French Supreme Court requires parties to raise irregularities, not just before the arbitral institution to avoid waiver in set aside proceedings, but also before the arbitral tribunal
01 August 2023 01 August 2023
UK & Europe
French Supreme Court requires parties to raise irregularities, not just before the arbitral institution to avoid waiver in set aside proceedings, but also before the arbitral tribunal (CNAN Group SPA and Bulk Carrier SPA v CTI Group Inc)
Arbitration analysis: The French Supreme Court (the Cour de cassation) held, in the context of set aside proceedings, that a party’s unsuccessful challenge before an arbitral institution of an arbitrator for an alleged lack of independence or impartiality is not a legitimate reason for failing to raise, before the arbitral tribunal, the tribunal’s irregular constitution. The court referred to Article 1466 of the French Code of Civil Procedure (FCCP) which provides that ‘[a] party which, knowingly and without a legitimate reason, fails to object to an irregularity before the arbitral tribunal in a timely manner shall be deemed to have waived its right to avail itself of such irregularity’. It held, on this basis, that a party’s failure to invoke the irregular constitution of the tribunal before the arbitral tribunal constitutes a waiver by that party of the right to avail itself of such irregularity in set aside proceedings in France. Written by Nadia Darwazeh, Partner at Clyde & Co and Remi Sassine, Associate at Clyde & Co.
CNAN Group SPA and Bulk Carrier SPA v CTI Group Inc and others Pourvoi n° Y 21-24.968
This analysis was first published on Lexis+® UK on 16 June 2023.
What are the practical implications of this case?
The Cour de cassation’s decision is an important one for arbitration practitioners to be aware of if they want to preserve their client’s rights in potential set aside or enforcement proceedings in France.
Indeed, practitioners must be cognisant of the fact that a challenge of an arbitrator for alleged lack of independence or impartiality made before an arbitral institution is insufficient to preserve a party’s right to raise such irregularity before the French courts in set aside proceedings. The irregular constitution of the tribunal (due to a lack of independence or impartiality of an arbitrator in the present case) must also have been raised before the arbitral tribunal.
This rule stems from a literal reading of Article 1466 of the FCCP, which provides that a party must ‘object to an irregularity before the arbitral tribunal’. As such, the Paris Court of Appeal judgment of 15 June 2021, which was confirmed by the present Court de cassation decision, expressly stated that ‘[i]t follows from [article 1466] that the irregularity must be invoked 'before the arbitral tribunal', which is not the same as the institution in charge of organising the arbitration’ (Paris Court of Appeal, 15 June 2021, no 20/07999).
A question arises as to what is meant by the word ‘invoke’ (‘invoke’ an irregularity before the arbitral tribunal) used in the Cour de cassation and Paris Court of Appeal decisions. Must a party expressly object before the arbitral tribunal, as the wording of Article 1466 of the FCCP (a party must ‘object to an irregularity’) would suggest? Or does a party’s reservation of rights suffice to preserve its right to raise the irregularity subsequently in set aside proceedings? In its judgment of 15 June 2021, the Paris Court of Appeal considered that a reservation of rights sufficed, stating that a party must ‘expressly object or at the very least [express] reserves before the arbitral tribunal’.
Practitioners should expect this rule to apply not only to the irregular constitution of an arbitral tribunal, but also to any procedural irregularity during the arbitral proceedings that a party wishes to raise subsequently. Indeed, it is well established under French law that Article 1466 of the FCCP applies to all set aside grounds listed in Article 1520 of the FCCP, except to the specific ground under Article 1520,5° according to which the recognition and enforcement of an award cannot be enforced if it is contrary to substantive international public policy (Paris Court of Appeal, 10 January 2023, no 20/18330).
What was the background?
During the ICC arbitration proceedings, one of respondents submitted before the International Court of Arbitration of the ICC (ICC) two challenges against the arbitrator appointed by the claimants. These challenges were rejected. The arbitration proceedings continued, and the arbitral tribunal ultimately rendered an award in favour of the claimants.
The respondents sought to set aside the award in France on the basis of, inter alia, Article 1520,2° of the FCCP, namely that the arbitral tribunal had not been properly constituted.
On 15 June 2021, the Paris Court of Appeal held that the set aside application made on the basis of Article 1520,2° of the FCCP was inadmissible. It ruled that a party’s failure to raise an irregularity in the arbitral tribunal’s constitution before the arbitral tribunal itself constitutes a waiver of its right to avail itself of such irregularity before French courts in set aside proceedings.
The respondents in the arbitration lodged an appeal against the Paris Court of Appeal judgment. They argued that the court had expressly noted that the parties had challenged the arbitrator before the ICC and that these challenges had been rejected. The respondents claimed that they had therefore a legitimate reason to refrain from making the challenge once again before the arbitral tribunal, which, they argued, would have been rejected.
What did the court decide?
The Cour de cassation upheld the Paris Court of Appeal judgment of 15 June 2021.
It stated that a party’s unsuccessful challenge made before an arbitral institution against an arbitrator for alleged lack of independence or impartiality does not constitute a legitimate reason not to invoke it before the arbitral tribunal.
In this case, the court observed that the Paris Court of Appeal had expressly noted that the respondent which submitted the challenges to the ICC against the arbitrator argued the merits of its case before the arbitral tribunal, without raising the alleged irregularity of the constitution of the tribunal.
The court concluded that the Paris Court of Appeal had correctly held that by failing to raise it before the tribunal, the party was deemed to have waived its right to raise this irregularity before the French courts. Thus, the set aside application made on the basis of Article 1520,2° of the FCCP was inadmissible.
Furthermore, the Cour de cassation’s decision also addressed the possibility of reviewing the independence and impartiality of arbitrators pursuant to Article 1520,5° of the FCCP, which provides that set aside applications may be made if the recognition or enforcement of the award is contrary to international public policy.
The court recalled the rule that an award rendered by an arbitrator whose lack of independence or impartiality is established cannot be enforced if such enforcement would undermine the principle of equality between the parties, their rights of defence and would be contrary international public policy. The court added that, in order to verify an arbitrator’s independence and impartiality, national courts must identify all circumstances which are likely to affect the arbitrator’s judgment and to give rise, in the minds of the parties, to reasonable doubt as to her or his independence or impartiality.
In this case, the court noted that the Paris Court of Appeal addressed the circumstances raised by the parties seeking to set aside the award and considered that they were unlikely to give rise to reasonable doubts as to the arbitrator’s independence.
The court concluded that the Paris Court of Appeal’s judgment was justified.
- Court: Cour de cassation
Judges: Mr Chauvin, chairman, Mrs Robin-Raschel, rapporteur referendum adviser, Mr Bruyère, councillor acting as senior councillor, and Mme Vignes, chamber clerk
- Date of judgment: 7 June 2023