The story so far...

In Issue 61 Raid Abu-Manneh and Wisam Sirhan reported on the decision of the UK Supreme Court, in Dallah Real Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan.

Dallah had sought to enforce its final arbitration award against the Pakistani Government in England but the High Court refused enforcement on the ground that the Government was not a party to the arbitration agreement. Contrary to the findings of the arbitral tribunal, the Supreme Court found that there was no “common intention” that the Government of Pakistan would be party to the agreement, and therefore as a matter of French law (the law of the seat of the arbitration) the Government was not a party to the arbitration agreement providing for ICC arbitration in Paris. On this analysis, the Supreme Court’s decision was that the Government had successfully demonstrated that the alleged arbitration “agreement” with it was “not valid” for the purposes of s.103(2)(b) of the Arbitration Act 1996.

But a little while later, in the French courts...

A few months later, however, across the Channel, the Paris Court of Appeal was faced with a request, in parallel proceedings, to set aside the same arbitral award, this time not by Dallah, but by the Government of Pakistan, in an application for annulment of the arbitral award under Article 1502(1) of the French Code of Civil Procedure.

This provision allows the setting aside of an award rendered with a seat in France if the award was rendered with no valid arbitration agreement.

Although the hearings before the Paris Court of Appeal took place after the decision of the UK Supreme Court, the UK decision was only mentioned in passing because, under French law and the New York Convention, the French Court, as the court of the seat of the arbitration, was not required to stay (or even to take into account) the proceedings in London.

The French decision rejected the Government’s arguments and held that the arbitral tribunal validly extended the scope of the contract arbitration agreement to Pakistan.

The French decision is entirely at odds with the UK decision but, in both cases, each court applied the law of the seat of the arbitration, French law, to the issue. What, then, was different in the French decision?

And the difference is?

Putting aside the differences in style (French decisions are generally shorter and less detailed) the French decision in Dallah does not apply legal principles that are any different to those relied on by the UK Supreme Court.

Under French law, the court that reviews the award at the annulment stage (where a party alleges lack of jurisdiction), conducts its own analysis of all relevant factual and legal aspects of the matter before the arbitrators. In other words, French courts, although perceived to be extremely liberal in their approach to international arbitration awards, do review the legal and factual grounds of an award when assessing whether the arbitrators had jurisdiction or not. This is in marked contrast to the French Court’s liberal attitude when it comes to respecting the principle of “competence-competence” at the outset of the arbitration.

In Dallah, the Paris Court of Appeal analysed all aspects of the case and the various documents relied upon by the arbitrators to reach the conclusion that they had jurisdiction over the Government of Pakistan. In doing so, it applied the French case law tests that were also identified and applied by the UK Supreme Court.

Where the Paris Court of Appeal departed from the findings of the UK Supreme Court was in assessing the evidence of the case and the weight to be given to certain documents. In finding that the Government of Pakistan “behaved as if the contract was its contract” and “as the real Pakistani party in the economic operation”, the French Court took a different view as to the importance to be given to precontractual negotiations between the parties and the interpretation of key correspondence and came to the same answer as the arbitrators.

From a French perspective, the UK Supreme Court’s decision appears to be more focused on assessing the reasoning of the arbitrators’ award – which it strongly criticised. In contrast, the Paris Court did not address the award at all but instead decided afresh the issue of the extension of the arbitration clause to the Government.

So where does this leave us? The conflicting decisions may not send those wishing to enforce awards hurrying to Paris, and those wishing to evade them rushing to London, but there are two important lessons here. The first is that the choice of enforcing court may be crucial and the second, pre-emptive, moral, is to highlight the importance of ensuring that parties to a negotiated agreement sign up to it. It may be obvious advice but it could avoid some difficult future arguments on jurisdiction.