Can you still enforce awards in France that have been set aside?

In this article, Clyde & Co explores the possibility of enforcing arbitral awards that have been set aside by a court in the seat of arbitration. Clyde & Co’s international arbitration team in Paris, associate Remi Sassine and jurist Dilara Khamitova, consider this subject from a French perspective and draw on France’s arbitration-friendly approach.

France is widely recognised as a leading arbitration-friendly jurisdiction. Indeed, France earns this distinction because of its approach to recognition and enforcement of arbitral awards which is more favourable than the standard set in the New York Convention. This primarily concerns Article V(1)(e) of the New York Convention, which allows domestic courts to refuse the recognition or enforcement of awards that have been set aside or suspended in the country where that award was issued. Courts in most jurisdictions are guided by this rule, whereas French courts have adopted a different view.

Articles 1520 and 1525 of the French Code of Civil Procedure (the “CCP”) do not list setting aside of an international arbitral award by the court at the seat of arbitration abroad as a ground for refusing its enforcement.[1] French courts rely on Article VII (1) of the New York Convention and the above provisions of the CCP when examining applications for recognition and enforcement of arbitral awards.[2]

Since 1984, Norsolor,[3] Polish Ocean Line,[4] Hilmarton,[5] Chromalloy[6] and Putrabali[7] have become recognised as major French case law precedents on the recognition and enforcement of annulled arbitral awards. According to the French courts, the enforceability of an international arbitral award in France is not jeopardized when it is set aside at the seat of arbitration as long as such an award does not contradict French international public policy. As the French Cour de Cassation ruled in the landmark Putrabali decision in 2007:

• an international arbitration award, which is not anchored in any national legal order, is a decision of international justice whose validity must be ascertained with regard to the rules applicable in the country where its recognition and enforcement are sought.[8]

Two recent decisions have confirmed this position, while adding a nuance to the reasoning. On 12 July 2021 and 11 January 2022, the Paris Court of Appeal held that, if a foreign decision setting aside an award has not been granted exequatur in France, then it does not prevent the enforcement of the award in France. The court made this finding on the basis that the ignorance of the res judicata effect of a foreign court decision does not in itself violate international public policy.[9]

In another decision of 13 January 2021, the French Cour de Cassation went even further.[10] The Court confirmed a judgment of the Paris Court of Appeal on 21 May 2019[11] which decided that the provisions in the CCP on recognition and enforcement of awards apply, regardless of the domestic or international nature of an award issued abroad. In that case, following French law and Article VII (1) of the New York Convention, the fact that an award rendered abroad has been set aside in the country of the seat is not a ground for refusing enforcement, even in the context of domestic arbitration. The same rule was already established by the French Cour de Cassation on 17 October 2000[12] but the issue had not been addressed since then. Although the French courts ultimately characterized the arbitration as international, the judgments are highly relevant to their effect on “domestic” arbitral awards rendered abroad.

These decisions may surprise some practitioners, since they may alert the legal certainty that parties enjoy in domestic arbitration proceedings. However, they appear to be justified from a legal standpoint. Indeed, given the rules applicable in France, the same provisions on recognition and enforcement of arbitral awards apply whether the award is issued in an international or domestic arbitration located abroad.[13] Therefore, if the award is issued abroad, even in a strictly domestic context, it is subject to the same provisions applicable to international awards, art. 1514 et seq. and 1520 et seq. of the CPC. This is further supported by the New York Convention, which does not restrict its scope to international awards but also applies to "arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards is sought" (Article I (1) of the New York Convention).

Legal scholars have also explained the approach of the French courts by considering the private nature of an award. Unlike a judgment, an award (international or domestic) is not incorporated within a ‘legal order’ because it is a private act and not a ‘legal norm’. On this basis, arbitral awards can be given legal effect in any jurisdiction and not only in that of the seat of arbitration. It therefore becomes coherent to recognize, in France, a foreign domestic award that has been set aside in the country of the seat of arbitration.

This series from Clyde & Co’s arbitration teams continues next week and will cover other contentious issues in arbitration from the perspective of jurisdictions where Clyde & Co operate.

[1] Articles 1520 and 1525 (¶ 4) of the CCP provide that an arbitral award may be set aside or its enforcement may be refused by the French courts only on the following five grounds: (i) the arbitral tribunal wrongly upheld or declined jurisdiction; (ii) the arbitral tribunal was not properly constituted; (iii) the arbitral tribunal ruled without complying with the mandate conferred upon it; (iv) due process was violated; or (v) recognition or enforcement of the award is contrary to international public policy.

[2]Nadia Darwazeh, Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention (Kluwer Law International), Chapter on Article V(1)(e), Section on France.

[3]French Cour de Cassation, 1^st civil chamber, Pabalk Ticaret Ltd. Sirketi v. Norsolor S.A., 9 October 1984, n. 83-11.355.

[4]French Cour de Cassation, 1^st civil chamber, Polish Ocean Line v. Jolasry, 10 March 1993, n. 91-16.041.

[5]Paris Court of Appeal, Hilmarton Ltd. v. Omnium de Traitement et de Valorisation, 19 December 1991, n. 90/16778.

[6]Paris Court of Appeal, Arab Republic of Egypt v. Chromalloy Aeroservices, Inc., 14 January 1997, n. 95/23025

.[7]French Cour de Cassation, 1^st civil chamber, PT Putrabali Adyamulia (Indonesia) v. Rena Holding, et al., 29 June 2007, n. 05-18.053.

[8]French Cour de Cassation, 1^st civil chamber, PT Putrabali Adyamulia (Indonesia) v. Rena Holding, et al., 29 June 2007, n. 05-18.053.

[9]Paris Court of Appeal, 12 July 2021, n. 19/11413, para. 35: “Only the recognition or enforcement of an award that is incompatible with a domestic or foreign court decision previously granted exequatur in France is likely to violate international public policy in a manifest, effective and concrete manner, it being specified that court decisions with mutually exclusive legal consequences are incompatible”.
Paris Court of Appeal, 11 January 2022, n. 20/17923, para. 54: “if French international public policy is likely to be affected by the incompatibility between an arbitral award and a decision of a foreign court which have mutually exclusive legal consequences, these decisions must be equally enforceable on French territory”.