International arbitration awards are by their very nature final and binding, however, despite these key characteristics, the awards are not necessarily voluntarily executed by the other party. As a result, where a party has obtained a favourable arbitration award in another jurisdiction but the other party has not voluntarily allowed enforcement of the award, the successful party can try to enforce the arbitration award in France against any assets held by the other party in France.
The Legal Framework Applicable for Granting Exequatur
Although France is a signatory of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards signed in New York in 1958 (New York Convention),1 an arbitration award is incapable of direct enforcement without the assistance of the local courts.
The New York Convention's principal objective is that foreign and non-domestic arbitral awards will not be discriminated against. It forces countries party to the New York Convention to ensure that such awards are recognized and generally capable of enforcement in their jurisdiction in the same way as domestic awards are.
In accordance with the New York Convention and its objective, the French Civil Procedural Code governs the enforcement and recognition of foreign arbitral awards in France.2
The recent reform of the French Law on arbitration, which was enacted through Decree no.2011-48 of 13 January 2011, has not modified the main features of the enforcement procedure.
Enforcement of foreign arbitral awards is obtained through an ex parte3 application to the Tribunal de Grande Instance in Paris to obtain an enforcement order or “exequatur order”, i.e. turn a foreign arbitral award into an enforceable French judgement. In accordance with article IV of the New York Convention and article 1515 of the French Civil Code, the application to enforce a foreign arbitral award must be supported by (i) an authenticated original of the arbitral award or a duly certified copy, (ii) a copy of the arbitration agreement and, where applicable, (iii) a translation of these documents (iv) a €35 stamp.
Once the request is filed, the President of the Tribunal de Grande Instance renders his decision on the exequatur within approximately one week.
The cost of this procedure before the Tribunal de Grande Instance is minimal (cost of the stamp) insofar as no appeal is formed. 4
It is worth noting that the successful party may still request the enforcement in France of foreign arbitral awards which have been annulled at the seat of arbitration. 5
The presence of assets in France is not a prerequisite for the court to grant exequatur.
As the enforcement procedure is ex parte, the claimant is not required to disclose it to the other party. However, upon obtaining the enforcement order, the claimant must notify the other party in the country where it is based. This notification is critical because it triggers the right of appeal belonging to the other party.
Once the time period available for setting aside the enforcement order has expired and the enforcement order is final, the arbitral award can be immediately enforced in France, in the same way a French judgement would be.
The Potential Escape Routes
In France, a foreign arbitral award is not subject to appeal, but only to annulment on a limited number of grounds, as defined by the French Civil Procedural Code.6 However, the enforcement order may only be challenged by the other party before the Court of Appeal only on the basis of the grounds available for annulment,7 which are:
- The Arbitral Tribunal wrongfully declared itself either competent or incompetent
- The Arbitral Tribunal was not appropriately formed
- The Arbitral Tribunal acted beyond the scope of the mandate conferred to it by the parties
- The adversarial principle was breached
- The recognition or enforcement of the award is manifestly contrary to international public policy
Any appeal against the enforcement order of a foreign arbitral award must be made by the other party within one month of the notification to the other party. Although the grounds available to challenge the validity of the enforcement order are scant, the appeal procedure follows the normal appeal track.8
One of the Reform's Innovations
Although Decree no.2011-48, has not modified the main features of the enforcement procedure, it has introduced a key innovation to the French legislative regime, which demonstrates that France is striving to become a more attractive and arbitration-friendly seat for arbitration proceedings.
Since the introduction of the Decree, an appeal to set aside an enforcement order no longer suspends the enforcement of the award in France. This modification aims to prevent dilatory actions from unsuccessful parties and, provide a higher protection of the rights of successful parties.
Prior to the introduction of the Decree, actions for setting aside the enforcement order suspended the enforcement of the award, as long as the appeal procedure was still pending.9 As a result of the reform, and as a matter of principle, the claim to set aside an enforcement order does not stay the execution of the order and an immediate execution is possible.
However, the French legislator has introduced an exception to this rule. Pursuant to article 1526 (2) of the French Civil Procedural Code, the judge may only grant a stay of enforcement of the award where the unsuccessful party’s rights would be seriously impaired or prejudiced by such an automatic execution.
The Paris Court of Appeal has adopted a very strict interpretation of the conditions and has thus set a very high threshold that must be satisfied to obtain a stay of enforcement. As a result it has not made it easy for unsuccessful parties to obtain such measures.
The Court of Appeal reiterated that those measures must remain exceptional and be limited to cases in which the rights of the party are seriously impaired or breached and where immediate enforcement would cause material and irreparable harm to the unsuccessful party.10 This serious impairment or irreparable harm may not include any financial difficulties that would result from the immediate enforcement of the award.11
How to Enforce an Enforcement Order
The main method of enforcing an enforcement order in France is to exercise various types of seizures of the other party’s assets identified as being located in France. These seizures, which are carried out directly by a French bailiff once the enforcement order is obtained, mainly consist of:
- Attachment on the bank accounts located in France of the judgment debtor
- Seize money that is owed by a third party to the judgment debtor, by which the unsatisfied creditor holding the enforcement order will seek payment of his debts froma third party who in turn owes money to the judgment debtor
- Seizing movable or immovable property of the judgment debtor located in France
- Seizing intangible rights and assets of the judgment debtor located in France, such as shares, interests, securities, etc.
The seizures performed by the bailiff may be challenged by the debtor before the French enforcement judge upon receipt of the notification of said measures.
Insofar as the challenge proceedings are pending, the funds are escrowed either by the bank or by the third party and are unavailable for bother parties.12
In no challenge has been formed, once the challenge period has expired the funds/monies/assets are awarded to the successful party holding the arbitral award enforcement order.
The provisions of Decree no.2011-48 illustrate the confirmation of France as a key location for enforcement of foreign arbitral awards and arbitration proceedings. The flexibility and innovation demonstrated by the legislation will accord an improved level of protection to parties who wish to enforce an arbitral award within the jurisdiction.
The option of enforcing an award whilst an appeal is pending will discourage unsuccessful parties from commencing vexatious appeals intended to delay enforcement. However the true success of these provisions will depend upon the stance adopted by the French Courts. To date, the Courts have supported the underlying philosophy of the Decree, requiring the existence of exceptional reasons to justify staying enforcement. It remains to be seen whether this approach will continue or whether unsuccessful parties will manage to secure stays on the basis of less demanding criteria.