The approach of the French courts to violations of international public policy: Cour de cassation pinpointing recent developments and trends

  • Market Insight 2022年11月15日 2022年11月15日
  • 英国和欧洲

  • 国际仲裁

This is the first article in Clyde & Co’s latest international arbitration series covering the scope of court powers on issues or violations of international public policy across various jurisdictions. In this piece, jurist Maria Mironova, from our Paris office, provides the legal perspective from France.

Under Article 1520, 5° of the French Code of Civil Procedure (“CCP”), an arbitral award shall be set aside if its recognition or enforcement is contrary to “international public policy”[1].  

In 2017, in the Belokon case, the Paris Court of Appeal set aside a US$ 15 million arbitral award on the ground that the investor had been engaged in money laundering[2]. Subsequently, in the (long-awaited) judgment of 23 March 2022, the French Cour de cassation (Supreme Civil Court) confirmed the Court of Appeal’s reasoning (the “Belokon judgment”)[3], giving rise to much debate within the arbitration community. Although it had long been established that French courts’ approach to annulment of arbitral awards under Article 1520, 5° of the CCP is particularly narrow, the Belokon judgment finally confirmed that this is no longer the case.

Intensity of the Court of Appeal’s control: moving towards a broader standard

“Minimalist” approach

Historically, French courts have taken a strong pro-enforcement stance on the issue, based on the well-established prohibition of review on the merits[4]. The so-called “minimalist” point of view was first taken by the Court of Appeal in the Thalès case in 2004[5] and confirmed by the Cour de сassation in the Cytec case in 2008[6].

The applicable standard was based on the premise that a breach of international public policy had to be “flagrant, actual and concrete” for the award to be set aside, and that the Court of Appeal could not question the arbitral tribunal’s findings, or accept new evidence for that matter.

That said, the “flagrancy” test meant that a breach had to be strikingly obvious and incontestable and, therefore, was often criticized as being overly cautious and even superficial.

Shift to the “maximalist” approach

The “minimalist” approach seems to have shifted in 2014, when the breach no longer had to be “flagrant[7]. In 2016, the Court of Appeal added that the breach had to be “manifest”, but ruled that it had the duty to “seek, at law and in fact, all the elements allowing it to reach a decision on the alleged illegality of the contract”.  While doing this, it was bound neither by the assessments made by the arbitral tribunal, nor by the substantive law chosen by the parties[8].

The Court of Appeal’s reasoning in the Belokon case in 2017 is in fact just a continuation of this shift of view. Not only did the Court of Appeal apply the “maximalist” approach; it also asked whether there was “serious, precise and converging” evidence of money laundering operations – a low standard of proof that has been applied in matters of this kind ever since[9]. This new standard also reflects the “red flags” methodology of dealing with corruption (and, presumably, similar public policy allegations).  This allows allegations to be proved by referring to a set of indirect indicia when it is difficult to do that by adducing direct evidence[10]

On 23 March 2022, the Cour de cassation eventually confirmed the “maximalist” approach, saying that the Court of Appeal had rightly held that the inquiry into the matter “was neither limited to the evidence produced before the arbitral tribunal nor bound by [its] findings, assessments and qualifications”. The Cour de cassation also shifted from requiring the breach to be “manifest, actual and concrete” to requiring it to be merely “in a characterised manner”  -  a simpler and arguably more effective formula. 

Court of Appeal’s independent review extended to new evidence: nothing to worry about?

One concern that has been raised is that, by extending the scope of the Court of Appeal’s review, the Belokon judgment might be crossing the line of reviewing an award on its merits.

However, the Cour de cassation explicitly pointed out that the Court of Appeal “did not proceed with a new investigation or a revision of the merits of the award but made instead a separate assessment of the facts based solely on the consistency of the recognition or enforcement of the award with international public policy”.

In other words, according to the Cour de cassation, the Court of Appeal’s role does not involve revisiting the tribunal’s findings on liability or double-checking the relief granted. Its role remains within the ambit of Article 1520, 5° of the CCP and is limited to verifying whether the award’s recognition and enforcement would hinder international public policy, and nothing more.

Another safeguard is that, in the Belokon judgment, the Cour de cassation has explicitly provided that, when the Court examines new evidence obtained outside of the arbitral proceedings, its duty is to “ensure that the new evidence is being produced in conformity with the adversarial principle and equality of arms”. Indeed, it is only logical that the Court of Appeal could not possibly exercise its review by bypassing parties’ right to have access to, examine and contest new evidence.

Court of Appeal’s review of allegations raised for the first time: a promising trend?

The liberal approach adopted by French courts in the last few years can also be traced back easily to recent annulment judgments where the Court of Appeal examined corruption allegations despite the fact that they had not even been raised before the arbitral tribunal[11].

On 7 September 2022, in the Sorelec case, the Court of Appeal’s approach was confirmed. The Cour de cassation held that the Court of Appeal had been correct in examining all the evidence in support of corruption allegations, “regardless of the fact that such evidence had not previously been submitted before the arbitral tribunal”[12].

On the one hand, admissibility of public policy allegations at the annulment stage might incentivise arbitral tribunals to inquire sua sponte (on its own initiative) into issues of corruption or other violations of international public policy, provided there are “red flags” giving grounds for suspicion. There is already some arbitral case law in this vein[13], and the legal theory is favourable, holding that a sua sponte inquiry can be made (at least in corruption matters) if its subject matter is relevant to the outcome of the case and providing the tribunal does not violate the principle of due process[14]. Tribunals’ proactive attitude could thus enhance enforceability of arbitral awards.

On the other hand, there is a tangible risk that public policy allegations are saved for the annulment stage, as part of a conscious procedural strategy. In the long run, this could undermine the attractiveness of arbitration and even jeopardize France’s reputation as one of the most arbitration-friendly jurisdictions.

A recent development is that the Court of Appeal has already applied the Belokon standard of review in its latest decision of 5 April 2022 concerning a corruption matter, when it found that international public policy was violated “in a characterised manner” based on a sufficiently “serious, precise and converging” pattern of indicia, including those revealed after the arbitral proceedings concluded[15].

It remains to be seen how the “maximalist” approach will be applied going forward, and in particular whether a Pandora’s box has been opened or not. 

This series will continue to run over the coming weeks, with the England & Wales perspective to be featured next.

[1] “International public policy” under Article 1520, 5° of the CCP should be understood as an inherently French concept encompassing a set of rules and values that the French legal order may not disregard, even in international matters (Paris, 14 June 2001, Rev. arb., Vol. 2001, p. 773, note Ch. Seraglini).

[2] Paris, 21 February 2017, Belokon v. Kirghizstan, No. 15/01650, Rev. arb., Vol. 2017, p. 915, note M. Audit et S. Bollée. Note: while the most recent developments of French case law relate to allegations of corruption and money laundering, the same approach would presumably apply to other instances of international public policy violations.

[3] Cass. Civ. 1st, 23 March 2022, Belokon v. Kirghizstan, No. 17-17.981.

[4] See, for example: Cass. Civ. 1st, 12 February 2014,  No. 10-17.076 (also known as Schneider case): “Whereas the setting aside judge is the judge of the award in order to admit or refuse its integration into the French legal system, and not the judge of the case for which the parties have concluded an arbitration agreement; that having exactly retained that the action for setting aside was aimed, in reality, at a new investigation of the merits of the case, the Court of Appeal rightly rejected it”.

[5] Paris, 18 November 2004, Thales Air Défense v. Euromissile, No. 02/19606, Rev. arb., Vol. 2005, p. 771.

[6] Cass. Civ. 1st, 4 June 2008, SNF v. Cytec Industries BV, No. 06-15.320, Rev. arb., Vol. 2008, p. 473, note I. Fadlallah; see also, on a corruption matter, Cass. Civ. 1st, 12 February 2014, No. 10-17.076.

[7] See, for example, Paris, 14 October 2014, Congo v. Commisimpex, No. 13/03410, Rev. arb., Vol. 2014, p. 1030.

[8] Paris, 27 September 2016, SA Ancienne Maison Marcel Bauche v. Indagro, No. 15/12614.

[9]  See also: Paris, 16 January 2018, MK Group v. S.A.R.L. Onix, No. 15/21703, on obtaining a license for exploitation of natural resources by fraudulent means; and on contracts tainted by corruption: Paris, 28 May 2019, Alstom Transport v. ABL, No. 16/11182, Rev. arb., Vol. 2019, p. 850, note E. Gaillard, quashed because the Court of Appeal distorted the evidence (Cass. Civ. 1st, 29 September 2021, No. 19-19.769); Paris, 17 November 2020, Sorelec v. Libya, No.18/02568, Rev. arb., Vol. 2021, p. 762, note P. Mayer; Paris, 25 May 2021, Webcor v. Gabon, n°18/18708, Rev. arb., Vol. 2021, p. 778, note P. Mayer.

[10] See more on this in E. Gaillard, 'The emergence of transnational responses to corruption in international', in William W. Park (ed), Arbitration International, Oxford University Press 2019, Volume 35, Issue 1, pp. 1-19.

[11] Paris, 17 November 2020, Sorelec v. Libya, No.18/02568, Rev. arb., Vol. 2021, p. 762, note P. Mayer; Paris, 25 May 2021, Webcor v. Gabon, No.18/18708, Rev. arb., Vol. 2021, p. 778, note P. Mayer; see also Paris, 13 April 2021, AD Trade v. Guinea, No.18/09809; Paris, 5 October 2021, DNO Yemen v. Ministry of Oil and Minerals of Yemen, No. 19/16601.  

[12] Cass. Civ. 1st, 7 September 2022, Sorelec v. Libya, No. 20-22.118.

[13] Metal-Tech Ltd. v. Republic of Uzbekistan, ICSID Case No. ARB/10/3, Final award of 4 October 2013: “The Tribunal finds that it does not require the application of the rules on burden of proof or presumptions to resolve the present dispute. In this case, facts emerged in the course of the arbitration. Because those facts raised suspicions of corruption, the Tribunal required explanations”; Glencore International A.G. and C.I. Prodeco S.A. v. Republic of Colombia, ICSID Case No. ARB/16/6, Final Award of 27 August 2019: “The Tribunal agrees with Respondent that, provided that there are prima facie grounds for suspecting malfeasance, an international arbitration tribunal has the duty to investigate the facts, even sua sponte”; ICC Award in Case 14470 of 2013, in ‘ICC Special Supplement 2013: Tackling Corruption in Arbitration’: “The Arbitral Tribunal cannot disregard the objection of invalidity due to illegality of the subject-matter, especially when such invalidity is due to corruption. This objection should be raised ex officio by the arbitrator”.

[14] See, for example: E. Gaillard, 'La corruption saisie par les arbitres du commerce international', Rev. arb., Vol. 2017, pp. 805-838; D. Baizeau and T. Hayes, 'The Arbitral Tribunal’s Duty and Power to Address Corruption Sua Sponte', in Andrea Menaker (ed), International Arbitration and the Rule of Law: Contribution and Conformity, ICCA Congress Series 2017, Volume 19, pp. 243-246.

[15] Paris, 5 April 2022, Gabon v. Santullo Sericom, No. 20/03242.