Third-party challenges inadmissible in international arbitration | Practical Law

Third-party challenges inadmissible in international arbitration | Practical Law

James Clark (Associate), Herbert Smith LLP

Third-party challenges inadmissible in international arbitration

Practical Law Legal Update 0-500-9241 (Approx. 2 pages)

Third-party challenges inadmissible in international arbitration

Published on 03 Dec 2009France, International
James Clark (Associate), Herbert Smith LLP
The French Supreme Court has upheld a Paris Court of Appeal decision confirming that third parties cannot challenge an international arbitration award even if they claim that the award affected their rights.
In Members of Société historique et littéraire polonaise (SHLP) v Académie polonaise des sciences et des lettres (PAU), the French Supreme Court upheld a Paris Court of Appeal decision confirming that third parties cannot challenge an international arbitration award even if they claim that the award affected their rights. (The court considered this question along with a number of others that were not arbitration related.)
In 1893, SHPL sold a building in Paris to PAU, a Polish association, and in the years that followed, a dispute arose relating to the ownership of the building. In 2002, SHLP and PAU agreed to settle their disputes in arbitration. The arbitral tribunal rendered its award in 2003 and declared that PAU was the owner of the building.
Unhappy with the outcome of the dispute, a few individual members of SHLP filed a third-party challenge (tierce opposition) with the French courts, challenging the substance of the arbitral award. The claimants also challenged the internal procedures that led to SHLP's agreement to arbitrate disputes with PAU. They therefore asked that the court declare the arbitration agreement void, along with the resolutions of SHLP's general assembly that approved the arbitration agreement.
Although third-party challenges, which provide recourse to a party who did not participate in an arbitration but whose rights are affected by the award, are available in French domestic arbitration, they cannot be used to challenge arbitral awards rendered in international arbitration.
At first instance, the court refused to annul the general assembly resolutions and confirmed that third-party challenges were not admissible in international arbitration cases. The Paris Court of Appeal upheld the first instance decision.
Before the French Supreme Court, the appellant members argued that the arbitration at issue was a domestic arbitration, and not international. Under the French Civil Procedure Code (Article 1492), "an international arbitration is one that concerns the interests of international commerce". The French Supreme Court confirmed that the arbitration at issue was indeed international in character because the operation of the building was financed with foreign funds. It then confirmed that third-party challenges applied only to domestic arbitration proceedings. The challenge brought by SHLP's members could not, therefore, be allowed, even though their rights may have been adversely affected by the award.
The case confirms that third party challenges are confined to domestic arbitration cases, and cannot be invoked by third parties in relation to international awards.