In 2011, a reform of French law modified several aspects of international arbitration and of the remedies available in domestic law to set aside arbitration awards.
It entered into force on May 1st, 2011 (decree no. 2011-48 dated January13th, 2013).
This reform follow the previous reforms dated May 14th, 1980 and May 12th, 1981, which had revamped the matter with provisions favorable to arbitration that however ended up leaving a few practical difficulties.
These difficulties are what the 2013 texts attempted to solve.
Through this reform the legislator chose to categorize the provisions of the new decree which pertain to international and domestic arbitration in a single Book IV entitled “Arbitration” in the Civil Procedure Code (CPC) which is entirely dedicated to arbitration (Articles 1442 to 1527 of the CPC).
In the framework of these provisions, a relevant case, AM Company (Miami) v. VA Company (Dubai), gave rise to two Orders from the Civil Procedure Assessor and one Order from the Court of Appeals dated March 19th, 2015, May 7th, 2015 and January 10th, 2017 respectively.
The legal issue pertains to the admissibility of the motion to set aside an international arbitration award from the International Chamber of Commerce (CCI) in light of the provisions stemming from the 2011 reform.
- As a reminder, the only admissible remedy in matters of international arbitration, pursuant to Articles 1518 and 1519 of the CPC, is the motion to set aside brought to the state Court of Appeals in whose jurisdiction the award was issued.
The French legislator, in the 2011 reform, upholds the general principle of the sole remedy to set aside an arbitration award from Article 34 of the model law of the United Nations Commission on International Trade Law (UNCITRAL) regarding international arbitration in commercial matters.
This principle is set out in Article 1518 of the CPC in the following, concise fashion: “The award issued in France in matters of international arbitration may only be subject to an action for annulment”.
It is applicable to arbitration awards issued in foreign countries.
Additionally, Article 1526 of the CPC, included in Section 3 entitled “Provisions applying to awards issued both in France and in foreign countries”, provides that “The action for annulment brought against the award and the appeal against the order granting domestication have no suspensive effect.”
- Article 1520 of the CPC establishes an appropriate action for annulment by setting out a limitative list of the five grievances that constitute admissible grounds for such an action:
« The action for annulment is only available if:
1° the arbitration court wrongly determined that it had or lacked jurisdiction; or
2° the arbitration court was irregularly constituted; or
3° the arbitration court ruled without complying with its conferred mandate; or
4° the adversarial principle was not upheld; or
5° the recognition or enforcement of the awards runs contrary to international public policy ».
The French legislator thus clearly chose to uphold the general principle of sole remedy and limited the cases of admissibility.
- This remedy is only available for a period of one month from the notification of the award (Article 1519 of the CPC): “The action for annulment is brought before the Court of Appeal from the jurisdiction in which the award was issued. This remedy is admissible as soon as the sentence is rendered. It is no longer admissible if it has not been exercised within one month of the notification of the award.”
Thus, the Applicant in an action aimed at setting aside an award must ensure the time limit is complied with in order to avoid having a lapse of right to bring the action raised against them.
Facts of the case and proceedings of the orders of the Court of Appeals
The facts result from a commercial relationship between two companies, one of which is an American company (VA) and the other is an Emirati company (AM).
The first one is specialized in the sale and repairs of plane equipment.
The second one operates jumbo jets.
In February 2011 it entered into a contract for the sale of three turbojets to the Emirati company.
On February 15th, 2011, the three engines were delivered and received by the Emirati company in Abu Dhabi on February 16th, 2011.
Following a commercial dispute between both Parties, on January 31st, 2012 AM initiated international arbitration proceedings as per the sale contract before the International Chamber of Commerce (ICC) (Arbitrations Rules of the ICC in their version dated January 1st, 2012).
On August 23rd, 2012, the ICC appointed a sole arbitrator of Swiss nationality and determined that the place of arbitration would be Paris.
The Parties respectively submitted their briefs, exchanged exhibits and attended two hearings on May 21st and 22nd, 2013.
Given the new information and evidence contained in said briefs, the Arbitrator authorized the Parties to submit additional brief to obtain their comments.
The Arbitrator’s deliberation was initially set for April 26th, 2013 but the Court extended the deadline until July 31st, 2013.
The deadline was then extended several times by the Court upon request from the Arbitrator.
On May 6th, 2014, the Arbitration Court issued a sentence ordering AM to pay 724,000 USD to VA.
Refusing to comply with the order, on October 24th, 2014, AM moved to set aside the arbitration award before the Court of Appeals of Paris.
The motion to set aside was thus brought by the unsuccessful party 5 months after the arbitration award was notified to them by the ICC’s Secretariat by international courier dated May 12th, 2014.
In submissions filed on April 13th, 2015, it provided grounds for the motion to set aside the award based on Article 1520 of the CPC by arguing that:
– the order ran contrary to public policy in that it was issued after the deadline had expired,
– the Arbitration Court had ruled without complying with its conferred mandate
– it had not upheld the adversarial principle.
The Court of Appeals issued three orders:
– a first Order from the Civil Procedure Assessor dated March 19th, 2015 on the admissibility issue raised by the successful party at the arbitration,
– a second Order of the same Civil Procedure Assessor on an issue of suspension of provisional enforcement of the award raised by the unsuccessful party at the arbitration dated May 7th, 2015,
– and an Order on the admissibility of the motion to set aside dated January 10th, 2017.
The Order on the admissibility of the motion to set aside
Article 1519 of the CPC provides that: “[…] This remedy is admissible as soon as the award is rendered. It is no longer admissible if it has not been exercised within one month of the notification of the award. The notification is made by way of service unless otherwise agreed by the parties.”
Notification is defined in French law as: “The fact (generally subject to certain formal requirements) of bring to a person’s attention a fact, deed or draft deed which pertains to them individually, e.g. the fact to bring to an interested party’s attention a procedural document either by way of service, or by post, etc. […]” (Ref.: Vocabulaire juridique, presses universitaires de France, 7ème édition).
Thus there is a regular period of one month with contractual arrangements allowed.
Article 34 of the ICC Rules provides that: “Once an award has been made, the Secretariat shall notify to the parties the text signed by the arbitral tribunal, provided always that the costs of the arbitration have been fully paid to the ICC by the parties or by one of them. […]”
But in practice notification as provided for by the Arbitration Rules of the ICC in their January 1st, 2012 version causes a few issues.
The ICC Arbitration Rules currently in force (latest version: March 2017) uses the same provisions in its Article 35.
In this case, the Secretariat of the Arbitration Court notified the Award to the Parties by way of:
– international DHL courier with address for service elected at VA’s Counsel in Miami on May 12th, 2014.
– and FedEx courier with address for service at AM’s Counsel in Paris on May 12th, 2014.
VA, relying on this notification, requested that the Court rule that AM’s right to move to set aside the award had lapsed since the legal period of one month had already expired.
In answer, AM highlighted that the general principle which applied regarding the notification was the principle of notification by service provided by Article 1519 of the CPC, thus a mere notification by international mail, in this case by DHL, cannot be deemed valid.
It quoted in this regard Article 651 of the same Code which provides that: “The notification made by a process through a bailiff’s will take a form of service”.
As well as Article 680 which provides that: “The notification of a judgment to a party must contain very clearly the time-limits for a motion to set aside, appeal or appeal in cassation in the case where one of these means of review is available as well as the manner in which such review action may be brought; it will, further, indicate that the originator of an abusive or dilatory review action may be ordered to pay a civil fine and a compensation to the other party.”
The mere notification by DHL or FedEx would not be valid and the only exception to that rule would be the case in which the Parties clearly and unequivocally provided that other terms would apply.
The Civil Procedure Assessor rejected the objection to admissibility raised by VA and found in an Order dated March 19th, 2015 “that a notification which, as is the case here, does not mention the existence and the conditions for the exercise of remedies cannot validly set in motion the running of time for the deadline which applies to them […]”.
In so ruling the French Court of Appeals anchored international arbitration in French domestic law and somewhat set aside the principle of the autonomy of arbitration
Internationalists may find this regrettable.
The enforcement of the exception contained in Article 1519 of the CPC which opens up the possibility to choose different terms for the notification can only be implemented through a clear, unequivocal manifestation of the Parties’ will.
In the Order, the Assessor adds and specifies that this will cannot result from the mere agreement to comply with the general provisions of the Arbitration Rules.
In other words, the mere agreement to the rules of an arbitration institution could not set aside the enforcement of the guarantees set out by Article 1519 of the CPC.
This is the takeaway from this caselaw.
The exception contained in this Article is subject to the presence of an express, unequivocal will to implement the exception.
One solution would thus be to keep the notification by international mail (FedEx, DHL, Aramex etc.) with an official letter including the mandatory mentions set out in Article 680 of the French CPC.
The Order on the suspension of the provisional enforcement of the award
An application for the suspension of the provisional enforcement of the arbitration award was brought by AM before the Civil Procedure Assessor.
It argued that the seizure of one of its three jumbo jets caused it serious difficulties and that AV did not provided sufficient guarantees in case of a restitution of monies paid.
The application was denied in a standard way due to the lack of evidence regarding the financial difficulties of the Applicant on the one hand and to the absence of collection risk within the territory of the United States of America on the other hand.
Internationalists will rejoice at this order which sets aside any judicatum solvi.
The Order on the motion to set aside
En ce qui concerne la demande d’annulation elle-même, le recours n’est recevable que s’il se fonde sur l’un des griefs limitativement énumérés à l’article 1520 du même Code. As far as the motion to set aside itself is concerned, the remedy is only admissible if it is grounded on one of the grievances from the limitative list set out in Article 1520 of the same Code.
As grounds for its motion to set aside the arbitration award, AM, as the Appellant, relied on violations of Article 1520 of the CPC.
Additionally, AM claimed that a breach of international public policy resulted from the fact that the Arbitration Court had, at its discretion, extended the deadlines for the proceedings, and that this was in violation of Article 30 of the ICC Rules which provides that the Arbitration Court issues its final award within a time period of six months.
But the Court of Appeals of Paris, in its order dated January 10th, 2017, ruled that this argument could only be denied by confirming that: “it was for the international arbitration Court of the ICC, as part of its institutional functions of organizing and monitoring the proceedings to extend on behalf of the parties the time within which the award was to be issued.”
Thus, the French Court confirms the role of the Arbitration Court in organizing and monitoring the proceedings.
The other argument raised by the Appellant, having regard to Article 1520 of the CPC, is the violation of the adversarial principle. It argued that the Arbitration Court had denied ex officio some requests without having invited the Applicant to provide grounds or details regarding them which would be infringing the adversarial principle.
The Court of Appeals of Paris confirmed, in a standard way, the Arbitration Court’s discretionary power in conducting the proceedings.