This article was published in slightly different form in the January 2008 issue of the IBA Journal.

On 29 June 2007, the French Supreme Court (Cour de cassation) handed down two decisions in which it held that—provided that it satisfies French arbitration law requirements—an international award can be executed in France, even where that award has been set aside by the courts of the State where it was issued.1 Although these two decisions—and the sequence of events in France—confirm well-established jurisprudence dating back to the Hilmarton case of 23 March 1993,2 this principle continues to fuel debate.

The claimant, an Indonesian company, had sold white pepper to the defendant, a French company, which was lost during shipping. When the French company refused to pay the claimant, the latter submitted an arbitration claim under the auspices of the International General Produce Association (IGPA). The Arbitral Tribunal issued a first award on 10 April 2001, in London, in favor of the defendant. Pursuant to its rights under the 1996 Arbitration Act, the claimant, whose claim had been dismissed, appealed to the London High Court of Justice which partially set aside the award on 19 May 2003, holding that the defendant’s refusal to pay the price of the transaction was a breach of contract. The dispute went back to arbitration and a second award was issued on 21 August 2003, this time in favor of the claimant.

The French defendant requested and obtained a decision from the Paris Tribunal de Grande Instance, on 30 September 2003, which accepted the first award of 10 April 2001 (rendered in favor of that defendant), for execution in France.3 This, of course, despite the setting aside of that award by the London High Court of Justice, and the fact that a second award had been issued by the IGPA Arbitral Tribunal.

The claimant appealed to the Paris Court of Appeal arguing that the defendant’s request to enforce the first award in France was tantamount to fraud, but the Paris Court of Appeal nevertheless confirmed, on 31 March 2005,4 the lower court’s decision.

Meanwhile, the claimant managed to obtain from the Paris Tribunal de Grande Instance an order that the second award of 21 August 2003 be accepted for execution in France. However, on 17 November, 2005, the Paris Court of Appeal overruled this decision. It held that the second award could not be enforced in France, since the first award related to the same matter between the same parties, and had already been accepted for execution in France (by the Paris Court of Appeal in March 2005). In other words, the second award could not be enforced for reasons of res judicata.

In June of this year, the French Supreme Court confirmed both decisions of the Court of Appeal.

In its first decision (relating to the Paris Court of Appeal decision of 31 March 2005), the Supreme Court confirmed the court’s findings, and held that an international arbitration award is not connected to any state legal system, and as such is a decision of international justice, whose validity should be assessed pursuant to the rules applicable in the country where its recognition and enforcement are sought. The Court added that, pursuant to Article VII of the New York Convention of 10 January 1958, the defendant was entitled to request the enforcement of the first award issued on 10 April 2001 in France, in accordance with the arbitration clause and the IGPA rules. The defendant further had the right—it was held—to invoke the French law of international arbitration (Article 1504 of the French New Code of Civil Procedure), which does not provide—as the claimant to arbitration sought—that the setting aside of an award in its country of origin prevents the enforcement of this award in France.5

In its second decision relating to the Paris Court of Appeal decision of November 2005, the Supreme Court confirmed the Court of Appeal decision. In so doing, it held that the first Paris Court of Appeal decision (of 31 March 2005, which accepted to enforce the first award), had res judicata effect, therefore preventing the enforcement of the arbitral tribunal’s (second) award of 21 August 2003.6

Whereas this second decision of the French Supreme Court is consistent with French procedural law regarding the force of res judicata,7 the holdings of the Court continue to attract a good deal of attention.8

As Emmanuel Gaillard well summarized in his commentary of the Paris Court of Appeal’s decisions of 31 March 2005,9 many authors criticize the “Hilmarton” jurisprudence—which the Supreme Court has however, once again, confirmed—on two major grounds.

First, some authors question the theoretical postulate that the validity and the enforceability of an international award should be assessed by the country where such enforceability is sought, rather than the country where the award was issued.10 This criticism, made by authors attached to the notion of an “international harmony of solutions” (that is to say that awards should be accorded the same respect wherever the venue), attracts the response that to do otherwise would not only contradict the New York Convention (which specifically allows each member state where execution is sought to control the enforceability of awards), but would—it is said—also deny the country of enforcement a legitimate control over assets located on its territory.11

Second, some authors12 argue that the solution adopted by the French Supreme Court contradicts the principle of procedural good faith in the performance of the arbitration agreement, which is simultaneously (and fiercely) defended by the French courts.13 In this respect, it cannot be denied that allowing the enforcement of an award which has been set aside at the place of the arbitration creates a type of “chase for exequatur,”14 where a party will seek to obtain the enforcement of a favorable award, as soon as they realize that the award is about to be set aside. In the present case, the violation of the principle of procedural good faith (Article 30 of the French New Code of Civil Procedure) was actually raised in the appeal by the claimant. The Supreme Court, however, did not even consider the merits of the argument, satisfying itself with a conventional reasoning based on civil procedure rules. While such reasoning is legally sound, one may question its consistency and legitimacy with regard to the principle of procedural good faith, which nowadays permeates both French procedural and substantive law.

However, regardless of these (continuing) criticisms, the French Supreme Court does not show any sign of overruling the principles espoused in Hilmarton.