By Barthélemy Cousin and Vincent Béglé
France’s position as one of the most liberal arbitration regimes in the world will be reinforced when its overhaul of the French arbitration law (Decree No. 2011-48, the “Act”) comes into effect on 1 May 2011. The country traditionally favours arbitration and commentators agree that the Act’s liberalism is designed to consolidate the position of Paris as one of the most frequently chosen seats for international commercial arbitration.
This revision of the arbitration sections of the French civil procedure code (CPC) will apply as much to domestic arbitration as to international arbitration. The Act, which codifies case law, introduces some remarkable innovations, aimed at simplifying and speeding up recognition and enforcement of arbitral awards.
Enforcing awards faster
The Act’s most emblematic innovation is the power it gives parties to agree in advance to waive the right to set aside an international arbitral award (1522 CPC). Such a waiver, which is only available in a few countries, can be included in the arbitration agreement or the arbitration rules. This provision will apply to awards rendered by any arbitral tribunal constituted after 1 May 2011. In such a case, an international arbitral award rendered in France would become immutable, as it could not be set aside in France. In the case of fraud however, an application for revision of the award will still be possible (1502 CPC) – besides, an appeal against the grant of the exequatur order to the award will always be available (1522 CPC).
There is nothing to suggest that an express waiver by the parties, especially if made within an arbitration clause, cannot be made before the Act comes into force. Waivers of available appeals against awards are often found in arbitration clauses. From now on, particular attention will need to be given to their precise wording (the specific scope of the waiver). Arbitration clauses entered into well before this reform run the risk of creating unintended consequences. It would be prudent to check, in international contracts already entered into, the wording of waivers in any arbitration clauses where the seat is in France.
“The Act’s most emblematic innovation is the power it gives parties to agree in advance to waive the right to set aside an international arbitral award”
Two new provisions relate to the notification of awards, a stage that triggers various appeal time limits. Until now, notification of an award to a party required a prior “exequatur” order from the state court, followed by service of the award and the order by a bailiff. This can take several months, depending on the country in which the party to be notified is located. When the Act comes into force, the notification of the award will no longer be contingent on the prior “exequatur” order (1484, 1494, 1519, 1522 CPC). Instead, notification can be effected as soon as the ruling is rendered. Further, service by a bailiff will no longer be mandatory if the parties have agreed on another method of service, such as notifying the award by e-mail – a cheaper and faster route.
Confidentiality is another important area to check in existing clauses before the Act comes into force (and for future clauses after it comes into force). The terms of the Act seem to make the confidentiality of international arbitration the exception rather than the rule. In practice, confidentiality will often be preserved through the arbitration rules, which usually provide for the confidentiality of the proceedings. In some cases, particularly ad hoc arbitrations, the confidentiality of international arbitration can only be ensured by the parties making an express provision in their clause, or by reference to certain rules.
The Act will expressly recognise a universal jurisdiction of the French courts in any case where a party is denied justice in an international arbitration, even if there is no link with France (1505 CPC). The “denial of justice” is not defined by the Act, but there is little doubt that this international jurisdiction will attract parties to Paris who are arbitrating in another country and unable to obtain justice because of fraud or for political reasons.
The codification of case law
The Act gives flexibility both to the form and to the content of arbitration agreements. The new wording reflects wide recognition of the validity of arbitration agreements. An international arbitration clause “is not subject to any condition as regards its form” (1507 CPC), and therefore will be effective without the need for it to be expressed in writing, provided it comes with valid evidence. However, the enforcement of an award rendered on the grounds of such an unwritten clause would not benefit from the 1958 New York Convention, requiring written arbitration agreements. In addition, the Act also gives effect to an arbitration clause appearing in a chain or group of successive or separate contracts.
An arbitration agreement which does not state the method used in appointing arbitrators will still be valid and effective. The new legislation contains supplementary rules to ensure that an arbitral tribunal is seized and arbitrators are appointed by effectively filling in gaps in the agreement and curing pathological clauses.
“there is little doubt that this international jurisdiction will attract parties to Paris who are arbitrating in another country and unable to obtain justice”
The jurisdiction of the arbitral tribunal is strengthened by the statement of the kompetenz-kompetenz principle (1448 CPC): a state court does not have any jurisdiction in a case related to an arbitration agreement, unless (i) the arbitrators have not yet been appointed and (ii) the arbitration agreement is manifestly void or inapplicable. In other words, only the arbitrators have the right to declare themselves not competent. This strict rule can be contractually modified by the parties in international disputes.
The Act creates a new position of “supporting judge” (the juge d’appui), to ensure that arbitration progresses effectively. The supporting judge has considerable powers to deal with the difficulties that can arise during the appointment of arbitrators and the constitution of the arbitral tribunal (1452-1454 CPC), the retirement of arbitrators (1456 CPC) or the interruption of their mandate as a result of resignation or some other impediment (1457 CPC). These rules can be modified by agreement between the parties for international disputes.
When the arbitral tribunal is not yet constituted and in situations of urgency, the state courts have complementary powers to impose interim or conservatory measures. To obtain evidence, the supporting judge is always competent when the evidence is held by a third party (1469 CPC). The judge’s competence over evidence held by a party to the arbitration will cease as soon as the arbitral tribunal is constituted (1449 CPC).
Entry into force
The new provisions will only apply to arbitration agreements entered into after 1 May 2011. They will, in part, only apply to arbitral tribunals constituted after 1 May 2011 and, as far as their immediate enforceability is concerned, to international or foreign awards only rendered after the same date.
The new Act clarifies and simplifies the existing provisions considerably. Despite being very comprehensive, however, some questions still remain. For example, the reform has not been used as an opportunity to address the recent debate in France on arbitrations involving the state.
Overall the Act has achieved the objective of innovating, simplifying and strengthening French arbitration law – and has consolidated the position of Paris as an attractive arbitration seat. This reform reflects strong political support for international arbitration – directly in line with recent investments offered by the French government to the International Chamber of Commerce, aimed at anchoring the headquarters of the world’s biggest arbitration institution in Paris.
Barthélemy Cousin is a partner and Vincent Béglé is a senior associate in our Paris dispute resolution department.