The new arbitration law of France[i] - a complete reworking of the law that has attracted much attention - will come into force on May 1, 2011. It is acknowledged by commentators that France, traditionally an arbitration-friendly jurisdiction, will, as a result of adopting Decree No. 2011-48 (the "Decree"), have one of the most liberal arbitration laws in the world. Such a liberal approach can only reinforce the position of Paris as a seat of choice for international commercial arbitration.
This overhaul of the Code of Civil Procedure ("CCP") covers the titles of the code that pertain to both domestic and international arbitration, consolidating numerous jurisprudential trends and incorporating a number of innovations.
CONSOLIDATION OF JURISPRUDENTIAL TRENDS
The Decree demonstrates a very flexible approach to the form and content of arbitration agreements.[ii]
First, the new language affirms the broad recognition afforded to arbitration agreements. Accordingly, in international arbitration, an arbitration clause "shall not be subject to any requirements as to its form" (1507 CCP), which means that an arbitration clause not recorded in writing may be proved by other means.[iii]
The Decree also confirms that an arbitration clause may be operative within a chain or group of successive or separate contracts (1442 CCP).[iv]
Moreover, if the terms that apply to the appointment of arbitrators[v] are not specified in the arbitration agreement, the agreement may still be valid and effective. Indeed, the new law contains various supplementary rules (1452-1454 CCP) which will operate to complete or cure a deficient clause, thus ensuring that arbitrators will be appointed, an arbitral tribunal constituted, and the parties' dispute brought before that tribunal.
The Decree preserves the arbitral tribunal's powers. The principle that the arbitration clause is independent of the contract to which it relates, a long-standing tenet enshrined in the new law (1447 CCP), allows arbitrators to retain their powers even where an arbitration clause is contained in a contract that is void or voidable.
The arbitral tribunal's powers are buttressed by reference to the principle of competence-competence (1448 CCP): a court may agree to hear a dispute subject to an arbitration agreement only if the arbitrators have not yet been seized of the dispute and the arbitration agreement is manifestly void or inapplicable; otherwise, only the arbitrators have the power to declare themselves incompetent to hear a dispute. In international matters, this strict rule may be relaxed[vi] by the parties contractually. There remains one problem that is not adequately settled, however: the case where an arbitration clause invoked by a party does not exist.
Nevertheless, this veritable fortress erected around arbitral tribunals does not isolate them completely. The judge acting in support of the arbitration, a role now explicitly recognized by the Decree, ensures that arbitrations proceed smoothly with a view to reinforcing the efficiency of the arbitral process. The supporting judge possesses important powers to deal with problems arising from the appointment of arbitrators and the constitution of the arbitral tribunal (1452-1454 CCP), as well as in respect of the recusal of arbitrators (1456 CCP) and interruptions to the mandate of an arbitral tribunal owing to the resignation or legal incapacity of an arbitrator (1457 CCP). In international matters, these rules, too, may be relaxed by the parties.
Where the arbitral tribunal has not yet been constituted, the supporting judge also has supplementary powers to rule on provisional or conservatory measures, where urgency warrants. In matters relating to the taking of evidence, the supporting judge has continuous jurisdiction to deal with evidence held by a third-party to the arbitration, even after an arbitral tribunal has been constituted (1469 CCP). However, where evidence is held by a party to the arbitration, the supporting judge's jurisdiction ends once the arbitral tribunal has been constituted (1449 CCP).
PRINCIPAL INNOVATIONS: ACCELERATION OF THE PROCESS FOR ENFORCING AN AWARD
Some notable innovations - intended to simplify and accelerate the recognition and enforcement of arbitral awards - are incorporated in the Decree.
Two of these relate to notification of an award, the step as of which the periods for exercising the various recourses available against the award begin to run. Until now, notification of an award required that an enforcement order (exequatur) first be obtained from a judicial authority, followed by service by bailiff on the opposing party. Depending on the country where the opponent is located, notification could thus take several months.
In future, the exequatur procedure will no longer have to be completed before an award can be notified (1484, 1494, 1519, 1522 CCP) - the award can be notified as soon as it is made by the arbitral tribunal. Moreover, service by bailiff will not be necessary if the parties can agree on a swifter and less costly means of effecting notification, such as notification by electronic mail.
Better still, the Decree allows for the possibility of a foreign arbitral award or an award made in France in an international arbitration being enforced immediately, breaking with the traditional rule that initiation of recourse against the award has a suspensive effect. Now, enforcement proceedings can be initiated without waiting for the times for exercising any recourse against the award to expire, or even if the opposing party has initiated recourse against the award (1526 CCP).
Lastly, the most emblematic innovation is that the parties in an international arbitration will be able to waive, in advance, their right to bring an action to set aside an award made in France (1522 CCP). This option, available in only a very few countries, will mean that a waiver of this kind may be set out in the arbitration agreement or the arbitration rules. As a result, such an award would effectively become permanent, and could never be set aside in France.[vii]
The transitional rules that will apply when the Decree comes into effect vary with the subject matter. The new provisions:
- relating to arbitration agreements will apply only to agreements entered into after May 1, 2011;
- relating to arbitral tribunals will apply, in part, only to tribunals constituted after May 1, 2011;
- relating to the abolition of the suspensive effect of recourses against foreign arbitral awards, or awards made in France in international arbitrations, will apply only to arbitral awards rendered after May 1, 2011.
Notably, the option of waiving in advance the right to bring an action to set aside will apply to awards rendered by any arbitral tribunal constituted after May 1, 2011. In this regard, there is nothing to indicate that the parties' explicit consent to such a waiver, including in an arbitration clause, could not have been given prior to the reform. Arbitration clauses often stipulate that the parties waive in advance the recourses that will be available against an award, and particular attention will now have to be given to the formulation of such clauses (i.e., how specific the waiver is). Arbitration clauses entered into long before the reform could also have a broader effect than originally anticipated. It may thus be prudent, for existing international contracts, to review how any such waivers in arbitration clauses[viii] previously entered into have been formulated.
Another useful stock-taking exercise has to do with confidentiality. Under the Decree, confidentiality in international arbitrations will no longer be the rule, but the exception.[ix] Confidentiality will often be assured in practice by the arbitration rules, which usually provide for the proceedings to be confidential. However, in other cases, such as ad hoc arbitrations, an international arbitration will be confidential only if the parties have expressly provided as such in their arbitration clause or by reference to a body of arbitration rules. As this rule will begin to apply as of May 1, 2011, it is worthwhile reviewing existing[x] or future clauses to assess whether language concerning confidentiality may be necessary.
A BIG STEP FORWARD
For the most part, the Decree goes a long way toward clarifying and simplifying the provisions of the prior law. However, while the Decree is comprehensive, certain questions remain.
For example, the drafters did not use the occasion of the reform to settle the recent discussion in France surrounding arbitrations that involve the state.
On another note, explicit provisions in the new law will give the French courts universal jurisdiction in all cases where, in an international arbitration and even in the absence of any connection with France, one of the parties could be exposed to a denial of justice (1505 CCP). While denial of justice is not defined, such transnational jurisdiction accorded to the French courts is sure to attract parties to Paris who cannot rely on the support of jurisdictions where, for reasons of politics or of fraud, they are unable to obtain justice.
In sum, it must be concluded that, to a very great extent, the Decree has achieved the objective of innovating, simplifying and strengthening French arbitration law - and also of reinforcing the attraction of Paris as a seat of choice for conducting arbitral proceedings. The reform reflects the strong political support for international arbitration practice in France and is in keeping with the recent offers of investment extended to the ICC by the French government in an effort to solidify Paris' position as the seat of the first global arbitral institution.