Caution: dismissal of an action to set aside an award on the grounds of its inadmissibility does not grant exequatur to the award
Cass. 1re civ., 7 June 2023, no. 22-12.757
In its ruling of 7 June 2023, the First Civil Chamber of the French Supreme Court held that the decision declaring inadmissible the action to set aside the award did not entail its exequatur. Consequently, a person intending to enforce an award cannot rely on Article 1498, paragraph 2 of the French Code of Civil Procedure in case of inadmissibility and is not exempt from applying for the exequatur of the award rendered in his favour.
Although the first commentators on this judgment seemed to favour this position and noted the consistency of such a decision, this was not self-evident insofar as Article 1498, paragraph 2 of the French Code of Civil Procedure makes no distinction as to the reasons that would lead the judge to dismiss the action for annulment.
In its ruling, the French Supreme Court introduced a difference in the enforcement regime depending on the grounds for dismissal, in order to prevent the award from escaping the judge’s control. However, certain inadmissibilities (in particular those based on Article 1466 of the French Code of Civil Procedure) require the judge to examine the award in greater detail. It is therefore not certain that such a solution is justified in all cases.
On 15 November 2013, a sole arbitrator was appointed to rule as an amiable compositeur on a dispute between the shareholders of two companies belonging to the same group.
An action for annulment has been brought against this award.
In a ruling of 17 March 2016, the Douai Court of Appeal declared the action to set aside the award admissible, notwithstanding the failure to submit the notice of referral to the Court electronically, as the e-Barreau platform did not include a reference to “an action to set aside an arbitration award”.
The Douai Court of Appeal in a decision of 18 January 2018, – after qualifying the arbitration as domestic – then set aside the arbitral award on the grounds that the arbitral tribunal had ruled without fulfilling its functions.
On 26 September 2019, the French Supreme Court quashed and set aside the Court of Appeal’s decision handed down on 17 March 2016 declaring admissible the action for annulment which had not been made by electronic means, as required by Article 930-1 of the French Code of Civil Procedure. This led to the annulment of the judgment of 18 January 2018 setting aside the award.
Following this judgment of 26 September 2019, the case was referred to the European Court of Human Rights (ECHR). In a judgment of 9 June 2022 (ECHR, sect., 9 June 2022, no. 15567/20), it ruled that “(…) the Cour de cassation had displayed a formalism which the guarantee of legal certainty and the proper administration of justice did not require and which must therefore be regarded as excessive“.
However, as this decision had no effect on the case under review, the beneficiary of the award, who regained his title following the reversal and annulment of the judgment setting it aside, sought to continue its enforcement. To do so, he did not apply to the relevant jurisdiction for an exequatur, believing that he could rely on Article 1498, paragraph 2, which provides that: “The dismissal of the appeal or of the action for annulment confers exequatur on the arbitral award or on those of its provisions that are not affected by the court’s censure“.
To contest the enforcement of the award, its opponent argued that the reversal without referral of the decisions of the Douai Court of Appeal on 26 September 2019 was insufficient to grant the exequatur on the award and that the judgment of the French Supreme Court, insofar as it declared inadmissible the action to set aside the award, did not constitute a dismissal decision within the meaning of Article 1498, paragraph 2 of the French Code of Civil Procedure.
In its judgment of 3 February 2022, the Douai Court of Appeal was not convinced by this argument and held that the French Supreme Court’s dismissal of the action for annulment on the grounds of inadmissibility did confer exequatur on the award, with the result that the beneficiary of the award did in fact have a writ of execution enabling him to implement the enforcement measure at issue.
However, in a ruling dated 7 June 2023, the French Supreme Court overturned this decision on the grounds that, as the action for annulment had been declared inadmissible, this had not had the effect of conferring exequatur on the award.
The desire to ensure a prima facie review of the award
This position taken by the French Supreme Court is understandable given its concern to ensure that an arbitration award is subject to judicial review before it is incorporated into the French legal system.
When reviewing the award, the Court checks that the award exists and is not contrary to French public policy.
The logic here would be that when the court dismisses the action for setting aside the award as inadmissible, it would not examine the objections raised on the merits and would therefore not have the opportunity to rule, either at the request of the parties or of its own motion, on whether the award complied with public policy.
This line of reasoning calls for at least three comments.
Firstly, the French Supreme Court makes a distinction based on the reason for dismissal, that Article 1498 of the Code of Civil Procedure does not. While the reason for dismissal in the case of inadmissibility does not relate to the merits, it is still a dismissal.
Secondly, certain inadmissibilities require the judge to examine in detail the objections raised. This is the case in particular with the inadmissibilities under Article 1466 of the French Code of Civil Procedure, according to which a party that has refrained from invoking an irregularity before the arbitral tribunal is deemed to have waived its right to invoke it. The parties may not, however, waive irregularities that are a matter of public order of direction. In such a case, the judge hearing the appeal is therefore required to examine all the claims raised to ensure that none have been waived and that those that have been waived do not affect public order of direction. In such a case, there is therefore an adversarial debate on all the claims raised.
Lastly, in the case at hand, the Douai Court of Appeal reviewed the award after initially declaring the action for annulment admissible and found no breach of public policy. Admittedly, its ruling was subsequently set aside, but it seems reasonable to think that if the award was manifestly violating public policy, the appeal judge would have noted this of its own motion.
The implications of the distinction in the enforcement regime according to the grounds for dismissal of the action for annulment
The position taken by the French Supreme Court implies to hurry up to request the exequatur of the award to the judicial tribunal or, where applicable, to the first president or the competent Conseiller de la mise en état (in domestic arbitration, where the award is subject to provisional enforcement).
In this case, if an action to set aside the award in question is brought and that the action is upheld, the enforcement order will lapse at the same time as the award.
If the challenge of the award is dismissed and the beneficiary of the award has obtained an enforcement order beforehand, a distinction must be made depending on the reason for the dismissal. Indeed:
- Either the dismissal is on the merits, in which case the rejection decision constitutes the writ of execution;
- Or the dismissal is due to the inadmissibility of the appeal, in which case it is likely that only the enforcement order issued by the competent judicial tribunal or the Conseiller de la mise en état, which is supposed to be only a provisional step, would survive and constitute the writ of execution enabling the enforcement of the award to continue.
In the absence of any enforcement order, rejection of the recourse against the arbitration award on the grounds of inadmissibility will oblige the beneficiary to refer the matter to the relevant judicial tribunal in order to enforce the award.
The position taken by the French Supreme Court imposes a procedural burden that does not appear to be justified in any event. And probably none of this would have happened if the electronic configuration system for appeals against arbitration awards had been correctly configured…