In a judgment on 11 January 2022, the Paris Court of Appeal confirmed its long-standing pro-arbitration stance by agreeing to enforce a contract-based award in SGS v Benin, despite the fact that the award had previously been set aside by the court at the seat of arbitration.
The International Chamber of Commerce (ICC) tribunal – Martin Hauser (chair), Frank Gentin (SGS's appointee) and Ouattara Aboudramane (Benin's appointee) – found the state liable for almost €7 million for breaching a service contract and for outstanding invoices under the contract.(1)
The underlying ICC awards of 6 April 2018 (partial award on jurisdiction) and 31 March 2019 (final award) remain unpublished.(2) On 20 December 2019, the final award was set aside by the Court of Appeal of Burkina Faso, where the arbitration was seated.(3) Subsequently, on 27 February 2020, the partial award was set aside by the Organization for the Harmonization of Business Law in Africa (OHADA) Common Court of Justice and Arbitration (CCJA),(4) on the ground that a Beninese court had previously annulled the contract underlying the arbitration.(5)
Benin argued that the final award had been rendered by an incompetent arbitral tribunal,(6) and that the recognition and enforcement of an award set aside at the seat would be contrary to international public policy.(7)
The Paris Court of Appeal found that the foreign court judgments were irrelevant for the purposes of enforcement in France and concluded that the final award was valid under French law.(8)
Set-aside judgment by local courts is irrelevant to enforcement in France
At the heart of Benin's argument was the relevance of the res judicata effect of the decisions of the local courts.(9) It alleged that the exequatur of the tribunal's award – wrongly upholding its jurisdiction despite the judgments of the local Beninese courts annulling the underlying contract and finding itself competent to rule on the matter, and the Burkina Faso court decision annulling the final award – would contravene international public policy in violation of the res judicata effect of decisions of local courts.(10) It noted that res judicata is a principle of international public policy. The incompatibility of an arbitral award with a foreign decision that has a res judicata effect constitutes a violation of international public policy.(11)
On its part, SGS argued that Benin's requests for recognition or exequatur of foreign court judgments – if they were to qualify as valid applications – were inadmissible before the Paris Court of Appeal seized with the appeal against an exequatur order of a foreign arbitral award. SGS stated that these were two distinct procedures under French law.(12)
In response, Benin clarified that it was not seeking to obtain exequatur of foreign judgments but to ensure their recognition based on the applicable bilateral agreement between the two states (France and Benin), pursuant to which the effects of judicial decisions were not conditional on granting of exequatur by the court seized with an enforcement request.(13)
The Paris Court of Appeal, in line with its previous decisions,(14) held that an international arbitral award, which is not connected to the legal order of any state, is an international legal decision, the validity of which should solely be determined with respect to the applicable rules of the state where recognition and enforcement is sought.(15) The Court subsequently concluded that the enforcement request had to be examined solely in light of article 1520 of the French Code of Civil Procedure, and the annulment of the award by the court at the seat of the arbitration had no effect on its recognition in France.(16)
The Court also held that the foreign court judgments do not have a res judicata effect per se in France and may not impede the enforcement of an award without the judgment first being granted exequatur in France.(17) Thus, the issue of res judicata between the court judgments and the arbitral award would have arisen only in the case of a prior recognition of a foreign court judgment through exequatur proceedings in France (while incidental recognition would not suffice).(18) On the other hand, breach of the res judicata effect of a foreign judgment, not granted exequatur in France, would not constitute a violation of French international public policy.(19)
Existence of tribunal's jurisdiction, despite a local court ruling annulling the underlying contract
Benin also argued that the tribunal lacked jurisdiction since the underlying contract had been annulled by the local Beninese court.(20)
The Paris Court of Appeal also rejected this argument on the ground that an arbitration agreement is in principle separable from the rest of the contract, and the existence and the validity of an arbitration agreement should be determined primarily in light of the common intent of the parties.(21)
A ruling of a foreign judge invalidating a contract and finding its own jurisdiction therefore had no impact on the arbitral tribunal's jurisdiction.(22) By examining the contract's arbitration clause – the validity of which was not disputed(23) – the Court was satisfied that the tribunal had validly upheld its jurisdiction.(24)
France is a rare jurisdiction where legislation and supporting jurisprudence permits the enforcement of an award set aside at the seat. Often, even in pro-arbitration jurisdictions, such as the United Kingdom or the Netherlands, the court seized with a request to enforce will ordinarily respect a foreign judgment setting aside an arbitral award, unless that decision is found to be contrary to basic principles of honesty, natural justice, due process or domestic public policy.
This case confirms France's long-standing favourable approach towards enforcement of foreign awards and its attractiveness as a place where enforcement of a foreign award, set aside at the seat, can be successfully sought.
For further information on this topic please contact Christophe Seraglini or Ketevan Betaneli at Freshfields Bruckhaus Deringer via email ([email protected] or [email protected]). The Freshfields Bruckhaus Deringer LLP website can be accessed at www.freshfields.com.
Valentine Gaignard, trainee, assisted in the preparation of this article.
(1) "Paris Court enforces ICC awards against Benin, despite set-aside at seat", 14 January 2022 (available here); see also, Paris Court of Appeal, 11 January 2022, No. 20/17923, République du Bénin v Société Générale de Surveillance SA (SGS) (judgment), paragraphs 6, 12 (available here).
(4) CCJA is the supranational court of the Organization for the Harmonization of Business Law in Africa, an organisation that currently covers 17 countries in West and Central Africa. CCJA functions as the highest national court of its member states.
(5) Judgment, paragraphs 10-11; the CCJA decision, dated 27 February 2020, no. 077/2019/PC, pages 3-4 (available here).
(8) Id, paragraphs 28-32, 46-47, 53-57, dispositive.
(9) Id, paragraphs 26, 33, 48.
(14) See, for example, Court of Cassation (1st Civil Chamber), 29 June 2007, No. 05-18.053, PT Putrabali Adyamulia v Rena Holding, page 2; Court of Cassation (1st Civil Chamber), 8 July 2015, No. 13-25.846, RyanAir v SMAC, page 1.
(16) Id, paragraphs 28-29, 31. Article 1520 of the Code of Civil Procedure sets out the five grounds on which an award may be refused recognition and enforcement in France. Annulment of the award at the seat is not listed among them.
Since 1984, French case law has confirmed that an arbitral award that has been set aside in its state of origin may nonetheless be recognised by French courts. See Court of Cassation (1st Civil Chamber), 9 October 1984, No. 83-11.355, Société Pabalk Ticaret Limited Sirketi v Société Norsolor; Court of Cassation (1st Civil Chamber), 23 March 1994, No. 92-15.137, Société Hilmarton Ltd v Société Omnium de traitement et de valorisation (OTV). For a landmark decision, see Court of Cassation (1st Civil Chamber), 29 June 2007, No. 05-18.053, PT Putrabali Adyamulia v Rena Holding.
(17) Judgment, paragraph 30. This is in line with previous court decisions in France. See, for example, Court of Cassation (1st Civil Chamber), 11 February 2015, No. 13-17.203, Atlantique Telecom v Planor Afrique, page 2.
(21) Judgment, paragraph 38. See also the landmark decision of the Court of Cassation (1st Civil Chamber), 20 December 1993, No. 91-16.828, Comité Populaire de la Municipalité de Khoms El Mergeb v Dalico Contractors, page 1 (holding that "the arbitration agreement is legally independent of the main contract containing or referring to it, and the existence and validity of the arbitration agreement are to be assessed, subject to the mandatory rules of French law and international public policy, on the basis of the parties' common intention, with no reference to any national law"). (This is an unofficial translation.)