French Arbitration Law Reform
Thirty years ago, the Decrees of 14 May 1980 (relating to domestic arbitration) and 12 May 1981 (relating to international arbitration), which respectively inserted in the French Civil Procedure Code (“CPC”) Articles 1442 to 1491 and Articles 1492 to 1507, propelled France in the vanguard of nations nurturing a strong arbitration culture, and a pro-arbitration, non-intrusive judiciary.
However, the competitive advantage gained by the novelty of the system which France had then put in place slowly eroded as other countries modernised their own arbitration laws.
Moreover, case law had filled in some gaps left in the system and practitioners, academics and judges were requesting that the solutions found over the last thirty years by French courts (and also a few foreign courts) be consolidated in statutory provisions, since France, as a civil law country, has no precedent rule.
A more modern domestic and international arbitration law was thus felt to be due: the Comité Français de l’Arbitrage started preparing a first draft of the reform in 2006 and the final draft was submitted to the Ministry of Justice in 2010. This process resulted in a decree Nr. 2011-48 dated January 13, 20111 .
This decree maintains the duality of rules applicable to domestic and international arbitration, but changes the previous numbering of CPC Articles: CPC Articles 1442 to 1503 are devoted to domestic arbitration, and CPC Articles 1504 to 1527 to international arbitration.
General thrust of the reform
The reform has many facets:
- Entering into an arbitration agreement once a dispute has arisen, absent a previous arbitration clause, is made simpler.
- The enforcement and the service of awards upon litigants are easier.
- The authority of the arbitral tribunal is affirmed in the area of interim measures.
- The place and role of the supporting judge is clarified.
- The provisions relating to appeals and setting aside actions are improved.
Entry into force
The new statutory provisions of the CPC shall enter into force on 1st May 2011.
In more detail
Case law had determined that an arbitration agreement is valid for several contracts if it is inserted in one and the other contracts are connected to the former2, or when parties to a contract which contains an arbitration clause have agreed to perform it3 : This is now reflected in the wording of the new CPC Article 1442-2.
The new CPC Article 1447 expressly states that “the arbitration clause is independent from the contract to which it refers; it is not impacted by its fate”. This reaffirms the principle of the autonomy of the arbitration agreement, separate from the contract in which it is inserted.
The new CPC Article 1456-2 provides that “The arbitrator, before accepting his appointment, must disclose any circumstance which may affect his independence or impartiality”. This provision imposes an obligation of sincerity on the arbitrators: they have a personal duty to disclose to the parties any potential cause for objection. Where one of the parties has knowledge of a fact which leads it to doubt the arbitrator’s impartiality, even when this has not been disclosed by the arbitrator, this party must challenge that arbitrator’s appointment within one month of becoming aware of same, before the supporting judge, or its right to challenge will be lost. If the undisclosed cause for recusal is discovered by one of the parties after the arbitrator has been appointed but before the award has been rendered, the arbitrator may be removed either by the arbitration institution or by the supporting judge. Once an arbitrator has been removed, the arbitration proceedings may resume once his replacement is appointed (CPC Article 1473).
The arbitrators are now under a duty of celerity (CPC Article 1464-3), which is a duty of care and not a duty to produce a result, and in domestic arbitrations, unless the parties agree otherwise (i.e. opt-out), under a duty of confidentiality (CPC Articles 1464-4 and 1479), but this duty of confidentiality may also apply in international arbitrations if the parties have expressly so decided (opt-in).
In domestic arbitrations, estoppel appears in the new CPC Article1466, which provides that “a party which knowingly and without just cause refrains from invoking an irregularity before the arbitral tribunal is deemed to have waived invoking it”.
These provisions stem from case law but were not previously found in the CPC.
The decree modifies the previous statutory provisions on certain points:
The new CPC Article 1472 states that the arbitral tribunal is empowered to stay the arbitration proceedings while awaiting an event; the new CPC Article 1473 states that the death or resignation of an arbitrator no longer ends the arbitration proceedings but stays them until the arbitrator is replaced.
The new CPC Article 1489 states that an appeal cannot be filed against a domestic award unless the parties agreed to it, reversing the former position which permitted appeals where parties (or the applicable arbitration rules) had not excluded that possibility.
The new CPC Article 15054 provides the support of a French judge either where the arbitration proceedings take place in France or where the parties have chosen French law to govern the proceedings. The power of the supporting judge to assist with interim measures and the production of evidence is affirmed (CPC Articles 1467 and 1468)
Regarding international arbitrations, arbitration agreements no longer need to be in writing, even if they were concluded prior to the entry into force of the reform: the new CPC Article 1507 states: “the arbitration clause is not subject to any condition of form”.
The new CPC Article 1513 draws the lesson from other current arbitration laws and allows the chair of the arbitral tribunal to decide alone when there is no majority opinion.
The new CPC Article 1522 provides that for arbitrations in which the arbitral tribunal will be constituted after 1st May 2011 and where an award will be rendered in France, the parties may at any time agree to expressly waive setting aside proceedings against that award. This is inspired by other current arbitration laws. It does not, however, preclude the parties which have done so from filing an appeal against an enforcement order, granted in France. Such an appeal would have to be based on any of the narrow grounds for setting aside an award.
Most importantly, the new CPC Article 1526 provides that setting aside proceedings against an award (wherever rendered), or an appeal against an enforcement order, granted in France, do not stay the provisional enforcement of the award or the enforcement order, unless they are stayed by a court order (which will be extremely difficult to obtain). This seminal change is designed to counter dilatory tactics in award enforcement proceedings.
In this reform, the essential features of French arbitration law, as practitioners around the world have known it for a generation, have been preserved: the effectiveness of international arbitration is ensured by a general principle of validity of the arbitration clause which allows very few exceptions and by providing when needed the assistance in the arbitration proceedings of a French judge in a supportive role only; also, once rendered, an international award exists independently of any legal system; and only minimal provisions regulate international arbitration, leaving open a wide space for contractual freedom, e.g. freeing the international arbitration clause from any formal condition, empowering arbitrators, if the parties so agreed, to condemn public order violations by a party, extending the effects of the arbitration clause to all parties involved in the performance of the contract to which the arbitration clause refers and allowing the assignment of the arbitration clause to the assignee of any party to the contract containing the arbitration clause.
The reason for the reform was not to fix something which was not broken, but to regain the attractiveness of selecting France as a venue to arbitrate, with or without French law as the procedural law, or of selecting French law as the procedural law for an arbitration taking place outside of France.
Only time (and the users of international arbitration) will tell whether this ambitious goal has been achieved.
1. Published in the Official Journal of the French Republic on January 14, 2011
2. Cour de Cassation, Commercial Chamber, ruling of March 5, 1991
3. Cour de Cassation, 1st Civil Chamber, ruling of June 25, 1991
4. Prior to the entry into force of the French arbitration law reform on May 1, 2011, case law had already widened the judge’s jurisdiction to two situations not envisioned in former CPC Article 1493: (i) the parties could amend the arbitration clause to expressly grant jurisdiction to a French judge; (ii) case law accepted the jurisdiction of the French courts in the event access to justice would otherwise be internationally denied (Cour de Cassation, 1st Civil Chamber, ruling of February 1, 2005).