Publication
10 September 2023

France

by Stéphane de Navacelle and Grégory Arnoult

I. Can allegations of corruption serve as a bar to jurisdiction of arbitral tribunals or admissibility of claims?

 

Under French law, by application of the principle of autonomy of the arbitration agreement – meaning that the validity of the agreement is assessed by reference to the common intent of the parties, by application of a material rule and without reference to legal provisions – and the principle of compétence-compétence – which means that arbitrators have the power to rule in priority on their own jurisdiction –, arbitral tribunals can rule on allegations of corruption.

In international arbitration cases, arbitrators have jurisdiction even when the dispute involves public policy rules. Parties may attempt to argue that alleged corruption affects the validity of contracts subject to the dispute and accordingly, the arbitration agreement. However, because of the autonomy of the arbitration agreement, whereby the nullity of the contract does not affect the validity of the arbitration agreement, such an argument is unlikely to prevail. The situation may be different if parties alleged that corruption relates to the arbitration agreement itself, although such an argument has not been raised to our knowledge.

Findings related to corruption, which fall under the purview of arbitrators, will in principle not affect the admissibility of the claims although this will depend on the law applicable to the merits of the dispute and not the arbitration law. Under French law, objections related to the inadmissibility of claims tend to have claims ruled inadmissible without a ruling on the merits. It is unlikely that allegations of corruption would lead to the inadmissibility of claims, without an examination of the merits.

 

II. Can allegations of corruption affect the validity of an arbitral award?

 

In annulment and enforcement proceedings in France, the court reviews the validity of award on the basis of limited grounds related to jurisdiction, the constitution of the arbitral tribunal, the compliance with its mission by the arbitral tribunal, the respect of due process rights and the compliance of the award with international public policy rules.

The fight against corruption and money-laundering has been confirmed by case law to form part of international public policy. Accordingly, reviewing courts may be required to determine whether recognition or enforcement of arbitral awards may contravene this objective, notably if it gives effect to a corruption pact.

 

III. In annulment or enforcement proceedings, can the court review the award and the merits to determine whether corruption or related offences affect the underlying dispute?

 

Annulment and enforcement proceedings are not appeals and the court does not review the award on the merits and rule again on the dispute. The court only reviews the award to determine whether it can become part of French public order, although in relation to jurisdiction and compliance with public policy, courts have greater powers of review.

In relation to the jurisdiction – which exclude issues related to the admissibility of claims –of the arbitral tribunal, courts perform a complete review of the issue, in law and in fact, and is not bound by the findings of the arbitrators.

In relation to compliance with international public policy, the review of the court focuses not on the merits of the dispute but on the recognition and enforcement of the award, which must not violate French international public policy rules, including the fight against corruption and money-laundering. However, in performing this review, the court can review, in fact and in law, all the elements necessary to assess whether the recognition and enforcement of the award complies with public policy.

 

IV. Can courts review corruption allegations which have not been raised in the arbitration?

 

Courts examining the compliance of arbitral awards with international public policy rules are not limited to the elements contained in the award or discussed in the arbitration proceedings, and the court can reopen the debate and is not bound by the findings of the arbitrators. Accordingly, claims related to allegations of corruption can be brought forward before the reviewing court for the first time, in spite of the estoppel rule of Article 1466 of the Code of Civil Procedure, even if this argument was not raised before the arbitrators.

 

V. Do courts defer to the arbitral tribunal’s finding that no corruption acts were committed?

 

No, in France, when reviewing an award, especially on grounds related to the arbitral tribunal’s lack of jurisdiction and compliance with public policy rules, the court is not bound by the arbitrator’s findings and will perform a complete review of the issue, in law and in fact.

 

VI. Is there a standard of proof used by arbitrators and reviewing courts to assess the existence of corruption?

 

In arbitration proceedings, including when ruling on claims related to allegations of corruption, French arbitration law does not impose specific standards of proof or rules of evidence. However, in relation to compliance with public policy, French courts apply a standard of “serious, precise and consistent” or “characterized” evidence to determine whether there has been a material violation thereof.

 

VII. Which method do arbitrators and reviewing courts employ to establish evidence of corruption?

 

In seeking to establish evidence of corruption, arbitral tribunals have used the “red flags” method. French courts, when reviewing awards, have also used red flags; Examples of evidence taken into account include lack of proof of services performed, irregularities and deficiencies in accounting and compliance, disproportion between the services and payments received, the wider context of corruption in a country, etc.

 

VIII. Are arbitrators seated in your jurisdiction bound by criminal proceedings on issues that could impact the underlying arbitration dispute?

 

Criminal law is inarbitrable per se, and arbitrators, naturally, cannot rule on criminal offenses. However, arbitrators can rule on the civil consequences of an offense, for instance, when it affects the validity of a contract.

Because arbitration proceedings are autonomous, French arbitral tribunals seated in France are not required to stay their proceedings until a criminal court – whether French or foreign – rules on an offence that is relevant for the arbitration case. Likewise, French courts ruling on enforcement or annulment of awards are not required to stay their proceedings when there is a criminal proceeding that can influence the commercial dispute.

 

IX. To what extent do they rely on or defer to findings from parallel criminal investigations?

 

Arbitral tribunals and French courts have the ability to stay their proceedings and it may be good practice for them to do so, in order to avoid contradiction between the award and the criminal ruling. In addition, recognition or enforcement of an award giving effect to a contract or claims which have been ruled illegal by a criminal judge, e.g. because of corruption, will likely violate French international public policy.

 

X. Are remedies available when an arbitral tribunal rules that there is no evidence of corruption but subsequently a criminal ruling decides otherwise?

 

Except the annulment or the appeal of the recognition and enforcement of award, there are no effective remedies in case of contradiction between an arbitral award and a ruling in French arbitration law. Applications for review, before the arbitral tribunal, can be made under specific conditions, which are unlikely to cover this situation. This application can be made by the parties to the original proceedings, within two months of the date when they have gained knowledge of the cause of the application, which are limited to the decision having been obtained by fraud, or on the basis of evidence found to be false or key evidence has been retrieved since the award.

 

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