POWER OF INTELLIGENCE

Insight Center: Publications

New French Arbitration Law Expected to Clarify Parties' Expectations, Increase Efficiency

French Desk

Authors: Jeremy Heep and Stephanie M. Wahba

7/20/2011

France, already known as one of the most arbitration-friendly jurisdictions in the world, recently passed its first reform to its arbitration law since the 1980s in the form of amendments to the French Code of Civil Procedure that became effective on May 1, 2011. The new provisions are designed to clarify the expectations of parties to an arbitration agreement, and to improve the efficiency of the process as a whole. Title I (Articles 1442-1503) concerns mostly domestic arbitration, with some provisions applying to both domestic and international arbitrations, and Title II (Articles 1504-1527) concerns international arbitrations exclusively. The full text of the new law can be found online in both the original French and an English translation.1

The new arbitration law first eliminates an historic distinction between an "arbitration clause" and a "submission agreement," now combining them under the term "arbitration agreement." This merger of two separate terms into one, regardless of whether arbitration was agreed on preemptively or after a dispute arose, simplifies the law’s application and erases the varying standards of the previous law.

Several rules enhance the speed, clarity and endorsement of arbitrations. Article 1452, for example, lays out a procedure for appointing arbitrators if the parties have not agreed upon one instead of voiding the agreement entirely. Article 1473 sets forth the substitution process for arbitrators in the event of the original arbitrator’s unexpected departure, and explicitly suspends the proceedings until the replacement is appointed. The law also makes clear the well-established principle that if the underlying contract is invalidated or terminated, the arbitration clause contained therein survives.

The law further clarifies that a tribunal can order a party to produce documentary evidence under Article 1467, determine the manner in which it is to be produced, and even award penalties for non-compliance. For domestic arbitrations, the law also appoints the president of the Paris Tribunal of First Instance (Tribunal de Grande Instance) as a "support judge" (juge d’appui). This provision thus grants the court the specific power to award interim relief pertaining to the collection of evidence and the appointment of arbitrators.

The law also contains measures to protect arbitration awards from appeal. For example, under Article 1466, a party who, knowingly and without a legitimate reason, fails to object to an irregularity in the arbitral process upon becoming aware of it waives its right to challenge the irregularity in court at the enforcement or annulment stage. More generally, Articles 1489 and 1492 explicitly bar any appeal except for by agreement or on the basis of public policy, due process or procedural defects.

In international arbitrations, Article 1518 establishes that the only means of recourse against an award made in France is an action to set aside. This annulment proceeding must be initiated within one month after notification of award (three months if the notified party was outside of France). The old law gave parties one (or three) months after service of the judgment enforcing the award to initiate annulment proceedings. The new law, therefore, shortens the time period. Article 1526 further establishes that neither an action to set aside an award nor an appeal against an enforcement order shall suspend enforcement of an award. This reverses the prior rule. Nevertheless, this refusal to suspend enforcement is subject to a judicial determination that the award’s enforcement does not "severely prejudice" the rights of one of the parties.

In addition to the "support judge" having jurisdiction when the place of arbitration is France, or when the parties have chosen to apply French procedural law, the judge also has jurisdiction if the parties have expressly agreed to refer their procedural disputes to French courts or cases in which one of the parties is exposed to a risk of denial of justice (Article 1505). This provision arises from case law, specifically National Iranian Oil Co. v. Israel, in which the French Supreme Court noted that there was a distant link with France that justified its decision. This new law, however, apparently goes further by allowing the "support judge" to have jurisdiction in a risk of denial of justice case without a link to France.

The provisions discussed above are a few of the new arbitration law’s highlights, but not an exhaustive list. These selections illustrate how France continues to lead the way in arbitration and make its law more accessible and understandable for practitioners all over the world.

Endnotes

1 http://www.legifrance.gouv.fr/jopdf/common/jo_pdf.jsp?numJO=0&dateJO=20110114&numTexte=9&pageDebut=00777&pageFin=00781 (French), http://www.parisarbitration.com/uploads/FRENCH%20LAW%20ON%20ARBITRATION.pdf(English).

Jeremy Heep and Stephanie M. Wahba

Ms. Wahba is a 2011 summer associate in Pepper Hamilton’s Philadelphia office. She is not admitted to practice law.

The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship. Pepper Hamilton LLP is not admitted to practice law in France. You should contact your French law advisor to address any specific French law questions you may have.