by the Arbitration Association

French case law on arbitration: in-depth review

April 4, 2019

Paris is one of the major centres and safest seats for international arbitration. Arbitration-friendly French law stems from the progressive legal framework in place since 2011. Local courts support the development of arbitration by their valuable pro-arbitration case law.

Paris Baby Arbitration is therefore delighted to share with the readers of its selection of the recent remarkable decisions of French courts prepared by volunteer students and young professionals.

The selection presents the multi-facet approach of French State courts towards arbitration. First and foremost, it is the approach of the minimalinterference. In presence of an arbitration clause, French courts will decline their jurisdiction unless the clause is manifestly void and inapplicable (Cour de cassation, 4 July 2018, Banque Delubac et Cie v. Agrarhandel GmbHand Banque Delubac et Cie v. Werner Tiernahrung GmbH, nos 17-13067 and 17-13069). One of the rare examples of such inapplicability concerns a dispute about the reimbursement of legal costs incurred during enforcement proceedings of an arbitration award (Paris Court of Appeal, 13 November 2018, Shackleton and associated Limited v. brothers Al Shamsi, no. 16-16608).

On the other hand, French courts will prevent the abuse of right to access to arbitration by applying the estoppel principle (Cour de cassation, 28 February 2018, First Smart Asia Ltd v. Cosfidel premium, no. 16-27823), holding arbitrators liable for the misuse of their powers (Cour de Cassation, 28 March 2018, Mr. Y. v. Jean-François X., no. 15-16909) or declaring inadmissible the appeals against decisions of arbitration institutions (Paris Court of Appeal, 13 November 2018, Heli-Union v. Airbus Helicopters, no. 16-25942).

In the same way, during annulment or enforcement proceedings, French courts do not hesitate to reject motions to set aside the award if the motion at stake concerns only admissibility of the claims and not the jurisdiction of the arbitral tribunal (Paris Court of Appeal, 16 January 2018, Republic of Iraq v. Fincantieri Cantieri Navali Italian, no. 16/05996 and Cour de cassation, 10 January 2018, Shell, Jnah Development v. Marriott, no. 16-21391).

The courts will pay close attention to the parties’ agreement (Paris Court of Appeal, 11 September 2018, Mr. D. B. v. Subway International BV, no. 16/19913), including as to how it describes the mission of arbitrators (Cour de cassation, 24 May 2018, Mr. and Mrs. X v. Toulouse Investment Company Leroux, no. 17-18796). Such a detailed analysis of the parties’ consent is equally applied when annulment proceedings concern international investment awards (Paris Court of Appeal, 29 January 2019,Venezuela v. Rusoro Mining Limited,no. 16/20822and Cour de cassation, 13 February 2019, Venezuela v. Mr. Serafin G. Armas et Mrs Karina Garcia G., no. 17-25851).


     I.        COUR DE CASSATION

Cour de cassation, 10 January 2018, Shell, Jnah Development v. Marriott, no. 16-21391

On 10 January 2018, the Cour de cassationconfirms that the power of the representative of the company to initiate arbitration concerns admissibility of claims and not the jurisdiction of the tribunal.

Jnah entered into a hotel operating agreement with Marriott. The agreement contained an ICC arbitration clause. The dispute arose. Jnah applied for arbitration.

During the arbitration proceedings, a change of ownership of the claimant (Jnah) took place. The former shareholders gave the transferee a power of attorney to act on behalf of the company in the ongoing proceedings.

Subsequently, the same representative brought another arbitration under the same power of attorney. The tribunal declined its jurisdiction because the power of attorney was only limited to the first arbitration. The representative brought an action for annulment of the award.

The court of appeal dismissed the appeal. It concluded that the arbitral tribunal had ruled on a question relating not to the scope of its jurisdiction, but to the admissibility of the request for arbitration, which could not be challenged in the context of an action for annulment.

The Cour de cassationconfirms the previous judgement. 


Cour de cassation, 28 February 2018, First Smart Asia Ltd v. Cosfidel premium, no. 16-27823

On 28 February 2018, the Cour de cassationrules that a party who adopted a contradictory behaviour throughout proceedings can be considered as having waived its rights under arbitration clause.

Cosfidel ordered goods from Fang’s Bag who, for reasons of urgency, shipped them by air freight. Refusing to cover this additional cost, Cosfidel deducted the amount of these transport costs from the invoices issued by First Smart Asia, on behalf of the supplier, for other orders.

A dispute linked to these invoices arose and Cosfidel sued First Smart Asia before the Commercial Court. The suit, due to lack of due diligence by Cosfidel, was canceled.

Cosfidel the applied to the ICC Court on the basis of the arbitration clause stipulated in the general conditions of purchase. The arbitration procedure was withdrawn for non-payment of fees by First Smart Asia and Fang’s Bag.

Smart Asia then restarted the suit to obtain the payment of the balance of the invoices. Cosfidel challenged the Court’s jurisdiction based on the arbitration clause.

The Court of Appeal held that Cosfidel did not show any disloyalty or contradictory behaviour by first seizing the state judge, changing its mind by failing to comply with the due diligence requirement and then seizing the arbitral institution. The Court accepted the jurisdictional plea. Smart Asia appealed before the Cour de cassation, invoking the principle of estoppel.

The Cour de cassation upholds the appeal. It states that, in view of the facts, Cosfidel had adopted a contradictory behaviour to the detriment of First Asia and Fang’s Bag. Hence, the Court of Appeal, which did not find the behaviour contradictory despite the facts, violated the principle of estoppel.


Cour de Cassation, 28 March 2018, Mr. Y. v. Jean-François X., no. 15-16909

On 28 March 2018, the Cour de cassationconfirms that the arbitrator can be held liable for a misuse of the arbitrator’s power if his/her fault caused damage.

Royal Annecy and Elitec entered into an agreement stating that any disputes would be submitted to the mediation of Mr. Y. In case of disagreement over the mediation, the parties were supposed to constitute a “college arbitral”, chaired by Mr. Y.

Following a dispute, the clause was enforced and Mr. Y. rendered five awards. The awards were subsequently quashed on the ground that the clause at stake were not an arbitration clause.

Royal Annecy brought a liability action against Mr. Y. and a representative of the opposing party. It pretended, inter alia, that Mr. Y. misused its arbitrator’s power in order to allocate to the opposing party an overwhelming sum of money.

The court of appeal upheld the judgment ordering Mr. Y. to pay various sums and rejected Mr. Y.’s claims as for the payment of his arbitrator’s fees.

It also found that Mr. Y. could not be unaware that it was impossible for him to render new awards after the annulment of his decisions based on an inexistent arbitration clause. His behaviour forced Royal Annecy to initiate various expensive procedures.

Mr. Y. appealed. He argued that the arbitrator’s personal liability can only be incurred for deceit, fraud or gross negligence. In this case, these omissions were allegedly not established. He also claimed that annulled awards, because they were unenforceable, did not cause any losses. Thus, neither the fault nor the link has been established.

The Cour de Cassationdismisses the appeal. It finds that the conclusions of the court of appeal are sufficient to establish the fault and the causal link between that fault and prejudice. It therefore correctly deduced that the tortious liability of the arbitrator must be established on the basis of the Civil Code.


Cour de cassation, 24 May 2018, Mr. and Mrs. X v. Toulouse Investment Company Leroux, no. 17-18796

On 24 May 2018, the Cour de cassationrules that the arbitral tribunal that received amiable compositeurpowers cannot rule in law without any further explication.

By an agreement, containing an arbitration clause, Mr. and Mrs. X undertook to sell to Toulouse Investment Company Leroux 100% of the shares of the Carrosserie peinture system company. The agreement contained an arbitration clause providing for the amiable compositeurpowers of the arbitral tribunal.

A dispute arose over the execution of this agreement. The arbitral award was rendered and subsequently annulled by a court of appeal which found that the arbitral tribunal had only ruled in law despite the obligation to rule as an amiable compositeur.

The Cour de cassationupholds the judgment. It states that, notwithstanding the reference to amiable compositionin the operative part of the award, its reasoning reveals that, even in the absence of any textual reference to a legal provision, the arbitral tribunal ruled in law. The Court of Appeal therefore correctly deduced that the arbitral tribunal had not complied with its mission.

Consequently, the Court dismisses the appeal.


Cour de cassation, 4 July 2018, Banque Delubac et Cie v. Agrarhandel GmbHand Banque Delubac et Cie v. Werner Tiernahrung GmbH, nos 17-13067 and 17-13069

On 4 July 2018, by two decisions, the Cour de Cassationconfirms that the tort nature of a claim does not render the invoked arbitration clause manifestly void or inapplicable.

In both cases, the French companies Tiwy and Etablissements Laboulet traded with German companies, Agrarhandel GmbH and Werner Tiernahrung GmbH respectively. Each sales contract contained an arbitration clause.

The French companies transferred invoices issued to each German company to the Delubac and Cie bank (“Bank”) under factoring agreements. These invoices remained unpaid. The Bank therefore sued the German companies for damages pretending their disloyal behaviour [tort action under French law]. Each company raised a jurisdictional plea, invoking the arbitration clauses inserted in the sales contracts.

The Court of Appeal held that the commercial court had no jurisdiction. The Bank consequently appealed to the Cour de Cassation. The Bank claimed that the arbitration clauses were inapplicable to the tort action based on the disloyal behaviour of the debtor.

The Cour de Cassationupholds the judgement. It rules that the transfer of invoices constitutes a sufficient link between the sales and the factoring agreements. It therefore dismisses the Bank’s appeal, deciding that the tortious character of the action is not sufficient, in itself, for the arbitration clause to be manifestly inapplicable.


Cour de cassation, 19 December 2018, J&P Avax v. Tecnimont, no. 16-18349

On 19 December 2018, the Cour de cassationrules that the information accessible on the Internet could have been found within the time limit provided for a challenge. Consequently, there is no reason to extend this time limit.

On 23 November 1998, the Italian company Tecnimont concluded a subcontract with the Greek company J & P Avax (“Avax”) for the construction of a propylene plant in Thessaloniki, which included an arbitration clause. A dispute arose between the parties and Tecnimont initiated arbitration proceedings under the auspices of ICC. ICC Arbitration Rules provide that for a challenge to be admissible, it must be submitted by a party within 30 days from the date when the party making the challenge was informed of the facts and circumstances on which the challenge is based.

Avax’s challenge against the president of the arbitral tribunal was dismissed as time-barred. Avax brought an action seeking the annulment of the award, claiming that the president of the tribunal had breached his obligation to disclose and his duty of independence. The Court of Appeal upheld the award. Avax appealed.

The Cour de cassationdismisses the appeal. It notes that the facts upon which the challenge is based are taken from a website. They are therefore public and easily accessible. This research could have been carried out on the day when the arbitrator accepted his mission. Accordingly, the challenge was late because it was filed more than a month after Avax had received the information that would have altered its confidence in the president of the arbitral tribunal. Consequently, Avax was no longer entitled to invoke, in support of the action for annulment of the award, the facts on which the challenge was based.


Cour de cassation, 13 February 2019, Venezuela v. Mr. Serafin G. Armas and Mrs Karina Garcia G., no. 17-25851

On 13 February 2019, the Cour de cassationrules that the international investment award cannot be annulled only partially, if the applicable BIT requires that criteria ofnationality of the investor and of the existence of an investment to be met cumulatively.

Mr. G. Armas and his daughter, Ms. Garcia G. (“Family G.”) acquired, in 2001 and 2006, the shares of two Venezuelan companies, Transporte Dole and Alimentos Frisa.

In 2012, the Family G. initiated arbitration proceedings against the Bolivarian Republic of Venezuela on the basis of the bilateral investment treaty (“BIT”) concluded between Spain and Venezuela. The award on jurisdiction rendered in Paris was partially annulled at the request of Venezuela. The Court of Appeal set aside the part of the award deciding that the disputed assets were investments within the meaning of the BIT. Venezuela appealed.

Family G. first argue that the appeal is inadmissible on the basis of the principle of estoppel, as the Bolivarian Republic of Venezuela applied to the arbitral tribunal for a new award on jurisdiction.

The Cour de cassationdeclares the appeal admissible. The Family G. requested the arbitral tribunal to hear them on the effects and scope of the partial annulment of the award. The Bolivarian Republic of Venezuela replied while informing the arbitral tribunal of the existence of its appeal. It did therefore not contradict itself to the detriment of the Family G..

The Court reverses and annuls the judgment. The applicability of the BIT arbitration clause depends on the fulfilment of all the conditions required by the text, meaning the nationality of the investor and the existence of an investment. Thus, the Court of Appeal could not partially set aside the award.




Paris Court of Appeal, 16 January 2018, Republic of Iraq v. Fincantieri Cantieri Navali Italian, no. 16/05996

On 16 January 2018, the Paris Court of Appeal confirms that the embargo measures can constitute an inadmissibility ground for arbitration claims.

The Iraqi government and an Italian company concluded several ship construction and missiles delivery contracts. The execution of the contracts became impossible because of the UN sanctions imposed on the State of Iraq. The State of Iraq applied for arbitration.

The arbitral tribunal rejected the claims as inadmissible because of the embargo measures. The State of Iraq moved to set aside the award.

The Court rejects the motion. It rules that the award could not be subject to annulment as it dealt with the admissibility of the claims and not with jurisdiction.

The Court then confirms that the interpretation of UN’s resolutions and EU’s regulations made by the tribunal did not breach international public policy.


Paris Court of Appeal, 11 September 2018, Mr. D. B. v. Subway International BV, no. 16/19913

On 11 September 2018, the Paris Court of Appeal dismisses a motion to set aside an award rendered on the basis of an arbitration clause inserted in a standard Subway’s franchise agreement.

Mr. D. B. concluded a franchise agreement with the Dutch company Subway International BV (“SIBV”) to run a restaurant in Narbonne. This agreement provided for the application of Liechtenstein law and arbitration in New York.

By an award rendered in New York, the sole arbitrator declared the agreement terminated, ordered the franchisee to pay the franchisor the amount of unpaid royalties and advertising costs, ordered the return of the advertising material and prohibited the exploitation of the restaurant and of the identification elements of the Subway brand.

The President of the Paris High Court granted, by its order, the exequatur to the award. Mr. B. appealed the order.

First, Mr. B. asks the Court to stay the proceedings pending the decisions of the Marseille Commercial Court and the Paris Commercial Court. Before the Marseille Commercial Court Mr. B. asked to annul the arbitration clause laid down in the agreement. The Paris Commercial Court hears the request lodged by the Minister of the Economy and Finance to declare various clauses of the Subway franchise agreements, including the arbitration clause, null and void.

The Court dismisses this request. Regarding the proceedings brought before the Marseille Commercial Court, it rules that the question of the validity of the arbitration clause and, consequently, the one of the arbitrator’s jurisdiction, can be examined a posteriorionly by the Court.

On the other hand, the proceedings brought by the Minister of Economy and Finance against SIBV do not concern the validity of the arbitration clause but the choice of English as the language of arbitration. These proceedings, because of their pure domestic law nature, cannot impact the control of an award rendered abroad.

Second, Mr. B. states that the arbitration clause provides for arbitration in New York. Arbitration in New York entails excessive costs, depriving the franchisee of its right to bring an action.

Nevertheless, according to the Court, the significant inequality in the commercial relationship, assuming it is contrary to international public policy, has no effect on the validity of the arbitration clause because of its autonomy.

Then, the Court considers that the actual arbitration costs were not excessive. In addition, the procedure could have been conducted in writing without lawyers needed to go to New York. The argument of the deprivation of the right of access to the judge is dismissed as not substantiated.

Third, Mr. B. contends that the adversarial principle and the principle of equality of arms were violated as all the procedural documents notified to him had been drafted in English without translation.

The Court dismisses the plea. The fact that the arbitration was conducted in English, while it is not a party’s mother tongue, cannot be regarded as an infringement of the mentioned principles, as soon as the English language was chosen by the parties to international commercial relationship and the reasonable procedural time-limits were established.

Fourth, Mr. B. contends that the principle of international public policy providing for contractual performance in good faith is violated. He alleges that the arbitration was conducted unfairly. In particular, the mediation did not take place prior to arbitration, and the debt settlement agreement was refused.

The Court rejects the plea. It rules that, under the pretext of an alleged breach of international public policy, Mr. B. seeks a review of the substance of the award, which is not allowed to the exequatur judge.

The Court thus confirms the order granting exequatur to the award. 


Paris Court of Appeal, 13 November 2018, Shackleton and associated Limited v. brothers Al Shamsi (the “Consorts”), no. 16-16608

On 13 November 2018, the Paris Court of Appeal rules that the arbitration clause inserted in a legal services agreement is not applicable to the dispute about the costs incurred to the enforcement of an award rendered on the basis of this clause.

Shackleton law firm (“Shackleton”) provided legal services to the Consorts on the basis of the engagement letter. The engagement letter contained an arbitration clause. An arbitral award rendered under this arbitration clause ordered the Consorts to pay the fees to Shackleton.

Shortly thereafter, Shackleton initiated a second arbitration claim under the same arbitration clause. It claimed all legal fees incurred before the French and English courts in attempt to enforce the first award. The firm considered that it had only obtained partial reimbursement of those fees pursuant to the decisions rendered by those courts. The sole arbitrator rejected its jurisdiction to rule over Shackleton’s claim. Shackleton then brought an action for annulment before Paris Court of Appeal against this award.

Shackleton pretended that such an award constituted a denial of justice and violated international public policy. In particular, it considered that, by refusing to enforce the award, the Consorts committed a breach of contract and that the legal fees incurred constituted contractual compensation for damages. In addition, it advanced that the Consorts violated the letter of engagement since the arbitration clause referred to the ICC Arbitration Rules, that in turn provided for an obligation to enforce the award spontaneously. 

The Court of Appeal dismisses the Shackleton’s application. It holds that the legal costs incurred during enforcement stage cannot be considered as contractual compensation for damages. Consequently, the arbitrator rightly held that these costs did not arise from the arbitration clause but from the legal proceedings. He had therefore no jurisdiction to hear them.

In addition, the Court of Appeal considers that Shackleton has not been deprived of its right of access to a judge and that the principle of full compensation has been respected insofar as the State courts, before which the legal costs have been incurred, have ruled on these costs.


Paris Court of Appeal, 13 November 2018, Heli-Union v. Airbus Helicopters, no. 16-25942

On 13 November 2018, the Paris Court of Appeal rules that one is not entitled to appeal decisions of arbitral institutions interpreting their arbitration rules.

Heli-Union and Airbus Helicopters (“Airbus”) concluded a sale contract for four helicopters.

The dispute arose. Heli-Union filed a request for arbitration before the ICC Court. Airbus submitted a counterclaim. Airbus requested the ICC Court to fix separate advances on costs. The ICC Court fixed the advance on costs payable in equal shares by the claimant and the respondent but informed the parties that, if not paid, the separate advance on costs would be applicable. The deadline for payment having been expired, the Secretariat of the ICC Court requested the parties to pay separate advances on costs. 

Heli-Union brought an action for the annulment of the decisions of the ICC Court before the Paris High Court. The Paris High Court rejected the request. Heli-Union appealed.

It first submitted that it was possible to bring an action against an association [ICC is a registered association under French law] concerning the application of an article of the bylaws of that association. On the merits, it considered that the advance on costs should be split equally. 

The Paris Court of Appeal first considers the admissibility of the claim. In the sales agreement between the two companies, all disputes were referred to arbitration under the ICC Arbitration Rules. The arbitration clause does not express a will to be bound by the ICC’s bylaws but a will to conclude a contract of organization of arbitration. The Court rules that the parties who entrust the administration of the arbitration proceedings to an institution waive the possibility to request a substitution of this institution by a State judge in the interpretation of the applicable arbitration rules. The parties may only bring an action for contractual liability against the arbitration institution once the award is rendered. 

The Court decides that Heli-Union paid the advance on costs that it owed and was not deprived of justice. Therefore, its action, seeking the annulment of decisions made by the ICC Court, is inadmissible.


Paris Court of Appeal, 29 January 2019,Venezuela v. Rusoro Mining Limited,no. 16/20822

On 29 January 2019, the Paris Court of Appeal annulles an international investment award considering that the tribunal overpassed its ratione temporisjurisdiction having wrongly calculated the compensation for the expropriation.

Rusoro Mining Ltd (“Rusoro”) is a Canadian company engaged in the acquisition, exploration and development of gold mines. (The chief executives of the company are Russian nationals, and the case was covered by Russian media –[1], Novaya Gazeta[2]and other sources[3]). Between 2006 and 2008, Rusoro acquired 58 mining concessions in the Bolivarian Republic of Venezuela (“Venezuela”).

In 2009-2010, Venezuela adopted various export and gold exchange restrictions. Subsequently, in 2011, the Venezuelan Government adopted a decree nationalizing Rusoro’s gold mining activities.

In July 2012, Rusoro filed a request for arbitration with the International Centre for Settlement of Investment Disputes under the bilateral investment treaty between Canada and the Republic of Venezuela (“BIT”).

By an award rendered in Paris, the arbitral tribunal ordered Venezuela to pay USD 966,500,000 for the expropriation of Rusoro’s investment. Venezuela brought an action for annulment of this award.

First, Venezuela contends that the arbitral tribunal did not have jurisdiction to rule on the dispute, because amicable settlement had not been attempted.

The Court rejects the plea since it concerns the admissibility of the claims and not the jurisdiction of the tribunal. Thus, the plea cannot be considered in the framework of the action for annulment of the award, according to Article 1520 of the French Code of Civil Procedure.

Second, Venezuela argues that the tribunal did not have jurisdiction because the harm claimed by Rusoro was unrelated to an alleged violation of the BIT. In particular, the arbitral tribunal awarded Rusoro compensation for the unlawful expropriation operated in 2011. The compensation did not reflect the value of the company at a date immediately prior to the expropriation but the one at the time of the investment. Thus, the tribunal did not take into account the collapse of the stock market that occurred after that date. However, according to Venezuela, the scope ratione temporisof the BIT excluded claims where more than three years had elapsed between the time when the investor should have been aware of them and the date on which the arbitration was initiated.

Finally, Venezuela claims that the arbitral tribunal failed to perform its duties by not complying with the parties’ agreement on the standard of compensation and on the date of assessment of the damage.

The Court first points out that these pleas relate exclusively to the same subject-matter.

The Court recalls that the date to be adopted for the assessment of the jurisdiction ratione temporisof the arbitral tribunal is the date of the submission of the request for arbitration. Consequently, facts which date back more than 3 years before that date are excluded.

However, the tribunal neutralised the effects of the export restrictions imposed in April 2009. Therefore, the compensation for the damage resulting from the 2009 regulations is included in the compensation for the expropriation operated in 2011, although, the 2009 regulations are technically inadmissible ratione temporis.

As a result, the jurisdictional plea is well founded. The Court, therefore, annuls the award as it orders Venezuela to pay Rusoro Mining Ltd the sum of USD 966,500,000 for the expropriation of its investment without compensation.


Alice Clavière-Schiele, Paola Damé, Edwige Nathan, Justine Touzet and Ekaterina Grivnova