Paris, the eternal city for arbitration?
The first edition of the Paris Arbitration Week commences on April 24.1 Organizers have highlighted that the event “is a great occasion to celebrate the repeated trust the actors of international arbitration have for Paris”.2 It is also a good opportunity to discuss both the importance and the role of Paris in international arbitration.
Paris is very well positioned in international arbitration. This position is not of a permanent nature however, and initiatives such as the Paris Arbitration Week are welcomed to ensure that Paris is to international arbitration what Rome is to the world, the Eternal City. Paris Arbitration Week calls into question the reasons for Paris’ success in international arbitration in order to reinforce it.
In that regard, the consistent choice of Paris, year after year, as the seat of numerous international arbitration proceedings3 largely contributes to this success. The more a city welcomes international arbitration proceedings, the more it secures a know-how, which appeals and reassures the actors of international arbitration who select the seat of arbitration to solve their dispute. Consequently, if the French capital desires to keep its privileged position, it must stay at the top of the list of the cities chosen as arbitration seats.
The choice of seat, which is likely to have major impacts on the effectiveness of an arbitration, is not only limited to geographic neutrality and should not be treated lightly4. Some cities enjoy the reputation of being arbitration friendly. As such, they are reassuring and are regularly recommended and chosen as arbitration seats. This is the case for London, Geneva and Paris.5 The City of Lights offers many advantages…6
Reasons for Paris' appeal as a seat of arbitration
From a legal standpoint, French arbitration law supports arbitration during the whole course of the proceedings.7 Except for exceptional circumstances, it is very difficult, in France, to prevent arbitration proceedings from taking place or to set aside an arbitral award -- keeping in mind that an arbitral award can usually only be set aside before the competent jurisdiction of the seat of the arbitration.8 The enforcement of arbitral awards are easily facilitated in France. To give an example, recourses against arbitral awards or against decisions granting enforcement are not suspensive9 and said recourses rarely prevent the enforcement in France of the arbitral awards they challenge.10 Furthermore, neutral jurisdictions, that are impartial and experienced in arbitration exist in Paris. The Paris Court of appeal includes one very specialized panel, comprised of three judges, Mrs Dominique Guihal as President, which hands down decisions debated in numerous universities across the globe.11
From a logistical standpoint, the French capital also provides the best conditions for hearings, with numerous hotels and conferences centres, close to international hubs (airports and stations), where parties, counsels, arbitrators, court reporters and interpreters can meet with ease.
From an economical standpoint, the cost of an arbitration in Paris is significantly less expensive than in other cities that are regularly chosen such as London. This is especially true when one takes into account the cost of a potential action before the local courts of the seats (either to support or to hinder the arbitral process).
Suggestions to maintain Paris’ success
Nevertheless, Paris faces fierce competition.12 Other “appealing” arbitration seats assert that they can offer similar advantages. This competition can be easily explained, as the organization of arbitration proceedings and their related disputes before the courts of the seat bear substantial economic consequences. A very conservative study estimated that in Paris alone, the annual turnover of the arbitration sector was valued at two hundred million euros in 2011.13
Similar to any actor in a competitive market place, Paris must generate investments and foster innovations in order to maintain its current position as a leading seat in international arbitration and to acquire new market share, as other competing cities are already doing.
A greater tolerance towards the English language
For example, a majority of international arbitration proceedings are held in English. However, when a legal action is introduced before a judge (to support the arbitration or to challenge an arbitral award), the local language of the judge must be used and the relevant documents translated, an expensive and time consuming process. To avoid this situation, Swedish and Swiss practitioners plead that all disputes regarding arbitration held before Swedish or Swiss courts should be held in the vernacular language, i.e. English.14 Paris could eventually line up with these examples or, at least, could tolerate that the arbitral award and the exhibits on which the award is based do not need to be translated when there are in English. The French Cour de Cassation already authorizes judges, when relevant, to base their decision on untranslated documents drafted in a foreign language.15
Fast-track proceedings to set aside awards
Another major innovation is for Paris to introduce fast-track proceedings when the losing party to an arbitration seeks to set aside the arbitral award rendered in Paris.16 Quicker proceedings would contribute to the efficiency of the arbitration process, and a fast-track procedure may directly influence the possibilities or not to enforce an arbitral award in a foreign State. The fast and effective enforcement of arbitral awards is an obvious criteria for the success of arbitration as a dispute resolution mechanism. The example set out below allows for the better understanding of the influence existing between a petition to set aside an award and the possibilities to enforce said award abroad.
If a party does not want to voluntarily enforce an award rendered in Paris, the only way to do so is to obtain the judicial right to enforce the award. With this aim in mind, the wining party of the arbitral proceedings should obtain the right to enforce the award in a State (usually not France) where the opposing party holds assets. This procedure called exequatur is mainly ruled by an international convention, the Convention on the recognition and enforcement of foreign arbitral awards dated 1958 (hereafter “New York Convention”).17 When deciding whether an arbitral award should be enforced in its jurisdiction, this convention offers the judge the possibility to stay its decision until the petition to set aside pending before a French judge has been ruled upon.18 This possibility incentivizes dilatory manoeuvres. The more an arbitration seat (in our example, France) has the reputation to deal with petitions to set aside an award slowly, the more it will be in the interest of the losing party to introduce such a petition. Even if this petition is introduced in bad faith and has no chance of success, the petitioner may be able to slow down the enforcement of the award against the assets it holds abroad. For example, it could ask for a stay of proceedings in front of the foreign judge to whom the enforcement of the award rendered in Paris is sought. In extreme circumstances, the opposing party will have enough time to organize its insolvency. A fast-track procedure to hear setting aside actions limits such a risk, however this limit does not really exist with Paris. Despite the quality of its specialized jurisdiction, the time period for when the petition to set aside an award rendered in Paris is introduced and the decision of the Court of appeal on this petition is about two years.
Paris could therefore be even more appealing for international arbitration, but the question remains as to whether the implementation of such a fast-track procedure is even possible. French law sets various procedural delays which cannot currently be shortened without a reform, as such a reform of the French code of civil procedure could be contemplated. In the age of the internet, benefitting from an additional delay of seven months simply because the headquarters of one party are abroad19 could legitimately be questioned. But beyond this, simply by allocating more resources, a clear improvement could be achieved.
Strengthening of financial and human resources
It is worth mentioning that the French Ministry of Justice has the ability to grant additional resources as it requires, and this has been done recently thanks to the contrat d’objectifs et de moyens dated 25 June 2015. This led to a significant reinforcement of human resources of the financial law and economic regulatory chamber of the Paris Court of appeal. This chamber now has 5 judges, 2 registrars, 1 administrative assistant, 1 clerk, 3 legal assistants, 6 intern attorneys, 4 volunteer judges and 2 specialized assistants.
These changes sent a strong message to the business world.
A similar investment should be made for the review of arbitral awards by State jurisdictions.
The methods exist, the need is there. The only thing lacking is the political will to change which will enable Paris to shine brighter.
Co-authored with Matthieu Boccon-Gibod, Partner at LexAvoué
1 For more information regarding this event, please have a look at the following website http://www.parisarbitrationweek.com/.
2 Elie Kleiman, President of the society Paris, Arbitration Place, quoted in the presentation flyer of the Paris Arbitration Week
3 School of International Arbitration, Queen Mary, University of London and White & Case LLP, “2015 International Arbitration Survey: Improvements and Innovations in International Arbitration”, see p. 12.
4 Entire books are indeed written about this question of the seat of arbitration. Please see for example Michael Ostrove, Claudia T. Salomon, Bette Shifman, eds., Choice of Venue in International Arbitration, Oxford University Press, 2014, 566, see pp. v-vii.
5 School of International Arbitration, Queen Mary, University of London and White & Case LLP, “2015 International Arbitration Survey: Improvements and Innovations in International Arbitration”, see p. 12.
6 For a summary of Paris’ advantages, please see the website of the society “Paris, Arbitration Place” at the following address: http://www.parisarbitration.com/home/.
7 Please see 2017 French civil code, Livre IV: L’Arbitrage, articles 1442 to 1527; please also see Thomas Clay, “‘Liberté, Égalité, Efficacité’: La devise du nouveau droit français de l’arbitrage – Commentaire article par article”, Journal du droit international (Clunet), n° 2, April 2012, p. 443 (first part) and p. 815 (last part).
8 Please see article V, paragraph 1(e) of the New York Convention; please also see Philippe Fouchard, Emmanuel Gaillard, Berthold Goldman, On International Commercial Arbitration, Kluwer Law International, 1999, 1280, see p. 974, § 1682; finally please also see Alan Redfern, Martin Hunter, Law and Practice of International Arbitration, London Sweet & Maxwell, 1986, 462, see p. 322.
9 Article 1526 of the French code of civil procedure.
10 Please see Alexander T. Brabant, Maxime Desplats, Étude “Arbitrage International: le nouveau contentieux de la suspension de l’exécution provisoire”, La Semaine Juridique Entreprise et Affaires, n° 05, 29 January 2015, 1053.
11 Lisa Vignoli, “Paris, place forte de l’arbitrage international”, LeMonde.fr, http://www.lemonde.fr/m-actu/article/2016/01/15/paris-place-forte-de-l-arbitrage-international_4847876_4497186.html, 15 Jan. 2016.
13 Mr Prada, General Inspector of financial fees, “Rapport sur Certains facteurs de renforcement de la compétitivité juridique de la place de Paris”, March 2011, see p. 5.
14 Sebastiano Nessi, “Introducing English as a possible language in setting-aside proceedings before the Swiss Supreme Court: a good idea?”, Arbitration Blog Practical Law, http://arbitrationblog.practicallaw.com/introducing-english-as-a-possible-language-in-setting-aside-proceedings-before-the-swiss-supreme-court-a-good-idea/, 20 Feb. 2017.
15 Please see for example the decision rendered by the 1st civil chamber of the Cour de cassation dated 26 September 2016 (decision n° 15-21.176), which justify the ruling of a lower court judge to base its decision on an exhibit not translated by stating that “the decision of the city of Villers-Cotterêts only relates to procedural orders and that lower court judges, in their sovereign decision, appreciate the conclusive force of the elements that are presented before them” (free translation).
16 The petition to set aside an arbitral award is usually introduced in front of the jurisdictions of the seat of arbitration and aims for the nullity of the arbitral award. According to French law, in order to avoid an entire new procedure, the petition to set aside the award must be based on the limiting grounds of article 1520 of the French code of civil procedure.
17 This Convention is in force in not less than 156 States; the list of the contracting States to this Convention is available at the following website: http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention_status.html.
18 According to article VI of the New York Convention: “If an application for the setting aside or suspension of the award has been made to a competent authority referred to in article V (1) (e), the authority before which the award is sought to be relied upon may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security”.
19 For example, according to the combination of articles 911-2 and 1527 of the French code of civil procedure.