Edouard Papeil*
The arbitrability of disputes implicating mandatory rules of European law being widely accepted,[i] the arbitrator has become a “regular judge of such disputes”[ii] alongside the national courts, in particular with regard to competition and consumer law. However, for the arbitrator, whose jurisdiction originates from the will of parties and not from the States, the application of those rules has not been without raising many questions.[iii]
Although most issues have been addressed by the European Court of Justice and Member States’ national courts, and despite the fact that arbitrators are generally chosen for their expertise on these matters,[iv] some doubts remain, particularly as to existence of a duty to raise, ex-officio, the mandatory rules of European law applicable to the dispute.
***
The uncertainty as to the answer that should be given to this matter originates from the deterritorilized nature of international arbitration. Unlike national judges, arbitrators are detached from the State’s legal orders. They are not bound either by procedural rules provided by national laws or by any strict judicial hierarchy.[v] In the absence of attachment to a forum, the arbitrators are similarly not bound by the European legal system. As a result, they are not subject to the principle of primacy or to the principle of effectiveness, on which the Court de Cassation relies to oblige judges in raising ex-officio, and where appropriate applying, the rules of public policy deriving from European law.[vi]
This autonomy vis-à-vis legal orders is coupled with considerable autonomy granted to arbitrators in the exercise of the mission conferred upon them by the parties. In principle, arbitrators are obliged to rule on the basis of the law chosen by the parties as applicable to their contract. Nonetheless, they are authorized to depart from it, if it is contradictory to a norm hierarchically superior because “the term law is sufficiently broad to cover not only the law in the sense of a text adopted by Parliament, but also regulations, case-law, customs, treaties insofar as their content is incorporated into the legal order of the State, federal law or the law of a regional entity (the European Union, for example) to the same extent, and the constitution”.[vii] Consequently, arbitrators may, at the request of a party or on their own initiative, and subject to respect for the adversarial principle,[viii] exclude the application of the chosen law should it be contrary to a mandatory rule of European law.
Despite this particular autonomy granted to the arbitrator, it is still constrained by the respect of certain standards deriving from national law. Indeed, when ruling on a dispute submitted to arbitration by the parties, it must ensure the effectiveness of the award,[ix] i.e. reasonably guarantee its recognition and non-setting aside. This presupposes the observance by the arbitrator of grounds for non-recognition provided by the law of the States, in which enforcement of the award will be sought, as well as grounds for setting it aside in the State of the seat of arbitration. In this respect, if one or several law of those States provide for the duty of the arbitrator to raise ex-officio the mandatory rules of the European law, the arbitrator shall have no other choice but to submit to it failing which arbitration proceedings would have been veined.
This subject was directly addressed by the Paris Court of Appeal in Thales v. Euromissile.[x] The court ruled that, under French law “no setting aside (of the award) is incurred simply because the arbitrators failed to raise questions of European competition law ex-officio”.[xi] In this view, by rejecting the principle whereby the award is not subject to setting aside, in the event that the arbitrator would not have ex-officio raised the mandatory rules of European Union law applicable to the case, judges refused to impose such a duty on the arbitrator.
Nevertheless, the arbitrator still has a vested interest, if the seat of the arbitration is Paris, or if the award is to be enforced on the territory of the Member-State, in seeking and ultimately raising the mandatory rules of European law. Indeed, even if the mere fact that the arbitrator has not raised these rules does not cause the award to be set aside, it is nevertheless weakened by its potential conflict with international public policy at the enforcement stage.
In this regard, the Paris Court of Appeal, in the Shooner[xii] case has, in line with the Thales case-law, guaranteed that the violation by the award of international public policy, of which European public policy is part,[xiii] is sanctioned by national courts. For this purpose, the court clarified the scope of article 1466 of the Code of Civil Procedure (applicable to international arbitration in virtue of article 1506 of the Code of Civil Procedure) providing that “the party who, knowingly and without legitimate reason, fails to invoke in due time an irregularity before the arbitral tribunal shall be deemed to have waived the right to invoke it”.[xiv]
On the one hand, it was affirmed that the presumption of waiver “does not only apply to procedural irregularities but to all claims that may be considered as grounds for initiating an action for the setting aside of awards [provided for by French law]”, and, on the other hand, were excluded from its scope of application “the claims alleging that the recognition or enforcement of the award would […] violate substantive international public policy”.[xv] On the basis of this exclusion, it was held that the parties, and the judge ex-officio, may raise any violation of international public policy in the proceedings subsequent to the award. Consequently, French judges have the power to set aside an award on the grounds of the arbitrator\’s failure to raise and apply the mandatory rules of European law, even if the parties have not raised them during the arbitral or judicial proceedings.
This ruling, although not directly imposing a duty on the arbitrator, is such as to prompt arbitrators to raise the mandatory rules of European Union law. This is all the more true given that the European Court of Justice, in three judgments,[xvi] obliged “both the court in charge of the setting aside and the court in charge of enforcement to raise ex-officio the rules of public policy for the protection of consumer law, even if the consumer has not invoked them at any stage of the arbitration proceedings”.[xvii]
For all that, an award issued by an arbitrator who would not have raised the mandatory rules of European law applicable to the case would not necessarily be subject to refusal of enforcement or setting aside. Indeed, the control of the award by the French judge being “minimalist”,[xviii] i.e. confined to manifest, effective and concrete violations of public policy,[xix] the arbitrator\’s omission should result in a violation sufficiently evident and its outcome should actually infringe the objectives of the public policy rules to be sanctioned. Accordingly, the French conception on the extent of the judge\’s control over the award diminishes the incentive for the arbitrator to raise the rules of European public policy ex-officio.
This position, however, is not shared by all member States. For example, Belgian courts operate a maximalist control over the award.[xx] This disparity of interpretation on the scope of control exercised by the national judges, although it “cannot satisfy the need for legal certainty of international trade operators, nor serve the interests of international arbitration”,[xxi] makes uncertain the solution reserved by Member-States to an award where mandatory rules of European law have not been invoked ex-officio. This uncertainty should strengthen the arbitrator\’s feeling of being held by a duty to seek the European rules applicable to the dispute, as an award is rarely intended to be recognized only in the State where the seat of the court is located.
*** Consequently, under French law, the arbitrator is not, strictly speaking, bound by a duty to raise, ex-officio the mandatory rules of European law applicable to the case. However, French courts, at the enforcement stage, are obliged to raise ex officio the applicability of these rules. This obligation on the judge, of which the arbitrators are aware, calls on them to exercise the utmost caution; the award being sanctioned if it is proved that the non-application of the mandatory rules of European law results in a flagrant, effective and concrete violation of European public policy.
*After graduating from the Master II English and North Americain Business Law at La Sorbonne, Edouard Papeil is currently an intern within the Litigation & Arbitration of Norton Rose Fulbright (Paris), a member of the MOOC Local and International Arbitration. Also, he is preparing for the French Bar Examination.
[i] Paris Court of Appeal, Labinal, May 19, 1993; Paris Court of Appeal, March 30, 1995
[ii] Maximin de Fontmichel, L’application du droit de la concurrence par le tribunal arbitral, AJ Contrats – Distribution 2014 p.204
[iii] For a comprehensive view of the connection between arbitration and European Union law, see. Anne-Cécile Bing, Arbitrage et droit de l’Union europenne : perspectives, 2015
[iv] Laurence Idot, Ordre public, concurrences et arbitrage : état de la rencontre, Revue Concurrences, No. 03-2006
[v] S. Bollee, Droit du Commerce International et des Investissements étrangers, 2e edition, “The arbitrator does not derive his jurisdictional functions from a State: he is not hierarchically subject to any State legal order.”
[vi] Court of Cassation, Mixed Chamber, Jully 7, 2017, No. 15-25.651
[vii] Pierre Mayer, L\’arbitre international et la hiérarchie des normes, Revue de l\’Arbitrage, Volume 2011, Issue 2
[viii] Court of Cassation, June 23 2010, No. 08-16.858, “[…] the judgment found that the arbitral tribunal had, without adversarial debate, based its decision on the non-invoked provisions of articles 120, 121 and 142 of the Egyptian Civil Code; […] the Court of Appeal, without having to carry out any research which its findings rendered inoperative, accurately inferred from this that the tribunal had violated the principle of contradiction and that the award could not be recognized or enforced in France.”
[ix] For an example of arbitration rules obliging arbitrators to ensure the effectiveness of the award, see. Art.35 ICC Arbitration Rules
[x] Paris Court of Appeal, Thales c. Euromissile, November 18, 2004
[xi] Ibid, 10 « aucune annulation n\’étant d\’ailleurs encourue simplement parce que les arbitres ainsi n\’ont pas soulevé d\’office les questions du droit communautaire de la concurrence »
[xii] Paris Court of Appeal, Shooner, 2 avr. 2019, n° 16/24358
[xiii] ECJ, Eco Swiss, June 1, 1999
[xiv] « La partie qui, en connaissance de cause et sans motif légitime, s\’abstient d\’invoquer en temps utile une irrégularité devant le tribunal arbitral est réputée avoir renoncé à s\’en prévaloir »
[xv] « ne vise pas les seules irrégularités procédurales mais tous les griefs qui constituent des cas d’ouverture du recours en annulation des sentences, à l’exception des moyens fondés sur l’article 1520, 5°, du code de procédure civile et tirés de ce que la reconnaissance ou l’exécution de la sentence violerait de façon manifeste, effective et concrète l’ordre public international de fond, lesquels, en raison de leur nature, peuvent être relevés d’office par le juge de l’annulation, et soulevés pour la première fois devant lui »
[xvi] ECJ, October 26, 2006, Elisa Maria Mostaza Claro c/ Centro Movil Milenium SL, No. C-168/05 ; ECJ, June 4, 2009, No. C-243/08, Pannon GSM Zrt (Sté) c/ Erzsébet Sustikné Gyorfi (Mme) ; ECJ, October 6, 2009, No. C-40/08, Asturcom Telecomunicaciones SL c/ Cristina Rodriguez Nogueira
[xvii] Ibid 2
[xviii] Christophe Seraglini, Le contrôle de la sentence au regard de l\’ordre public international par le juge étatique : mythes et réalités, Gazette du Palais – No. 80 – p. 5, March 21, 2009, « The prohibition of the judge from reviewing the merits of the arbitral awards is the main argument put forward by French case law to justify its minimalist solution. »
[xix] Court of Cassation, SNF c/ Cytec, June 4, 2008, « in the case of a violation of international public policy, only the recognition or enforcement of the award is examined by the setting aside judge as to the compatibility of its solution with that public policy, whose control is limited to the flagrant, effective and concrete nature of the alleged violation »
[xx] P. Guez, Le contrôle de la sentence arbitrale au regard du droit communautaire de la concurrence : application de l’arrêt Eco Swiss de la CJCE en France et en Allemagne, 2009, « Yet, the Brussels Court of First Instance [Trib. 1 inst. Brussels, Cytec, 8 March 2007], hearing an application for setting aside the award, set aside the same award and required that all violations of public policy be punished, and not only actual, flagrant and concrete violations.»
[xxi] Ibid 18