{"id":11660,"date":"2022-05-19T09:17:16","date_gmt":"2022-05-19T09:17:16","guid":{"rendered":"https:\/\/www.alerionavocats.com\/?p=11660"},"modified":"2022-05-19T09:17:17","modified_gmt":"2022-05-19T09:17:17","slug":"french-highest-civil-court-adopts-wide-scrutiny-of-arbitral-awards-corruption-money-laundering","status":"publish","type":"post","link":"https:\/\/www.alerionavocats.com\/en\/french-highest-civil-court-adopts-wide-scrutiny-of-arbitral-awards-corruption-money-laundering\/","title":{"rendered":"French Highest Civil Court adopts a wide scrutiny of arbitral awards in matters involving corruption and money laundering"},"content":{"rendered":"\n

Cass. Civ. 1st<\/sup>, 23 mars 2022, n\u00b0 17-17.981<\/strong><\/p>\n\n\n\n

Paris, 5 April 2022, n\u00b0 20\/03242<\/strong><\/p>\n\n\n\n

In a long-awaited decision dated 23 March 2022 rendered in the Belokon<\/em> case, the French Cour de cassation<\/em> (French Supreme Civil Court) confirmed that the conformity of arbitral awards with French international public policy could be subject to a \u201cmaximalist review\u201d by the annulment judge.<\/p>\n\n\n\n

This reversal of the same Court\u2019s previous case law confirmed the latest rulings of the Paris Court of Appeal, while modifying the test for a breach that could result in the setting aside of the award. This will undoubtedly be commented on extensively.<\/p>\n\n\n\n

Then, in a decision dated 5 April 2022, Gabonese Republic v. Soci\u00e9t\u00e9 Groupement Santullo Sericom Gabon<\/em>, the Paris Court of Appeal set aside an award on the ground that its recognition or enforcement would violate French international public policy, using the same test as the Cour de cassation<\/em> in Belokon<\/em>. <\/p>\n\n\n\n

The Belokon<\/em> case: background<\/strong><\/p>\n\n\n\n

In 2007, a Latvian citizen, Mr. Belokon, acquired a Kyrgyz bank, Manas Bank. The National Bank of Kyrgystan later placed the bank under temporary administration, then sequestration, which finally led to the bank being declared insolvent. Mr. Belokon initiated arbitration proceedings based on the Latvia-Kyrgyztan bilateral investment treaty (BIT). The Kyrgyz Republic\u2019s defence was essentially based on the allegation that Mr. Belokon\u2019s investment in Manas Bank was aimed at setting up money laundering and\/or tax evasion schemes.<\/p>\n\n\n\n

In an award dated 24 October 2014, the arbitral tribunal recalled the importance of the fight against money laundering. However, it also noted that the fundamental principles of due process and burden of proof should not be disregarded when dealing with such allegations. The arbitral tribunal found that the respondent had failed to bring sufficient evidence to support its allegations and awarded Mr. Belokon USD 33 million as compensation for the violation of the fair and equitable treatment standard provided for in the BIT.<\/p>\n\n\n\n

The Kyrgyz Republic initiated proceedings to set aside the award before the Paris Court of Appeal. By a decision dated 21 February 2017, the Paris Court of Appeal examined both in fact and in law the parties\u2019 positions, ruled that there was \u201cserious, precise, and concurring evidence<\/em>\u201d of money laundering practices and set aside the award. According to the Court, the recognition or enforcement of the award would otherwise result in Mr. Belokon benefiting from the proceeds of criminal activities, which was a \u201cmanifest, actual and concrete<\/em>\u201d violation of international public policy.<\/p>\n\n\n\n

Mr. Belokon appealed against this decision, claiming that the Court was not allowed to reinvestigate the merits of the case. This led the Cour de cassation<\/em> to (finally!) rule on the scope of the review of the award by the annulment judge when international public policy is at stake.<\/p>\n\n\n\n

The \u201cmaximalist\u201d review of the conformity of the award with international public policy<\/strong><\/p>\n\n\n\n

As a reminder, for many years, French case law was understood as favouring a \u201clight\u201d standard of review to determine potential violations of international public policy by arbitral awards, since the Paris Court of Appeal decision in SA Thales Air Defence v. GIE Euromissile <\/em>(Paris, 18 Nov. 2004)and the Cour de cassation<\/em> ruling inSt\u00e9 SNF v. St\u00e9 Cytec Industries BV (Cass., Civ. <\/em>1st<\/sup>, 4 June 2008).<\/em> To lead to sanction, the violation had to be \u201cflagrant, actual and concrete<\/em>\u201d. The same approach was applied even when the award was challenged based on allegations of corruption, such as in the Schneider<\/em> case (Cass., Civ. 1st<\/sup>, 12 February 2014; contra<\/em>: Paris, 30 September 1993, Westman<\/em>).<\/p>\n\n\n\n

Since 2014, the Paris Court of Appeal has taken a different approach in favour of a fuller scrutiny of arbitral awards, first when internationally recognized criminal offenses such as bribery and money laundering were alleged (St\u00e9 Gulf Leaders for Management and Services Holding Company<\/em> v. SA Cr\u00e9dit Foncier de France<\/em>, 4 March 2014; Congo v. SA Commissions Import Export<\/em>, 14 October 2014, Alstom v. Alexander Brothers, <\/em>28 May 2019), then also when other violations of French international public policy were at stake (MK Group<\/em>, 16 January 2018). In all these cases, the Paris Court of Appeal carried out a review of the law and facts (including new evidence) to determine whether the recognition or enforcement of the award violated French international public policy in an \u201cactual and concrete<\/em>\u201d manner, while the requirement that the breach be \u201cmanifest<\/em>\u201d or \u201cflagrant<\/em>\u201d was not always reaffirmed.  <\/p>\n\n\n\n

However, in a recent decision, the Aix-en-Provence Court of Appeal applied the minimalist approach (Aix-en-Provence, 17 June 2021). A decision by the Cour de cassation<\/em> was therefore awaited by arbitration practitioners in France.<\/p>\n\n\n\n

In its Belokon<\/em> decision, the Cour de cassation <\/em>endorsed the Paris Court\u2019s approach, and approved it for having:<\/p>\n\n\n\n