and large contingents of specialist lawyers, further reinforces France as the leading jurisdiction for international arbitration.
The revision proceedings before French courts in the well-known Tapiecase have attracted particular attention on two legal points, as detailed below.
In international arbitration, according to Article 1502(2) of the Code of Civil Procedure (CCP), a request for revision of the award must be submitted to the same arbitral tribunal. However, this provision fails to contemplate the possibility – as occurred in Tapie– that a party applies for revision of the award alleging that an arbitrator committed a fraud. In such case, some legal scholars argue that a new tribunal should be constituted. This issue remains unsettled: the Paris Court of Appeals instead ruled that this arbitration was merely domestic, which implied that the Paris Court of Appeals had jurisdiction to revise the award in lieu of the arbitral tribunal (Article 1502(3) of the CCP).
Therefore, much of the debate centred on the domestic or international character of the Tapiearbitration. Under Article 1504 of the CCP, an arbitration is international when international trade interests are at stake. In Tapiethe Paris Court of Appeals subtly distinguished between situations where the parties generally expressed their consent to arbitration in an arbitration clause included in the main contract and those where the parties agreed to refer a specific dispute to arbitration. In the former case, the Paris Court of Appeals reaffirmed its jurisprudence that all of the stakeholders and features of the economic transaction set in the main contract should be taken into account to determine whether international trade interests were at stake. On the contrary, the Paris Court of Appeals held that, in the latter case, as happened in the Tapiearbitration, the international or domestic character of the arbitration will depend only on the parties and the specifics of the dispute. Following this restrictive approach, the Paris Court of Appeals ruled that the Tapiearbitration was domestic. The Court of Cassation upheld this decision, and rendered its last decision on the matter on 18 May 2017.
Arbitration in France is mainly used in the construction, oil and gas, mining, and telecommunications industries, though it is common in other sectors as well – for instance, in post-acquisition disputes.
The most prominent arbitral institution is the International Court of Arbitration of the International Chamber of Commerce (ICC). Its Arbitration Rules (the ICC Rules) were last amended in 2017 and entered into force on 1 March 2017. This version incorporates new features, including an expedited procedure for smaller claims. The ICC serves as Appointing Authority for the appointment of ad hoc arbitrators under the UNCITRAL Arbitration Rules.
Other active institutions in France are the French Arbitration Association (Association française d'arbitrage), the International Arbitration Chamber of Paris, the Paris Centre for Mediation and Arbitration (Centre de Médiation et d'Arbitrage de Paris), and the Paris Maritime Arbitration Chamber (Chambre arbitrale maritime de Paris).
French arbitration law was newly codified in 2011. The main source of legislation on arbitration is Book IV of the CCP. Title I deals with domestic arbitration, while Title II relates to international arbitration. Many provisions contained in Title I apply equally to international arbitration by virtue of Article 1506 of the CCP. Pursuant to Article 1504 of the CCP, an arbitration is international “when international trade interests are at stake” – that is, where the economic operation at stake involves a transfer of goods, money or know-how beyond borders, irrespective of the nationality of the parties, the applicable law or the location of the seat of the arbitration.
Other provisions relating to arbitration are scattered across the Civil Code (Articles 2059-2061), the Commercial Code (Articles L 721-3 and L 721-5) and other codes (eg, Article L 311-6 of the Code of Administrative Justice and Article L 615-17 of the IP Code).
France has not adopted the UNCITRAL Model Law, but takes a similarly – if not more – liberal approach to arbitration than the Model Law.
The last major reform was implemented through Decree 2011-48 (13 January 2011) and came into force on 1 May 2011. More recently, Law 2016-1547 (18 November 2016) modified Article 2061 of the Civil Code to allow non-professionals to resort to domestic arbitration for purely internal disputes. There is no pending legislation that may change the arbitration landscape in France.
In international arbitration, French courts do not undertake a conflict-of-laws analysis and deem arbitration agreements to be valid provided that the parties consented and the arbitration agreement does not violate French international public order (Cass 1st Civ, 20 December 1993, Dalico).
Accordingly, there are no formal requirements for arbitration agreements (Article 1507 of the CCP). For instance, arbitration clauses incorporated by reference to a general document which contains them are valid and binding (Cass 1st Civ, 6 November 2016).
This approach is actually more favourable than the New York Convention – in particular, Article II, which requires an arbitration agreement to be in writing. In accordance with Article VII(1) of the New York Convention, French courts therefore disregard the New York Convention in favour of Book IV, Title II of the CCP.
Arbitrability is addressed in Articles 2059 and 2060 of the Civil Code.
Under Article 2059, a dispute relating to rights which parties are not free to dispose of cannot be referred to domestic arbitration. Whether Article 2059 applies to international arbitrations seated in Paris is subject to debate.
Article 2060 sets out an illustrative list of disputes incapable of being referred to arbitration, including matters of status or capacity of natural persons, divorce and legal separation. Article 2060 states that matters relating to public order may not be submitted to arbitration. However, in the context of international arbitration, French courts have ruled that arbitral tribunals can decide on matters involving public order.
According to Article 2060(1), matters involving public entities cannot be submitted to arbitration. By way of exception, certain public entities engaging in industrial and commercial activities can be authorised by decree to submit their disputes to arbitration (Article 2060(2) of the CCP). These limitations do not apply to international arbitration; it suffices to prove the public entities’ consent without referring to their national law (Cass 1st Civ, 2 May 1966, Galakis; Paris Court of Appeals, 13 June 1996, KFTCIC).
If a party objects to the arbitrability of the dispute based on French administrative public order, by way of exception it must initiate annulment proceedings in front of the French administrative courts rather than French civil courts (French Conflicts Tribunal, 17 May 2010, Inserm).
Under Article 1448 of the CCP, French courts must enforce arbitration agreements and decline jurisdiction over any dispute that is allegedly covered by an arbitration agreement. The exception is that French courts may assert jurisdiction over the dispute when two conditions are cumulatively met:
The second limb of the rule provides for a stringent test that is seldom met in practice. However, according to Article 1448(2) of the CCP, French courts cannot decline jurisdiction on their own motion; it is for the parties to allege the existence of an arbitration agreement. Further, a party cannot seek declaratory relief from a court determining that an arbitration clause is invalid.
Article 1447 of the CCP provides that an arbitration agreement should be considered entirely separate from the underlying contract, which means that the arbitration clause will still stand even if the main contract is found to be void (Cass 1st Civ, 17 May 1963, Gosset; Cass 1st Civ, 25 October 2005, Omenex). This holds true even if the contract is deemed non-existent or never to have been concluded – that is to say, an arbitration agreement might be valid even though the parties never agreed to the main contract (Cass 1st Civ, 6 December 1988, Navimpex).
In international arbitration, there are no restrictions on the number of arbitrators and legal persons who can be appointed as arbitrators.
Even though possession of civil rights is expressly required only in domestic arbitrations, it is generally accepted that such requirement similarly applies to international arbitrations.
Further, some restrictions are inherent to certain professions that apply both to domestic and international arbitration. Active French judges cannot serve as arbitrators; conversely, French law professors can act as arbitrators unless it would be contrary to the state’s interests. More generally, other French civil servants may act as arbitrators on the condition that they are not remunerated for their work and obtain appropriate authorisation from their supervisor.
In addition, the appointment of the tribunal should abide by the overarching principle of equality between the parties, unless the parties agree otherwise after the inception of the dispute (Cass 1st Civ, 7 January 1992, Dutco).
Pursuant to Article 1508 of the CCP, the arbitration agreement may designate the arbitrators or provide for the procedure for their appointment, directly or by reference to arbitration rules or procedural rules.
If the parties’ chosen method for selecting arbitrators fails, Article 1452 of the CCP provides a default procedure for appointing the tribunal:
Where the parties have not referred their dispute to an arbitral institution, the judge acting in support of the arbitration will decide on any dispute relating to the constitution of the tribunal (Article 1454 of the CCP).
The judge acting in support of the arbitration may eventually choose arbitrators when:
According to Article 1454 of the CCP, the parties may refer any dispute relating to the constitution of the tribunal to the arbitral institution (eg, where a party refuses to confirm the appointment of an arbitrator) or, where there is no such institution, the judge acting in support of the arbitration. Similarly, once the tribunal is constituted, a party’s challenge of an arbitrator should be submitted to the arbitral institution or, in its absence, to the judge acting in support of the arbitration (Article 1456(3) of the CCP).
In addition, under Article 1458 of the CCP, an arbitrator can be disqualified on the agreement of all the parties to the proceedings.
Article 1456(2) of the CCP provides that a prospective arbitrator must disclose any element which may affect his or her independence and impartiality before accepting the appointment. After having accepted the appointment, the same article of the CCP provides that an arbitrator must equally disclose without delay any element which may affect his or her independence and impartiality.
Similarly, Article 11 of the 2017 ICC Arbitration Rules states that every arbitrator must be and remain impartial and independent of the parties involved in the arbitration.
See 3.2 Arbitrability above.
French arbitration law adopts an expansive version of the principle of "competence-competence".
This principle empowers the tribunal to rule on its own jurisdiction, if challenged. This principle is enshrined in Article 1465 of the CCP (which applies to international arbitration by virtue of Article 1506(3) of the CCP).
Under Article 1448 of the CCP and as described above in 3.2 Arbitrability, French courts are prevented from deciding on the jurisdiction of the tribunal, except when (i) the tribunal has not yet been constituted, and (ii) the clause is manifestly invalid or inapplicable; this stringent test is seldom met in practice.
After the tribunal has been constituted, a party may challenge the tribunal’s decision on its jurisdiction only in subsequent annulment or enforcement proceedings. However, in the case of a partial award on jurisdiction, jurisdiction can be challenged immediately without the arbitral proceedings being suspended.
The standard of judicial review for questions of jurisdiction is de novo (Cass 1st Civ, 6 October 2010, Fondation Albert Abela Family v Fondation Joseph Abela Family). As a result, courts proceed to an independent process that grants no deference to the arbitrators’ jurisdictional ruling.
Pursuant to Article 1448 of the CCP, French courts must decline jurisdiction unless the arbitral tribunal has not yet been constituted and the arbitration agreement is manifestly invalid or manifestly inapplicable. The court may not do so ex officio.
The French courts have an extensive approach to the effects of arbitration agreements on third parties.
In particular, a party taking part in the negotiation, performance or termination of the underlying contract (which contains the arbitration agreement) – or assuming the rights and obligations of an initial party – can be bound by its arbitration clause (Cass 1st Civ, 27 March 2007).
Arbitral awards have no res judicata effect on third parties. However, the parties can rely on the award in its relation to third parties in order to ascertain the new legal obligations between the parties to the award.
Pursuant to Article 1468 of the CCP, once the tribunal has been constituted, the tribunal may issue any conservatory or provisional measures that it deems appropriate and may attach penalties to such orders. However, pursuant to the same article, national courts retain exclusive jurisdiction to order conservatory attachments and judicial securities.
Pending constitution of the tribunal and pursuant to Articles 1449 and 1506(1) of the CCP, local courts may order instruction measures (ie, measures aimed at obtaining evidence or preventing the disappearance or destruction of evidence), as well as provisional and conservatory measures.
No specific provision expressly empowers tribunals to order security for costs. This issue is under debate in France.
Parties are free to choose the procedural rules in the arbitration agreement or at any time during the proceedings. Without such agreement, the tribunal may conduct proceedings as it sees fit without having to comply with the specific civil procedure provisions (Article 1509 of the CCP). The tribunal must always ensure that the parties are treated equally and must uphold the principle of due process (Articles 1464(2) and 1510 of the CCP). In addition, both the parties and the tribunal must act diligently and in good faith in the conduct of the proceedings (Article 1464(3) of the CCP).
Under Article 1509 of the CCP, parties are free contractually to agree, refer to or include their own procedural rules or institutional rules. French law does not provide for mandatory and specific procedural steps.
A tribunal is empowered to order any provisional or interim measure that it deems appropriate (Article 1468 of the CCP).
The tribunal’s powers include investigative measures such as the appointment of an expert to provide forensic evidence, the examination of a witness or requests for document production (Article 1467 of the CCP). If a party fails to comply with the tribunal’s orders, the tribunal may draw adverse inferences against it.
The arbitrators’ primary obligation is to decide the dispute submitted to them (Article 1457 of the CCP) in a timely manner (Article 1464 of the CCP). The award must be rendered within the time frame agreed by the parties or, in the absence of such agreement, within six months (Article 1456 of the CCP). In the course of the proceedings, arbitrators must act loyally and in good faith towards the parties. In particular, arbitrators must be independent and impartial, and fulfil their duty to disclose any circumstances that may cast doubts regarding their ability to maintain this standard. They must be diligent in their handling of the evidence submitted by the parties and uphold essential principles of procedural fairness (eg, the equal treatment of the parties). Each arbitrator must take part in the deliberations of the tribunal and the making of the award.
The drafting of the award is subject to formal rules under Articles 1481 and 1482 of the CCP.
There are no particular qualifications or other requirements for legal representatives appearing in international arbitration proceedings in France.
Though France is a civil law country where judges traditionally take an active role in the gathering of evidence, in international arbitration France follows the usual approach to the collection and submission of evidence. As such, in international arbitrations seated in France, it is commonplace to have recourse to the usual practices regarding the production of documents, witness statements and cross-examinations.
The parties usually decide on the rules applicable to the taking of evidence. They either do so directly or through a reference to institutional rules of procedure. Among other things, the parties can decide to allow or refuse discovery. Arbitrators generally enjoy broad discretion to determine the admissibility or relevance of any evidence and may take guidance from the International Bar Association (IBA) Rules on the Taking of Evidence in International Commercial Arbitration (without necessarily being bound by them).
Unless the parties agree otherwise (Article 1056(3) of the CCP), the tribunal can order a party to produce documents and even impose penalties on recalcitrant parties (Article 1467 of the CCP).
If a third party holds a document relevant for the purposes of the proceedings, the tribunal may allow a party to seek an order for disclosure from the judge having jurisdiction over such third party (Article 1469 of the CCP).
French arbitration law provides for the confidentiality of domestic arbitration only.
In addition, in enforcement proceedings before French courts, the arbitral award and the arbitration clause are not part of the public record. However, the parties’ written pleadings filed to set aside an international award rendered in France, or an appeal against the ex parte decision granting recognition of the award, are part of the public record, and French courts do not have to protect the confidentiality of these pleadings.
Arbitral awards are recognised and enforced in France when applicants can prove their existence and their recognition and enforcement does not violate international public policy (Article 1514 of the CCP).
Pursuant to Articles 1480 to 1482 of the CCP, an award must comply with certain formal requirements. It must be signed by all arbitrators, or explain why a minority of the tribunal chose not to sign. It must detail the names of the parties and their addresses, the name(s) of their legal counsel, the name(s) of the arbitrators, and the date and the seat of the arbitration. It must also describe the claims and arguments of the parties, and the reasons leading to the tribunal’s decision.
All remedies are available provided that they are not contrary to French international public order.
In 2009, the Court of Cassation put an end to the debate surrounding the enforcement of arbitral anti-suit injunctions, which it held to be enforceable in France (Cass 1st Civ, 14 October 2009).
The enforcement of awards of punitive damages is debated. In French law, damages can only be compensatory and therefore should not exceed the amount of the loss sustained by the injured party. However, punitive damages are not per se contrary to French international public order, provided that the amount of those damages is not disproportionate in light of the loss sustained and the contractual breach (Cass 1st Civ, 1 December 2010).
It is commonly accepted that tribunals can award interest and that they enjoy a broad discretion to do so. In most cases, the applicable law or the terms of the contract provide little guidance on this.
There is no express rule on the applicable rate of interest. However, French courts consider that, according to Article 1153-1 of the Civil Code, the amount of compensation awarded accrues interest at the statutory rate from the date of the award, even if the award is silent on this point (Cass 1st Civ, 30 June 2004).
Usually, the tribunal assesses the costs of arbitration, which include administrative costs, arbitrators’ fees and all other costs incurred by the parties in relation to the preparation and conduct of proceedings.
The tribunal decides on the allocation of costs according to the rules found in the parties’ agreement or the arbitration rules. Most of the time, the tribunal apportions costs between the parties depending on the relative success of their claims.
Article 1520 of the CCP provides only the following limited grounds for setting aside awards:
Awards rendered in France may be challenged by way of either an action to set aside the award (Article 1518 of the CCP) or an appeal against the order granting enforcement within one month following service of the order or award (Article 1523 of the CCP). Since the 2011 reform, Article 1522 of the CCP provides that parties can waive their right to bring an action to set aside the award. Challenges must be brought before the appeal court of the place where the award was made (Article 1519 of the CCP).
Pursuant to Article 1518 of the CCP, international arbitration awards cannot be appealed in France.
The parties are entitled to waive their right to bring an action to set aside the award. However, the enforcement of the award can always be challenged (Article 1522 of the CCP).
French judges are not allowed to review the merits of a case.
France signed the New York Convention on 25 November 1958 and it entered into force on 24 September 1959. However, the convention plays a residual role in France. Pursuant to Article VII(1) of the convention, “[t]he provisions of the present Convention shall not […] deprive any interested party of any right he may have to avail himself of an arbitral award in the manner and to the extent allowed by the law of the treaties of the country where such award is sought to be relied upon”. Precisely, Article 1520 of the CCP is more favourable to the recognition and enforcement of foreign awards than the convention.
France is a party to the 1961 European Convention on International Commercial Arbitration and the 1965 Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States.
France is also a party to the 1968 Brussels Convention on Enforcement of Judgments in Civil and Commercial Matters (now replaced by the Brussels I Regulation Recast) and the 1988 Lugano Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters. Such conventions are generally inapposite to arbitration, except with regard to a few specific issues (eg, the enforcement of arbitral anti-suit injunctions and the award of damages for the initiation of court proceedings in breach of arbitral agreement).
In addition, France is party to more than 100 bilateral investment treaties.
The parties must seek exequatur of the award before it can be enforced in local courts. If the losing party does not comply with the award voluntarily, the winning party may commence enforcement proceedings. There is no specific time limit to request enforcement. Articles 1514 and 1515 require that the existence of the award be established.
The president of the Tribunal de Grande Instance has jurisdiction over the recognition and enforcement of international arbitral awards.
Exequatur of awards is granted in ex parte proceedings where representation by a French attorney is mandatory (Article 813 of the CCP).
Under French law, the winning party may seek assistance from bailiffs to locate the losing party’s assets and conduct the necessary operations for the enforcement of the award.
The general approach of French courts toward recognition and enforcement of arbitral awards is similarly restrictive as their approach toward setting aside proceedings, described in section 11 Review of an Award, above. As such, the grounds for refusing recognition and enforcement of an award are the same as those to set it aside, including public policy grounds, described in 11.1 Grounds for Appeal, above.