In El Assidi v Société Nest & Société SYS APS, Paris, Cour de cassation (Supreme Court), section 1, 12/05/2010, n°09-11.872, Georges El Assidi sought the annulment of an arbitration agreement. Having failed before the Paris Court of First Instance and the Paris Court of Appeal, he appealed to the Supreme Court. Before the Supreme Court, he argued that the clause was a domestic arbitration agreement. However, the Supreme Court rejected the appeal, finding that the economic substance of the parties' transaction was international in nature, rather than domestic, and that therefore the court had no jurisdiction to strike down the arbitration agreement.

Mr El Assidi inherited various real and intellectual property rights, which he subsequently transferred to the respondent Danish companies under a series of agreements. The agreements contained an arbitration clause submitting any disputes to arbitration under the rules of the Danish Institute of Arbitration.

At first instance, Mr El Assidi sought the annulment of the parties' agreements and of the arbitration clause. The court determined that it did not have jurisdiction to annul the agreements or the arbitration clause. This decision was upheld by the Paris Court of Appeal, and Mr. El Assidi pursued his appeal to the Supreme Court.

Before the Supreme Court, Mr El Assidi argued that arbitration agreements between professional parties and non-professional parties are void, pursuant to Article 2061 of the French Civil Code.

French case law establishes that Article 2601 does not apply to international arbitration clauses. To get around this, Mr El Assidi submitted that the arbitration clause was domestic only, on the basis that the agreement containing the arbitration clause (primary agreement) had been signed in France and did not, of itself, effect a transfer of goods, services or funds between nationals of different states. The purpose of the primary agreement was, he submitted, merely to define the scope of the parties' other agreements.

The Supreme Court rejected this argument and held that the arbitration clause was indeed an international arbitration clause: the economic substance of the parties' transaction was an assignment of rights by a French national to a foreign corporation. It also involved payments across boundaries.

The Supreme Court reiterated that national courts can only strike down an international arbitration clause if the clause is null or manifestly inapplicable. It added that, if the applicant fails to meet these conditions, only the arbitral tribunal, subject to the review of a court in annulment proceedings, has jurisdiction to determine the validity of an international arbitration clause, pursuant to the principle of kompetenz-kompetenz.

The case confirms that rather than considering an agreement containing an arbitration clause in isolation, the French courts will consider the economic substance of the transaction to determine whether the agreements that give effect it are truly international or domestic.