Enter to open, tab to navigate, enter to select
French Supreme Court quashes decision related to multi-tiered arbitration clause
Practical Law UK Legal Update 0-519-6983 (Approx. 3 pages)
French Supreme Court quashes decision related to multi-tiered arbitration clause
by Practical Law
| Published on 31 May 2012 • France |
Brendan Green (Associate), Herbert Smith LLP
The French Supreme Court (Cour de Cassation) has set aside a decision of the Paris Court of Appeal in a case that may raise interesting issues related to multi-tiered arbitration clauses and so-called "med/arb" proceedings that combine mediation and arbitration.
NOTE: In 2014 the case was referred back to the Court of Appeal which set aside the order for enforcement of the award in January 2015.
The dispute involved a contract between a French company (Seribo) and a Chinese company, Hainan YangpuXindadao Industrial Co/Ltd (Hainan), and arose out of a contract for the construction of a factory in China. The contract included an arbitration clause. However, the English and Chinese versions of the clause were inconsistent:
- The English version called for negotiation, followed by mediation and arbitration under the Rules of the China International Economic and Trade Arbitration Commission (CIETAC), followed, if the parties were not able to resolve their dispute, by a final resolution by arbitration under the arbitration rules of the International Chamber of Commerce (ICC), with a seat in Paris.
- The Chinese version called for negotiation, followed by arbitration under the CIETAC Rules with a seat in Beijing, followed, if the parties agreed, by ICC arbitration in Paris.
A dispute arose between the parties and was submitted to CIETAC by Hainan. On 22 December 2004, the CIETAC tribunal issued an award in Hainan's favour. Hainan obtained exequatur of the award by a Paris court on 17 April 2008. Seribo (which in the meantime had become subject to liquidation proceedings in France) appealed that decision to the Paris Court of Appeal.
The Court of Appeal decision, dated 19 October 2010, rejected Seribo's argument that the grant of exequatur was contrary to public policy due to a failure of the parties to follow the initial negotiation phase of the dispute resolution process (common to both the English and Chinese texts).
Seribo appealed that decision to the French Supreme Court. In its decision of 28 March 2012, the Supreme Court set aside the Court of Appeal decision, finding that the latter had failed to address one of the arguments put forward by Seribo. The Supreme Court noted that Seribo had argued before the Court of Appeal that, in rendering its decision, CIETAC had not acted in the capacity of an arbitral tribunal, and that its award was therefore not enforceable. The Supreme Court therefore referred the case back to the Court of Appeal for consideration of this issue.
The case has already generated discussion among practitioners with respect to its potential impact on the validity of clauses that combine negotiation, mediation and arbitration, as well as the "med/arb" procedures available in certain jurisdictions that combine the functions of mediator and arbitrator into a single proceeding (or concurrent proceedings).
While one hesitates to speculate as to the case's final resolution, the Supreme Court's decision suggests that it may turn on the somewhat narrower issue of whether the CIETAC award was in fact an arbitral award given that (at least under the English version of the contract) the dispute could subsequently be referred to ICC arbitration for final resolution.