On 9 November 2016, the French supreme administrative court (Conseil d’Etat) affirmed its power to review international arbitration awards arising from certain public law contracts, while the review of arbitral awards traditionally falls within the jurisdiction of Civil courts. In this decision, the Conseil d’Etat partially set aside an ICC award arising out of a public law contract, rendered in a Paris-seated arbitration, on the basis that it had violated a mandatory rule of administrative law. At the same time, however, the Conseil d’Etat proceeded to limit the scope of this review power.
The dispute arose from a 2004 contract awarded by Gaz de France (at that time a public agency) to STS (a construction consortium) to construct a liquefied natural gas terminal on the French Mediterranean coast. Gaz de France (now Engie) had since transferred the contract to its subsidiary Fosmax.
In accordance with the arbitration clause, a dispute arising out of a delay in the performance of STS’ obligations was submitted to an ICC tribunal. The tribunal applied French private law, and found mostly for STS against Fosmax. Fosmax subsequently applied to the Conseil d’Etat seeking annulment of the award on the basis that public law should have been applied.
The court accepts jurisdiction, but limits the nature and scope of potential review
First, the Conseil d’Etat decided that it had jurisdiction to review the award, confirming its power to review arbitral awards rendered in France, arising out of certain public contracts involving a French public entity and carried out in France, such as public procurement contracts. It thus confirmed the exception to the rule under which international arbitration awards should generally be reviewed by Civil courts.
Secondly, the Conseil d’Etat defined the strict limits of its power to review arbitral awards.
When reviewing an award, the Conseil d’Etat must first verify the lawfulness of the arbitration agreement. It then enumerated the only procedural grounds on which an award could be set aside: if the tribunal erred in the determination of its jurisdiction; if the tribunal was improperly constituted; if the tribunal exceeded its powers; if it failed to give reasons; if it failed to respect due process; or if there was a breach of public policy. The Conseil d’Etat also defined the public policy grounds, providing further limits to the review: if the object of the contract is illegal, if the consent of the parties was severely flawed, or if the award disregarded mandatory rules specific to French public entities.
In a significant departure from French civil procedure, the Court found that it could decide on the merits of the case if the award were to be set aside. However, this could only be done with the consent of the parties.
In the case at hand, the Conseil d’Etat found that although the ICC tribunal had erred in applying private law, this did not fall within one of the limited grounds for annulment it had enumerated. However, it also found that the tribunal had disregarded a mandatory rule of administrative law allowing a public entity to claim for costs for instructing a third party to carry out the work required due to a breach. Therefore, the tribunal had wrongly rejected Fosmax’s claim for payment by STS of such costs.
Similar review to the civil system
The Fosmax decision confirms that international arbitral awards involving certain public law contracts can be subject to the control of the Conseil d’Etat. In substance, however, the limited grounds for annulment are almost identical to those applied by civil courts, albeit with the addition of a specific requirement for the tribunal to give reasons for its decision.
The Conseil d’Etat‘s power to potentially review on the merits appears more controversial, being contrary to the general conception applied by French Civil courts of international arbitration awards as part of an international legal order, beyond a national courts’ review. However, this is limited to cases where consent exists, representing the parties’ freedom of choice, so any practical impact is likely to remain limited.
In sum, the decision brings clarification in the occasionally uncertain distinction between the public and private law French court systems. In practice, the limits on the Conseil d’Etat‘s jurisdiction implies that its reviews of arbitral awards are likely to remain rare. Furthermore, the general principles of review adopted are similar to those of the French civil courts – thus reinforcing the general approach of non-interventionism in the arbitral process.