This update offers guidance on the approach to defining an arbitral award taken by the French courts.
According to the French law on international arbitration, set out in Articles 1442 to 1527 of the Code of Civil Procedure, an action to set aside is available against international arbitral awards issued in France. Therefore, such an action may be instituted only against arbitral awards. An arbitral award is not merely any decision given by an arbitral tribunal; tribunals can issue a variety of communications to parties, from correspondence to procedural orders containing findings of a dispositive nature. Conversely, tribunals can issue decisions that they dub 'awards', although their legal nature may be ambiguous; some decisions can be hybrid in nature, as when tribunals purport to address procedural matters or even interim measures. The distinction is sometimes awkward. Clarity on the matter was required so as to strike a balance between procedural efficiency and the rights of the parties. However, the widely publicised reform of French domestic and international arbitration law introduced by Decree 2011-48 remained silent on this issue. On October 12 2011(1) the French Supreme Court provided a timely definition of an arbitral award and set out criteria that should provide guidance to practitioners. The decision was reassuringly conservative: the Supreme Court confirmed the definition that the Paris Court of Appeal had proposed almost 20 years ago.(2)
A Lebanese project finance company, Groupe Antoine Tabet (GAT), entered into financing agreements with the Republic of Congo relating to various public works conducted during the 1990s. A Congolese subsidiary of the Total group owed revenues to the Republic of Congo, and was thus charged by the Republic of Congo, with repayment of loans to GAT. Total then irrevocably guaranteed the Republic of Congo's obligations in regard to GAT under the loans. The Republic of Congo later alleged that it had paid more than it should have and obtained a Congolese court decision ordering Total to cease all payments.
GAT then initiated a payment claim against Total before the Swiss courts, which ordered Total to pay GAT more than Sfr64 million. These decisions were definitively granted leave of enforcement in France by the Supreme Court on July 4 2007.(3)
Meanwhile, the Republic of Congo had started arbitral proceedings in Paris under the rules of the International Chamber of Commerce (ICC) against GAT, seeking reimbursement of sums that it had allegedly paid without cause. Three awards were rendered by the arbitral tribunal in this respect.
The tribunal first established its jurisdiction in an award of March 30 2000. In a second award rendered in Paris on June 4 2002, the tribunal ordered the Republic of Congo to:
- pay interest to GAT;
- give Total the necessary instructions for its guarantees to be realised to their full effect of up to €15,598,232.17, in addition to interest and damages owed by the Republic of Congo, to be determined in a subsequent award; and
- pay GAT a provisional sum of €16,007,146.81.
GAT sought to annul the award before the French courts, but on May 14 2009 the Paris Court of Appeal rejected GAT's claim.(4) The Supreme Court has yet to rule on the matter.
A third award on interim measures was rendered in Paris on December 8 2003, whereby the arbitral tribunal granted the Republic of Congo's claim for interim measures and ordered GAT to give Total written instructions to transfer, in lieu of the upcoming decision of the Swiss courts, a sum of more than €16,007,146.81 to an escrow account opened with the head of the Paris Bar, in accordance with a procedural order to be made by the tribunal. GAT initiated annulment proceedings against this award in France, but in a May 11 2006 decision the Paris Court of Appeal granted leave to enforce the award.(5)
On December 11 2003, in the wake of the December 8 2003 award, the chairman of the arbitral tribunal issued a decision (entitled 'procedural order'), pursuant to which it was ordered that:
- the parties enter into an escrow agreement; and
- GAT place on escrow any moneys exceeding €16,007,146.81 received from Total before the escrow agreement was signed.
GAT requested that the Paris Court of Appeal annul the second ruling of the December 11 2003 procedural order, but this claim was rejected on October 29 2009 on the grounds that the procedural order was not an arbitral award.(6) GAT appealed to the Supreme Court, arguing that the procedural order:
- had created a new obligation for GAT, apart from the award of December 8 2003; and
- constituted a partial award deciding on part of the merits of the dispute.
The Supreme Court held that:
"only proper arbitral awards may be challenged through an action to set aside", and went on to define 'awards' as "decisions made by the arbitrators which resolve in a definitive manner all or part of the dispute that is submitted to them on the merits, jurisdiction or a procedural matter which leads them to put an end to the proceedings."
The court then confirmed the appeal court's ruling that the litigious procedural order had meant only to organise, for the sake of efficiency of the award, the transition period between the issuance of the award and the execution of the escrow agreement. It went on to note that in its procedural order, the tribunal had neither added any obligation beyond those contained in the award of December 8 2003 nor ruled on all or part of the dispute. The court thus mentioned that the appeal court had rightly concluded that the order was not an arbitral award, and that the tribunal's decision was not open to an annulment application.
In so ruling that actions to set aside are admissible only against proper arbitral awards, the Supreme Court followed an established rule of case law,(7) and complied with the Code of Civil Procedure, which refers only to 'awards' in the provisions relating to the action to set aside.
The Supreme Court did not introduce new criteria, but merely adopted those identified by the Paris Court of Appeal some 20 years ago. The court adopted and therefore confirmed the five criteria that should be borne in mind when looking to determine whether an arbitral tribunal's decision can be characterised as an award. In the reported case, the Supreme Court took the view that the procedural order against which an action to set aside had been brought could not be characterised as an arbitral award, and that consequently the annulment application had rightly been dismissed by the Paris Court of Appeal.
Definition of an award
Arbitral awards are:
"decisions made by the arbitrators which resolve in a definitive manner all or part of the dispute that is submitted to them on the merits, jurisdiction or a procedural matter which leads them to put an end to the proceedings."
Consistent with a long-established disregard for the conflicts of law methodology in matters of international arbitration, the Supreme Court considered that no particular law had to be applied to determine whether a decision is an award, and adopted a substantive definition without referring to any other national law. This is in line with, and complements, the principle of French case law that "the arbitral award, which is not linked to any national judicial system" is an "international judicial decision".(8)
Arbitration can be characterised by two criteria: the existence of a dispute and a jurisdictional remit.(9) A decision made by arbitrators will thus be an award only if it is of a jurisdictional nature, or – put differently – if it purports to determine all or part of the legal issues in dispute.(10) In this respect, French courts may review the nature of the arbitrators' remit in order to determine whether a decision is an award,(11) and courts have attempted to identify the cumulative criteria that determine whether an arbitral decision has a jurisdictional nature.
French courts, including the Supreme Court, have refused to follow a formal approach in this matter and have consistently refused to be bound by the characterisation given by arbitrators. Thus, a decision entitled 'order' may be found to constitute an award; equally, despite being dubbed an 'award', a decision given by an arbitral tribunal may not be seen as one on judicial review.(12) A number of reasons may lead arbitrators intentionally to avoid giving awards when issuing interim decisions. In the particular context of ICC arbitration, where draft awards are subject to an administrative scrutiny by the Court of International Arbitration before they are issued and notified to the parties, convenience may lead arbitrators to seek to avoid the formal scrutiny process and therefore to give simple orders where, in different circumstances, they would have given an award. The desire to avoid challenges against decisions issued in the course of the arbitral proceedings may be another consideration. In any event, French courts look only at the intrinsic nature of the decision for the characterisation of an award. Formal omissions (eg, name of the arbitrators, date of the decision) may be considered not to exclude the characterisation of an award, to the extent that such omissions are not of such nature as to affect the validity of the award.(13)
Five cumulative criteria should be considered for the definition of an award, each of which will be described separately.
- An award must be issued by one or several arbitrators. Only decisions made by arbitrators can be characterised as arbitral awards. Arbitrators are those on whom jurisdictional powers have been conferred by the parties. As a result, arbitral institutions may not issue awards. French courts do not consider decisions made by the Court of the ICC, for example, to be awards – they are administrative decisions.(14)
An award must be dispositive of an issue in dispute. The arbitrator's mandate has a jurisdictional nature, as it involves the resolution of a dispute between parties, in accordance with Article 1511 of the Code of Civil Procedure, which provides that "[t]he arbitral tribunal shall decide the dispute". Thus, an award must resolve at least one issue in the dispute in order to materialise this jurisdictional mission and therefore qualify as such.(15) This criterion excludes decisions that record the parties' agreements on procedural matters.(16) 'Resolving the dispute' must be understood as deciding a dispute by applying rules of law or equity:
- 'Deciding' – the jurisdictional character of an award derives from the fact that it decides part of the dispute.(17) An award concludes, wholly or partially, a jurisdictional process in which the arbitral tribunal proceeded as a judge would have done, following an adversarial debate on the relevant matters of fact and law.(18) Thus, decisions by which arbitrators manage the case, such as an order by which arbitrators decide not to rule on certain questions before obtaining more information from an expert, are not arbitral awards.(19)
- 'A dispute' – arbitrators must decide after having "examined the parties' conflicting arguments".(20) The concept of dispute is interpreted broadly by the French courts. However, the decision must affect the final outcome of the case and should relate to the merits or preliminary issues whose resolution is necessary to reach a final decision (eg, jurisdiction or applicable law). However, the Paris Court of Appeal once held that an arbitrator's decision to refuse to adjourn the procedure during an action to set aside initiated by a party against a preliminary award was in fact an award, although the decision did not affect the outcome of the case.(21)
- 'By applying rules of law' – a dispute must be a disagreement on the legal consequences to be drawn from a given situation. Arbitrators exercise a jurisdictional mission only where they decide a dispute by applying rules of law to the facts – or where they have received the power to decide ex aequo et bono (ie, according to what is right and good) and decide the dispute by doing so. Accordingly, an expert decision on sales objectives(22) or the price of shares(23) is not an arbitral award, since it does not rule on the parties' obligations, but merely consists of a factual remit.
- An award must have finality over the decided matter. Acts made by arbitrators must resolve a dispute, or part of it,(24) in a final manner,(25) so as to become res judicata, which is part of the jurisdictional nature of an award.(26) This principle is embodied in Articles 1484 and 1485 of the Code of Civil Procedure, which state that awards are res judicata regarding the issues adjudicated and the tribunal can no longer rule on the matter once the award has been rendered. Therefore, decisions that can be modified by the tribunal are not awards (this is a characteristic of a procedural order), and no action to set aside (other than against the award it relates to) may be exercised.(27) In addition, an award must be a decision that is binding on the parties, as opposed to mere recommendations that may be given in conciliation or mediation.(28) Additionally, a decision that is subject to the parties' agreement is not res judicata and thus not an award,(29) regardless of the parties' agreement to consider an act as an award.(30) However, if parties agree before the arbitral decision is rendered that an agreement that complies with it will be made regarding the outcome of the dispute, such decision may be deemed an award, since the arbitrators "have been entrusted with a jurisdictional mandate".(31) Finally, where the parties agreed on two-tiered arbitral proceedings (ie, where parties can appeal the award before a second arbitral tribunal), an action to set aside may be brought against the second award only, since the latter is the only final decision binding on the parties.(32)
- An award need not exhaust the whole controversy. An award does not have to put an end to the entire arbitral procedure, as long as it definitively settles at least one issue of the dispute and terminates the tribunal's mandate in this respect, in accordance with Article 1485 of the code. As mentioned above, an arbitral decision that decides part of the merits, or a preliminary legal issue that is necessary to reach the final solution, is an award.(33)
- An award must deal with a substantive issue or, when dealing with a matter of jurisdiction or procedure, must lead to putting an end to the proceedings. However, it is unclear whether the phrase "a procedural matter that leads the tribunal to put an end to the proceedings' should be read as meaning that the decision on the matter of procedure may only be likely to lead the tribunal to put an end to the proceedings, or whether the court meant to refer to the more limitative category of decisions on procedural matter that actually put an end to the proceedings.(34) Some prior decisions of the Paris Court of Appeal support the broader interpretation. An example of this can be found in a case in which the court considered that two decisions whereby arbitral tribunals established their jurisdiction were in fact awards, as they expressed the jurisdictional power of the arbitrators. The arbitrators could have decided that they had no jurisdiction, which would have put an end to the proceedings.(35) Another court ruling held that the decision by which the tribunal specified the date and confirmed the validity of its constitution was an award, since it decided in a definitive manner several litigious questions that, had they been resolved differently, could have led the tribunal to put an end to the procedure.(36) Conversely, an arbitral decision rejecting claims that could have led the tribunal to put an end to the proceedings was not considered to be an award, as it was found not to have decided in a final way all or part of the dispute, but rather to have simply allowed the arbitration to continue by ruling on a procedural incident.(37) However, it could be argued that the tribunal would have put an end to the proceedings had it accepted the claims of irregularity of such proceedings, and that the decision should thus characterise an award according to the first interpretation. The reported decision of the Supreme Court did not specifically expand on this question. However, it may be thought that the second, more limitative interpretation prevailed. The court's intention to require the decision to put an end to the proceedings can be read into the use of the indicative mode and present tense in the phrase 'a procedural matter which leads [the arbitrators] to put an end to the proceedings". This approach can be considered as favourable to the autonomy of arbitration. Rather than encouraging immediate court challenges against procedural decisions that do not put an end to the arbitral proceedings, it purports to defer the exercise of parties' right of judicial review to a later stage, once a final award has been given.
Decision in reported case was not an award
The December 11 2003 arbitral decision that was challenged had been made in the form of a procedural order, on the basis of the award on interim and conservatory measures of December 8 2003. The Paris Court of Appeal and the Supreme Court both concluded that the procedural order created no new obligations in addition to those imposed by the award. In particular, it was found that the chairman of the arbitral tribunal, by making this order, did not decide any disputed issue, as the order made on December 11 2003 dealt merely with the interim period between the issuing of the December 8 2003 award and the execution by the parties of the escrow agreement, in keeping with the dispositive section of the award that provided that an escrow account had to be put in place "in accordance with a procedural order to be subsequently made by the Tribunal", and therefore aimed at no more than giving full efficiency to the award. The December 11 2003 decision was clearly a procedural order made on the basis and for the purposes of the award of December 8 2003. It resolved no aspect of the dispute submitted to the arbitral tribunal: the portion of the dispute that related to the granting of interim measures had already been resolved in the 2003 award. Hence, the procedural order did not affect the legal situation of the parties. The court thus correctly determined that "the chairman of the arbitral tribunal did not add any obligation to those resulting from the award of 8 December 2003 and did not resolve all or part of the dispute".
The Supreme Court confirmed all findings of the Paris Court of Appeal and rejected the motion to quash that court's decision. It held that the appeal court had rightly refused to qualify the procedural order as an arbitral award and that the action to set aside initiated against it was thus inadmissible.
No judicial review of procedural orders
The definition adopted by the Supreme Court allows domestic courts distinguished between arbitral awards and procedural orders. Procedural orders are instruments through which the arbitral tribunals manage the proceedings. French courts have held that a procedural order is "a mere measure of judicial administration",(38) incapable of being set aside.
Indeed, in principle, procedural orders do not affect the parties' legal situation and can be amended by the tribunal. They are a means for tribunals to ensure the efficiency and fairness of the arbitral process. They can also serve to guarantee the efficiency of a partial award when the order is issued once such award has been given, as was the case in the reported decision.
Efficiency of arbitration would be undermined if parties were encouraged to bring procedural orders to judicial review. Parallel litigation would inevitably ensue and the course of arbitral proceedings could end up being disrupted, if not wholly paralysed.
Of course, procedural orders may be indirectly challenged when a party makes an annulment application against a related award; the court will take into account any communications from the tribunal, including procedural orders, when reviewing allegations of breach of due process.
Uncertainty regarding interim and provisional measures
In the case at hand the procedural order that had been challenged dealt with interim measures. This lends itself to a brief discussion regarding the characterisation of decisions that order interim and provisional measures. In light of the definition adopted by the Supreme Court, are matters of interim and provisional measures compatible with the definition of an arbitral award?
French case law is inconsistent on the issue of whether decisions ordering interim measures should or should not be characterised as awards.(39) It is therefore of no help in resolving this issue.
The ICC Rules 2012, which introduce the 'emergency arbitrator' system, indicate that the interim and provisional measures ordered by an emergency arbitrator will be made in an order and not in an award. This only partially answers the question; the rules are silent on the nature of interim and provisional measures ordered by an arbitral tribunal. Moreover, since French courts consider that they are not bound by the characterisation given by the parties to the arbitrators' decision, it may be questioned whether French courts could consider that they are not bound by the characterisation made in the ICC Rules either, and could consequently characterise as an award a decision given in the form of an emergency arbitrator's order. In support of this theory, a French court could argue that the binding effect of the ICC Rules is the result of the parties' agreement and is therefore of a contractual nature. A Belgian author is of this view, albeit based on Belgium's somewhat broader definition of 'arbitral awards': according to him, an ICC emergency arbitrator's decision could be enforced and/or subject to annulment proceedings in Belgium.(40) However, in practical terms, it would be difficult to characterise the emergency arbitrator's decision as an ICC award, given that rendering an ICC award requires complying with a scrutiny process, which could not – by definition – be complied with by the emergency arbitrator's order. Thus, several reasons point towards minimising the risk of a re-characterisation of the ICC emergency arbitrator's order by French courts. In any event, experience shows that most participating parties tend to comply voluntarily with interim measures ordered by arbitral tribunals.(41)
It could be argued that because the Supreme Court requires an award to "resolve all or part of the dispute … in a final way", decisions on interim or provisional measures lack the finality element of the definition and therefore cannot constitute an award. Indeed, it is inherent for interim and provisional decisions that they deal only with factual situations as they stand at a particular moment; for that reason, they are at least in theory subject to review by tribunals, should the evolution of the facts of the case so require. However, that such measures are open to re-assessment in light of changing circumstances is not inconsistent with their being ordered in a decision that is final, although temporary in nature. As a French author puts it, "the temporary… nature [of decisions ordering interim measures] does not deprive them from a final nature, for the time-period they cover".(42) The authors agree with that view. For example, a decision whereby an arbitral tribunal orders the parties to maintain the status quo and not to aggravate the dispute until the issuing of the final award, resolves one disputed issue, which is what behaviour the parties should adopt in relation to the rights in dispute during the period of time that commences with the introduction of the arbitration and finishes with the issuing of the award. The decision that deals with such a transition period with injunctive relief, or other interim measures such as protective or provisional orders, may do so in a final manner. In fact, such a decision can put an end to part of the dispute, albeit in an interim manner. Such decisions are not incompatible with characterisation as an arbitral award. They could, like any awards, give rise to enforcement proceedings and be subject to annulment proceedings. However, this is a matter where caution must be exercised; a fine balance must be struck. Characterising certain interim measure decisions as awards – provided that they resolve part of the dispute, albeit in an interim manner – can help to prevent arbitration tribunals from being perceived as paper tigers. Because arbitral tribunals lack the imperium that allow state courts to penalise non-compliance with interim measures, giving certain interim decisions in the form of an award can, in the right circumstances, allow access to the assistance of domestic courts.(43)
In practice, many arbitrators are reluctant to give decisions on interim measures and tend to avoid dressing them up with the characteristics of an award. There can be many reasons for this, including reluctance to aggravate the relationship between the parties, concern of accusations of prejudice and willingness to avoid parallel judicial review. It is not uncommon for arbitrators to try to create the conditions for self-regulation by the parties, where they will be persuaded by astute arbitrators to enter into an agreement whereby they will agree on measures that ensure the preservation of the status quo. Tribunals can also make recommendations for that purpose.
All told, the definition of an arbitral award given by French courts should be welcomed for its completeness and pragmatism. Its orthodoxy places it in line with French doctrine.(44) By strictly defining the notion of 'award', the court also sent a warning to parties that may seem to bring tactical applications against procedural orders or certain interim or provisional decisions, thereby preventing dilatory actions aimed at disturbing the efficiency and autonomy of the arbitral proceedings.(45) This definition also takes into account the fundamental characteristics of a jurisdictional decision and is sufficiently broad to encompass a wide range of decisions.
For further information on this topic please contact Elie Kleiman or Claire Pauly at Freshfields Bruckhaus Deringer by telephone (+33 1 44 56 44 56), fax (+33 1 44 56 44 00) or email (firstname.lastname@example.org or email@example.com).
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(2) CA Paris, March 25 1994, Société Sardisud v Société Technip  Rev Arb 391; CA Paris, November 10 1995, Verbiese v SEE  Rev Arb 583; CA Paris, May 25 2000, Guignier v SA HRA Europe  Rev Arb 199; CA Paris, April 11 2002, Société ABC International v Société Diverseylever Ltd  Rev Arb 150.
(7) CA Paris, July 7 1987, Pia Investments Ltd v LB Cassia  Rev Arb 649; CA Paris, May 25 2000, Guignier ès qual v SA HRA Europe  Rev Arb 199; CA Paris, April 11 2002, Société ABC International v Société Diverseylever Ltd  Rev Arb 150; CA Paris, June 17 2004, Le Parmentier v Société Miss France  Rev Arb 161; CA Paris, July 3 2008, Société Messagerie oyonnaxienne v Compagnie Aviva Assurances SA  Rev Arb 745.
(12) CA Paris, July 1 1999, Société Braspetro Oil Services (Brasoil) v GMRA  Rev Arb 834; CA Paris, March 15 2001, Société Albert et Société Courret Guguen et M Rambour ès qual v Société Frabeltex  Rev Arb 215; CA Paris, April 4 2002, Société National Company for Fishing and Marketing (NAFIMCO) v Société Foster Wheeler Trading Company AG  Rev Arb 143; CA Paris, April 11 2002, Société ABC International v Société Diverseylever Ltd  Rev Arb 150; CA Paris, July 3 2008, Société Messagerie oyonnaxienne v Compagnie Aviva Assurances SA  Rev Arb 745.
(14) Delvolvé, GH Pointon, J Rouche, French Arbitration Law and Practice (2009), para 147; Cass Civ 2, June 8 1983, Société Appareils Dragon v Empresa central de abastecimientas y vantas de equipos  Rev Arb 310; Cass Civ 2, October 7 1987, Société Opinter France v SARL Dacomex  Rev Arb 479.
(15) TGI Paris, March 14 1984, X v A,  Rev Arb 382; CA Paris, March 15 2001, Société Albert, Société Courret Guguen et M Rambour ès qual v Société Frabeltex  Rev Arb 215 (see also P Fouchard's note under the decision); CA Paris, March 28 2002, Société Spepidam v Société Adami  Rev Arb 1062.
(26) CA Paris, October 24 1991, Société Sicopag v Ets Louis Laprade  Rev Arb 494; CA Paris, July 3 2008, Société Messagerie oyonnaxienne v Compagnie Aviva Assurances SA  Rev Arb 745; CA Paris, June 17 2004, Le Parmentier et autre v Société Miss France et autre  Rev Arb 161.
(27) C Jarrosson, "Note – Cour d'Appel de Paris (1re Ch Suppl) July 9 1992 – Société Industrilexport-Import v Société GECI et GFC",  Rev Arb 307, para 6; CA Paris, March 25 1994, Société Sardisud v Société Technip  Rev Arb 391, note C Jarrosson, "Note – Cour d'Appel de Paris (1re Ch C) March 25 1994 – Société Sardisud et autre v. Société Technip et autre",  Rev Arb 394, para 6; C Jarrosson, "Note – Cour d'Appel de Paris (1re Ch C) July 1 1999 – Société Braspetro Oil Services (Brasoil) GMRA",  Rev Arb 834, para 14.
(34) C Jarrosson, "Note – Cour d'Appel de Paris (1re Ch C) March 25 1994 – Société Sardisud et autre v. Société Technip et autre",  Rev Arb 394, para 6; J Pellerin "Observations – Cour d'appel de Paris (1re Ch C) November 10 1995 – Verbiese v SEE et autre"  Rev Arb 596.
(38) CA Paris, July 7 1987, Pia Investments Ltd v LB Cassia  Rev Arb 649; CA Paris, March 25 1994, Société Sardisud v Société Technip  Rev Arb 391; CA Paris, 1 July 1999, Société Braspetro Oil Services (Brasoil) v GMRA  Rev Arb 834.
(39) CA Paris, April 11 2002, Société ABC International v Société Diverseylever Ltd  Rev Arb 150, commentary D Bensaude; CA Paris, October 7 2004, Société Otor Participations v Carlyle Holdings 1  Rev Arb 737, commentary E Jeuland.
(44) E Gaillard, J Savage, Fouchard, Gaillard, Goldman on International Commercial Arbitration (1999), para 1353; JL Delvolvé, GH Pointon, J Rouche, French Arbitration Law and Practice (2009), paras 302.
(45) C Jarrosson, "Note – Cour d'Appel de Paris (1re Ch. Suppl.) July 9 1992 – Société Industrilexport-Import v Société GECI et GFC",  Rev Arb 307, para 16; D Bensaude, "Note – Cour d'Appel de Paris (1re Ch C), 4 Avril 2002 et Cour d'Appel de Paris (1re Ch C), 11 Avril 2002",  Rev Arb 160.