Cour de Cassation Requires Parties to Invoke Irregularities Before Arbitral Tribunal and the Arbitration Institution to Avoid Waiver of Rights
Not invoking any irregularity regarding the constitution of an arbitral tribunal during the arbitration proceedings constitutes a waiver of this objection before the French judge of annulment. The French Cour de Cassation, the highest court in the French judicial system, held on 7 June 2023 (Arrêt n° 400 F-B, Pourvoi n° Y 21-24.968, Décision - Pourvoi n°21-24.968 | Cour de cassation) that this applies notwithstanding the fact that the party had already filed two unsuccessful challenges against the same arbitrator before the administering arbitration institution, thus requiring a broad and two-pronged approach.
Factual Background – Arbitrator Challenges Before the ICC Court
The French decision was rendered with regard to an ICC arbitration under the 1998 ICC Rules that had been initiated for alleged non-payment of a loan (SARL CTI Group Inc. and Pharaon Commercial Investment Group Limited v. CNAN Group Spa and International Bulk Carrier Spa and Mustapha Abdelwahab Laradji, ICC Case No. 17257/ND/MCP). An arbitral tribunal had been constituted under the auspices of the ICC and during the arbitration proceedings, one of the respondents had filed two unsuccessful challenges with the International Court of Arbitration of the ICC (“ICC Court”) against the co-arbitrator nominated by the claimants. Both challenges had been rejected in September 2011 and February 2012, respectively. Subsequently, these were not maintained before the arbitral tribunal, and a majority award was ultimately rendered in favour of the claimants.
The Annulment Proceedings Before the Cour d’ Appel de Paris
Claiming that the arbitral tribunal had not been regularly constituted, the respondents then filed an application for annulment of the award with the competent French courts. This application, however, was rejected by the Cour d’ Appel de Paris in June 2021. For the Cour d’ Appel de Paris, the fact that the respondents had not maintained the challenges before the arbitral tribunal was decisive in holding that there were no grounds for annulment. The Cour d’ Appel de Paris referred to Art. 1466 of the French Code of Civil Procedure, which provides in relevant parts 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.”
Relying on a literal reading of this provision, the Cour d’ Appel de Paris expressly confirmed that “the irregularity must be invoked 'before the arbitral tribunal', regardless of the involvement of an arbitration institution. For the Cour d’ Appel de Paris, “invoking” at the very least meant voicing an express reservation of rights before the arbitral tribunal. Accordingly, if a party fails to maintain its challenge before the arbitral tribunal, the party has waived their right to rely on that specific ground.
The Cour d’ Appel de Paris saw no room for an exception to the above rule. While Art. 1466 of the French Code of Civil Procedure generally provides for an exemption when there is a “legitimate reason”, in the eyes of the Cour d’ Appel de Paris, this requirement was not met in the case at hand. Remarkably, the fact that challenge decisions rendered by the ICC Court neither are subject to appeal nor have a res judicata effect nor are binding on the French courts did not constitute legitimate reasons for exemption.
On further appeal to the Cour de Cassation, the respondents, inter alia, nonetheless again put forward the argument that both unsuccessful challenges filed before the ICC Court were not subject to appeal under the applicable ICC Rules. According to the appeal, the respondents had “a legitimate reason” under Art. 1466 of the French Code of Civil Procedure for not subsequently raising the irregularity pertaining to the constitution of the arbitral tribunal before that tribunal.
On 7 June 2023, the Cour de Cassation however confirmed the position of the Cour d’ Appel de Paris, holding that “[t]he fact that an arbitrator has been unsuccessfully challenged by the institution responsible for organising the arbitration on the grounds of an alleged lack of independence or impartiality does not constitute a legitimate reason for not invoking, before the arbitral tribunal, the irregularity of its constitution for the same reason.”
The Strict Approach Chosen by the Cour de Cassation on Appeal
Following the Cour d’ Appel de Paris, the Cour de Cassation also opted for a strict application of Art. 1466 of the French Code of Civil Procedure and also held that “invoking of the irregularity” before the arbitral tribunal could be done either via an express objection or in the form of reservation of rights.
The Cour de Cassation also confirmed that the respondents’ argument regarding the lack of appeal of challenge decisions before the ICC Court does not constitute “a legitimate reason” under Art. 1466 of the French Code of Civil Procedure. For the Cour de Cassation, while the applicable ICC Rules provided that “[t]he decisions of the Court as to the appointment, confirmation, challenge or replacement of an arbitrator shall be final”, parties must maintain their objections before the arbitral tribunal in question to preserve the right of setting aside the award based on said grounds at a later stage before the French court. This was regardless of whether the objections or irregularities were submitted before the ICC Court and rejected by the same as per the Cour de Cassation’s conclusion.
For future arbitrations, in disputes possibly involving French courts during the recognition and enforcement phase, this quite strict interpretation of Art. 1466 of the French Code of Civil Procedure must be kept in mind.
Whether or not an arbitration institution provides for rules regulating the challenging of arbitrators therefore becomes less important in the face of these decisions – as even in cases where parties have agreed to submit their disputes to arbitration institutions providing for such rules, practitioners must consider the post award phase early on and object to such an irregularity or any other irregularities before the arbitral tribunal to preserve their right of annulment before the French court. To maintain this right, parties at the very least should submit reservations regarding aspects falling under the power of the arbitration institutions.
Practitioners should also expect French courts to apply the Cour de Cassation’s interpretation of Art. 1466 of the French Code of Civil Procedure not only to challenges of arbitrators, but to any procedural irregularity during the arbitration proceedings that a party wishes to raise subsequently. Indeed, Art. 1466 of the French Code of Civil Procedure applies to all annulment grounds listed in Art. 1520 of the French Code of Civil Procedure, which provides for a wide scope of application of this jurisprudence.