Case law related to arbitral awards handed down these last twelve months has again been plethoric. Several decisions involved issues related to criminal law, notably dealing with the admissibility of evidence obtained unfairly and procedural fraud surrounding the concealment of evidence during arbitration, the content of international public policy in the context of the fight against tax fraud and the consequences of foreign criminal proceedings on annulment proceedings.
Admissibility of evidence obtained unfairly and procedural fraud surrounding the concealment of evidence during arbitration
Accordingly, in a decision dated 17 October 2023 (No. 21/20796), the Paris Court of Appeal ruled on two issues relating to the production of documents in the context of a challenge. This challenge was brought by companies in the Hisense group against an award made on 19 October 2021 concerned a dispute relating to the termination of distribution contracts with a company incorporated under Egyptian law. The claimants alleged notably that, during the arbitration, the defendant in the action had committed procedural fraud by “knowingly manipulating its production, by concealing information that it should have communicated to the Hisense companies in response to their requests for the production of documents, in order to mislead the religion of the Arbitral Tribunal’’. These documents, produced in the context of the challenge, were allegedly discovered thanks to a former managing director of the defendant company, which the latter alleged had been obtained in breach of the duty of loyalty and which it was seeking to have declared inadmissible.
On the issue of the documents obtained unfairly, after having established the principle of the inadmissibility of documents obtained in such a way, the Court ruled that they were admissible, even if it could constitute theft under Egyptian law, insofar as the aim pursued, which is to “demonstrate the existence of a procedural fraud consisting in the concealment from the arbitrators during the arbitration of documents that were decisive for their decision’’, was of “overriding interest’’ and “without disproportionately infringing rights of [the defendant company’s] in light of the objective pursued”.
Content of international public policy in the context of the fight against tax fraud
As part of its review of the compliance of awards with international public policy, the Paris Court of Appeal has notably ruled, in a decision dated 24 October 2023 (No. 19/13396), on a breach of the fight against tax fraud. In this case, the Court was ruling on an annulment proceeding of an award rendered on 26 April 2019 that found the Bolivarian Republic of Venezuela liable for violations of the protections granted to foreign investments in favor of the Garcia family. Venezuela brought an action for annulment of the award, alleging notably that recognition or enforcement of the award would be contrary to international public policy in that it would legitimize criminal activities carried out by the Garcia family, namely tax fraud and fraud against the exchange control system.
The Court first noted that its review “is concerned solely with examining whether the implementation of the measures taken by the arbitral tribunal breaches in a characterized manner the principles and values included in that international public policy”. Consequently, the fact that the arbitral tribunal had already ruled on the matters relied on in support of the claimant’s action for annulment did not prevent the Court from examining them again in the context of reviewing the award in light of international public policy. Moreover, in this context, the Court pointed out that the purpose of the review was to determine whether the recognition or enforcement of the award was such as to characterize an infringement of international public policy and not to assess the facts relied on before the arbitral tribunal.
It then carried out a detailed examination of the solution adopted in the award, relying also on the findings of the Chilean courts, in order to determine whether it incorporated elements relating to the commission of tax fraud and annulled the award in part insofar as it awarded compensation for an investment that had contributed to the commission of tax fraud.
Consequences of foreign criminal proceedings on annulment proceedings
Lastly, in an order dated 30 March 2024 (No. 20/10169), the conseiller de la mise en état of the Paris Court of Appeal ruled on an application for a stay of annulment proceedings against an award rendered on 17 July 2020. The award had ordered the Venezuelan company PDVSA Servicios S.A. (“PDVSA Servicios”) to pay damages to the Barbadian company Petrosaudi Oil Services (Venezuela) Ltd (“Petrosaudi”). As part of the action for annulment brought by PDVSA Servicios, the company applied for a stay of proceedings pending a decision by the Malaysian courts in relation to criminal proceedings against Petrosaudi.
The conseiller de la mise en état, in deciding on this application for a stay of proceedings, recalled first of all that such an application is to be assessed on a discretionary basis, “in the interests of the proper administration of justice’’, and that as a procedural objection, it must be raised before any defence on the merits, unless its cause is revealed after the submissions on the merits. In the present case, in rejecting this application, the conseiller de la mise en état noted that although PDVSA Servicios relied on recent press articles to justify its request for a stay at this stage of the proceedings, this procedure had in fact been known since the action was brought, making the application untimely and inadmissible.
The incursion of criminal law into the field of arbitration is not recent, but the issues addressed are more numerous and varied, as evidenced by the decisions rendered these last twelve months, both on the merits or procedure. Although many areas of criminal law have already been explored by arbitrators and annulment judges, it is likely that new issues will be addressed in forthcoming decisions.
