In a recent decision (Cour de Cassation, Civ. 1, 16 December 2015, N°D14-26.279), confirming the decision of the Paris Court of Appeal (Cour d'appel de Paris, pôle 1, chambre 1, n°13/13459, 14 October 2014), the French Cour de Cassation (Supreme Court) has again emphasized the principle that the independence and neutrality of arbitrators is of paramount importance.

Background

Articles 1456 and 1506 of the French Code of Civil Procedure ("CPC") provide that an arbitrator is obliged to disclose any circumstance that might affect his independence or impartiality.

Article 1456 of the CPC (applicable pursuant to Article 1506(2)) provides that:

"Before accepting a mandate, an arbitrator shall disclose any circumstance that may affect his or her independence or impartiality. He or she shall also disclose promptly any such circumstance that may arise after accepting the mandate".

Facts

Caribbean Fiber Holdings ("CFH"), an American company fully owned by Leucadia National Corporation, and the French company Auto-Guadeloupe Investissements ("AGI") were the owners of Global Caribbean Fiber SA ("GCF"), a French submarine telephone cable company operating in Guadeloupe.

In 2008, AGI and CFH began negotiations with Columbus Acquisitions Inc and Columbus Holdings (together "Columbus") for the sale and purchase of shares in GCF. For this purpose, the parties entered into several memoranda of understanding; the latter of which was governed by Barbadian law and provided for arbitration under the rules of the International Centre for Dispute Resolution ("ICDR"), before a sole arbitrator seated in Barbados.

Ultimately, AGI did not proceed with the sale.

Procedural history

As a result, on 10 July 2009, Columbus initiated arbitration proceedings, seeking specific performance of the share sale, or in the alternative USD 990 million in damages. CFH joined itself to these claims and in addition claimed punitive damages.

Mr Henri Alvarez, partner at Fasken Martineau, was appointed as sole arbitrator in the Barbados-seated ICDR proceedings.

On 27 March 2011, Mr Alvarez issued a partial award finding that AGI had breached the terms of a binding agreement between the parties, but dismissing the claims for specific performance as well as AGI's counterclaims and deferring his decision as regards to damages and costs.

In the meantime, on 15 December 2010 Fasken Martineau had reported on its website Leucadia's finalisation of the sale of mining interests worth USD 575,000,000, with the assistance of three partners in the firm.

Columbus sought to enforce the partial award before the Paris Court of First Instance. Exequatur was granted by order for enforcement dated 20 June 2013, which AGI appealed.

The Paris Court of Appeal overruled the exequatur order, finding that the arbitral tribunal was improperly constituted and therefore that the partial award was unenforceable. Clearly reaffirming the arbitrators' duty of disclosure, the Court of Appeal specified that although the parties are supposed to search for possible conflicts of interest in public and very easily accessible sources prior to the beginning of an arbitration, they are not expected to investigate thoroughly and exhaustively within every source which might potentially be of relevance, nor are they expected to continue their research once the arbitration has started.

In light of this finding Columbus lodged an appeal before the French Cour de Cassation.

The decision

On 16 December 2015 the Cour de Cassation upheld the Court of Appeal's findings. In particular, it held that the sole arbitrator's failure to disclose his firm's role in Leucadia's transaction, which was unknown to AGI, was "such as to reasonably cause a doubt regarding the independence and impartiality of the arbitrator".

None of the grounds for appeal put forward by Columbus before the Cour de Cassation proved to be sufficient. Notably Columbus' case had been based on the incorrect reference made by the Court of Appeal to the new article 1456 of the CPC, which states: "Before accepting a mandate, an arbitrator shall disclose any circumstance that may affect his or her independence or impartiality. He or she shall also disclose promptly any such circumstance that may arise after accepting the mandate". Indeed, this provision was to apply only to arbitrations in which the arbitral tribunal had been constituted after 1 May 2011 which was not the case for Mr Alvarez's appointment. Columbus also tried to contend, albeit unsuccessfully, that the Court of Appeal had failed to explain how the non-disclosure by the sole arbitrator of his law firm's participation in the Leucadia transaction could affect his judgment.

Comment

This decision sits in perfect alignment with the strict French case law on an arbitrator's duty of disclosure, which was affirmed in particular in the Tecnimont saga.

This case reiterates the broad scope of the arbitrators' disclosure obligations under French law.  Arbitrators have a continuous obligation to disclose, throughout the arbitration proceedings, not only personal circumstances that may become grounds for a challenge to their independence and impartiality, but also factual circumstances involving the law firm in which they work. On the other hand, the parties themselves are only required to search for public and easily available information prior to the commencement of the arbitration.

Although such a broad construction of the provision now set out in Article 1456 of the CPC might lead to difficulties in practice, since practitioners do not necessarily know every client of their firm (although in most law firms computer-based systems of research help to raise awareness of potential conflicts), it is to be emphasized that this new provision simply reflects French case law at the time Article 1456 of the CPC was enacted and thus it has not, as such, changed the French courts' position in that respect. In any event, strict requirements of this nature play an important role in furthering the French courts' objective of safeguarding the integrity of international arbitration.