In Cass. Civ. 1re, 18 novembre 2015, n°14-26.482, the French Supreme Court considered an appeal from a Court of Appeal decision seeking an opinion from the CJEU on the applicability of European competition law in the context of proceedings to set aside an ICC award.
On 18 November 2015, the Cour de Cassation (French Supreme Court) held that an appeal against the lower court’s decision to seek a ruling from the Court of Justice of the European Union (CJEU) was inadmissible.
The applicant (Genentech) sought to set aside an International Chamber of Commerce (ICC) award ordering it to pay sales royalties due under a biotechnology licence. It did so on the basis that the award breached European competition law (and therefore international public policy). In a preliminary decision dated 23 September 2014, the Paris Court of Appeal stayed the proceedings and referred the question to the CJEU. The respondents appealed to the Supreme Court against the Court of Appeal's decision to seek a ruling from the CJEU.
In declaring the appeal to be inadmissible, the Supreme Court also found that the Court of Appeal had not carried out a review of the award under Article 1520 5° of the French Code of Civil Procedure, but had simply exercised its right, under Article 267 of the Treaty on the Functioning of the European Union, to refer a question on the "interpretation of the Treaties" to the CJEU.
This decision confirms that the French courts retain the right to refer questions on the interpretation of treaties to the CJEU, even when exercising their supervisory jurisdiction over international arbitrations seated in France. It will be interesting to see how the Court of Appeal deals with Genentech's application to have the award set aside, if the CJEU eventually rules that the award breaches European competition law. (Cass. Civ. 1re, 18 novembre 2015, n°14-26.482)
Article 1520 5° of the French Code of Civil Procedure (CPC) permits an application to set aside an international arbitral award made in France where the recognition or execution of the award would be contrary to international public policy.
Article 101 of the Treaty on the Functioning of the European Union (TFEU) prohibits agreements, decisions and practices which have the object or effect of preventing, distorting or restricting competition within the internal market.
Under Article 267 of the TFEU, "any court or tribunal of a Member State" may refer a question on "the interpretation of the Treaties" (that is, the TFEU and the Treaty on European Union) to the Court of Justice of the European Union (CJEU).
On 6 August 1992, the German company Behringwerke AG concluded an agreement with Genentech, a Delaware company. The agreement was subject to German law, and provided for ICC arbitration with an arbitral seat in Paris. Hoechst GmbH (Hoechst), another German company, later succeeded to Behringwerke AG's rights under the agreement.
The agreement granted Genentech a non-exclusive global licence for the use of a biotechnology. In return for the licence, Genentech was required to pay a number of royalties, including an ongoing royalty fixed at a percentage of sales of any products made under the licence (Sales Royalty). At the time, the biotechnology was the object of a European patent. The European Patent Office subsequently cancelled the patent for lack of novelty.
A dispute arose between Genentech, Hoechst and Sanofi-Aventis Deutschland (Sanofi-Aventis) (a wholly-owned Hoechst subsidiary) as to whether Genentech was required to pay the Sales Royalty. In October 2008, Hoechst instituted ICC arbitration proceedings. On 5 September 2012, following a series of interim awards, a sole arbitrator sitting in Paris issued a third interim award (Award), finding that Genentech had used the biotechnology in the manufacture of a number of products, and was therefore liable for non-payment of the Sales Royalty. Genentech was ordered to make an initial payment totalling EUR 684,985.63. Issues relating to quantum and the overall costs of the arbitration were reserved for a later stage.
Genentech applied to the Paris Court of Appeal to have the Award set aside on the ground that its recognition or execution would be contrary to international public policy (Article 1520 5° of the CPC). In substance, Genentech submitted that European competition law prohibits the payment of royalties in circumstances where the use of a particular technology does not constitute an infringement of a patent. In this instance, the agreement only required payment of the Sales Royalty if there would otherwise have been an infringement of the patent. The sole arbitrator had found Genentech liable for non-payment of the Sales Royalty but had not found that there had been a patent infringement. As such, Genentech argued, the Award breached the principle of free competition enshrined in Article 101 of the TFEU and, in consequence, international public policy.
In a preliminary decision dated 23 September 2014 (judgment "avant dire droit", that is, a decision that does not address the merits of the case), the Paris Court of Appeal stayed the proceedings and referred the following question to the CJEU under Article 267 of the TFEU:
"Must the provisions of Article 81 of the Treaty (now Article 101 TFEU) be interpreted as precluding effect being given, where patents are revoked, to a licence agreement which requires the licencee [sic] to pay royalties for the sole use of the rights attached to the licensed patent". (Taken from the English translation of the question referred published in the Official Journal (Case C-567/14, OJ C 73/18).)
Hoechst and Sanofi-Aventis appealed to the French Supreme Court (Cour de cassation) against the Court of Appeal's decision to seek a ruling from the CJEU.
The Supreme Court held the appeal to be inadmissible.
It found that the Court of Appeal had not carried out a review of the Award under Article 1520 5° of the CPC, but had simply exercised its right, under Article 267 of the TFEU, to refer a question on the "interpretation of the Treaties" to the CJEU. Moreover, the Court of Appeal had not reached a decision on the merits of Genentech's application (it merely issued a decision avant dire droit). In such circumstances, and in the absence of an excès de pouvoir(excess of power) by the Court of Appeal or special provisions under French law, an appeal to the Supreme Court was not permitted under French procedural rules. Accordingly, the appeal was found to be inadmissible.
This decision confirms that the French courts retain the right to refer questions of the "interpretation of the Treaties" to the CJEU, even when exercising their supervisory jurisdiction over international arbitrations seated in France. Given the terms of the TFEU, the decision is, in itself, unsurprising. However, the CJEU’s response to the question posed by the Court of Appeal may prove problematic. The French courts are precluded from reviewing the merits of an arbitral award. As such, it will be interesting to see how the Court of Appeal deals with Genentech's application to have the award set aside if the CJEU eventually rules that the Award breaches European competition law.
A version of this article has previously been published by PLC