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France's consistent pro-arbitration approach, illustrated in a dispute between a Swiss import/export services provider and the Republic of Benin, confirms arbitration awards can be enforced in France, even if they were previously set aside at the seat, provided none of the grounds within Article 1520 of the French Code are contravened.
The Paris Court of Appeal has cemented its 'pro' arbitration approach in a decision to enforce a €7 million award issued by an arbitral tribunal under the Rules of Arbitration of the International Chamber of Commerce (ICC), despite the award being set aside at the seat of arbitration.
Background
In 2014, Société General de Surveillance SA (SGS), a Swiss company providing services related to importing and exporting goods, and the Republic of Benin entered a contract under which SGS would provide tools and training to customs services in Cotonou, Benin's economic centre. The contract was governed by Benin law.
A dispute arose, resulting in Benin terminating payment of SGS' invoices and, subsequently, seeking to have the contract annulled through local administrative court proceedings.
As provided by the arbitration agreement in the contract, SGS launched an ICC claim in parallel.
The local courts and the arbitration awards
In early 2017, the local Beninese courts annulled the contract due to an alleged conflict with a contract entered into by Benin and a third party.
The arbitration claim continued and was heard by a tribunal seated in Burkina Faso (fixed by the ICC, as the contract was silent on the location of the seat). The arbitral tribunal issued a partial award on jurisdiction in 2018 and a final award in 2019, ordering payment of the unpaid invoices to the value of €7 million.
Benin challenged the partial award before the courts in Burkina Faso, though the award was ultimately upheld.
However, it was subsequently set aside in 2020 by the Common Court of Justice and Arbitration (CCJA), which held that it violated public policy. The CCJA's reasoning was that the partial award contradicted the 2017 judgment of the Beninese courts to annul the contract.
The final award was set aside on similar grounds by the court in Burkina Faso, the seat of arbitration, but only after an order of exequatur was granted by the Tribunal de Grande Instance of Paris on 24 May 2019 (see below).
The question – exequatur and res judicata
In accordance with French private international law, an order of exequatur, (a legal order provided by a sovereign authority, permitting the enforcement of a right within that authority's jurisdiction) is required for foreign judgments to be recognised and have full legal effect in France. A foreign judgment will only be recognised if it is in compliance with "international regularity".
An order of exequatur was granted for the final award by the Tribunal de Grande Instance of Paris on 24 May 2019, allowing for its enforcement in France. This was granted prior to the final award being set aside by the court of Burkina Faso.
Benin lodged an appeal against the order of exequatur before the Paris Court of Appeal in late 2020.
Benin argued that the exequatur of the ICC arbitration award contravened the res judicata effect of decisions of local courts, violating a principle of international public policy.
The purpose of the res judicata doctrine is to ensure the finality of judgments and avoid parties re-litigating on the same matters.
Decision
The Paris Court of Appeal held that judgments of foreign courts do not have a res judicata effect in France without the judgment itself first being granted an order of exequatur in France.
As a result, decisions made in France that breach the res judicata effect of foreign judgments without an order of exequatur do not violate French international public policy.
The Paris Court of Appeal also found that, as the arbitral award is an international legal decision not connected to any state, its validity should be assessed consistently with the laws of the state where it is being enforced.
On this basis, the enforcement request in question must be evaluated only with regard to Article 1520 of the French Code of Civil Procedure – an exhaustive list of grounds to set aside awards seated in France (e.g. if the tribunal incorrectly asserted jurisdiction).
The annulment of the award by the court in Burkina Faso, the seat of arbitration, did not fall within the scope of article 1520 and therefore had no impact on the decision regarding its enforcement in France.
Finally, the Paris Court of Appeal rejected Benin's argument that the tribunal lacked jurisdiction as the contract had been annulled by the courts of the seat of the arbitration.
The dismissal was based on the fact that the arbitration agreement is separate from the rest of the contract. A foreign judge invalidating the underlying contract had no bearing on the jurisdiction of the arbitral tribunal based on the arbitration agreement included in the contract.
Conclusion
France's consistent pro-arbitration approach continues, as it confirms decisively that arbitration awards can be enforced in France, even if they were previously set aside at the seat, provided none of the grounds within Article 1520 of the French Code are contravened.
This decision continues a general trend of pro-arbitration decisions, providing certainty for parties entering arbitration agreements.
This article was authored by Natasha Brown, trainee solicitor at Fieldfisher.