Arbitration in France

October 2011 | TALKINGPOINT | LITIGATION & DISPUTE RESOLUTION

financierworldwide.com

FW moderates a discussion on France as a seat of arbitration between Tim Portwood at Bredin Prat, Jérôme Richardot at Fasken Martineau, and Patricia Peterson at Linklaters LLP.

FW: In your opinion, what overall advantages does Paris offer as a venue for arbitration proceedings as compared to other locations?

Portwood: France ticks all of the boxes as a jurisdiction favourable to arbitration proceedings. Its substantive and procedural laws are pro-arbitration; the judiciary is accustomed to dealing with issues arising out of arbitrations at all stages of the proceedings from requests for provisional measures before an arbitration has started, through assistance in the constitution of an arbitral tribunal, to enforcement of arbitral awards. There is a significant body of culturally diverse counsel experienced in handling international arbitrations and practitioners who sit as arbitrators all resident in Paris and who are capable of working in English, French and other languages. Likewise there is a corpus of other specialists whose expertise is often called on in the course of international arbitration proceedings. On a more materialistic front, there is a wide range of facilities for the holding of hearings available and if care is taken these facilities need not be expensive. In addition, the ICC Court of International Arbitration has its headquarters in Paris which inevitably means that local counsel experienced in international arbitration have ready access to the ICC.

Peterson: Three principal advantages of Paris as an arbitration seat merit emphasis. First, France has a legal framework that is highly supportive of arbitration as a method of dispute resolution, which has recently undergone a thorough review process, with publication of a new arbitration Decree in January 2011. Second, there exists considerable expertise in the arbitration field at all levels in France, including among counsel, arbitrators and in the courts. With regard to arbitrations seated in Paris, a specialised chamber of the Paris Court of Appeal decides all applications to set aside arbitral awards and appeals from enforcement decisions. The new legislation reinforces the supporting role of the courts, through the juge d’appui, and, in the case of international arbitrations, gives those powers to the Presiding Judge of the Paris Court of First Instance, unless the parties agree otherwise. Finally, Paris offers a central location in Europe with infrastructure that is well-adapted to conducting international arbitration proceedings, including hearing facilities, competent translators, interpreters and court reporters.

Richardot: When a city applies for the Olympics, it promises a future. Paris has already proven its devotion to arbitration when hosting the ICC some decades ago. Moreover, French law since 1981 is at the forefront of international arbitration law and sets an example for other countries. Indeed, our French code of civil procedure provides a specific and friendly legal framework for arbitration and French case law is considered to be clear and efficient. Moreover, the recent French decree dated 13 January 2011 will contribute to making Paris even more attractive. Lastly, as well as having a long-standing reputation as a well-recognised arbitral seat, Paris has all the logistics of a big city. It is also a good venue for parties and arbitrators who wish to spend some time in a friendly and beautiful city.

FW: In your view, does the location of an arbitration affect the speed and efficiency of proceedings? If so, how does France compare to other locations in this regard?

Peterson: Speed and efficiency can be influenced by the extent to which a party can use the courts at the seat to interfere with the arbitration process, thereby causing delay. Another factor is the availability of assistance from the courts in aid of arbitration proceedings. The French legal framework for arbitration seeks to limit court interference; for example the compétence-compétence principle requires courts to decline jurisdiction to determine the validity of an arbitration agreement, except in limited circumstances, giving priority to the arbitral tribunal. At the same time, the system provides the necessary support for arbitration through the juge d’appui, including assistance in constituting the arbitral tribunal or in obtaining evidence from third parties. The new arbitration Decree introduced significant changes designed to promote speed and efficiency in international arbitration proceedings once an award has been rendered. Parties can now waive the right to bring an application to set aside an award rendered in France, which would leave challenges to the enforcement stage. Where the right has not been waived, the filing of an application to set aside an award will no longer automatically stay its execution. The time limit for filing an application to set aside an award has also effectively been shortened because the point of departure for the general one-month time limit is now the date of notification of the award by the applicable method, rather than service of the award bearing an enforcement order.

Richardot: The seat of arbitration undoubtedly influences the speed and efficiency of arbitration. The law of the seat, and domestic courts, should favour arbitration and not interfere with the arbitral process. On the other hand, it should authorise reasonable recourses against awards if needed. Our purpose is not to enter into a comparative study between legal systems but France, undoubtedly offers the predictability and the security of a legal system that will ensure the enforceability of the arbitral award at a reasonable cost. Meanwhile, exequatur of awards is refused only for very limited reasons, which gives the parties the security of the arbitration system.

Portwood: The factors that most readily affect the speed and efficiency of an arbitration are found in the choice of the members of the Tribunal and of counsel. The actual location of an arbitration proceeding is not in and of itself significant to speed and efficiency unless the assistance of the courts is called upon. Otherwise, the ease of communication even of large masses of material today means that location is not, in my view, an important factor.

FW: How would you characterise the commercial and legal expertise of arbitrators based in France?

Richardot: Paris is home to many international arbitrators from different origins, mainly leading academics as well as specialised lawyers from major international law firms. Many of them are internationally recognised as leaders in arbitration, and have a specific knowledge of different legal systems and languages. Moreover, one may find in France specialists in almost every field. French case law also looks seriously at the impartiality of the arbitrators which again offers the parties the predictability of an arbitration which will be respectful of due process.

Portwood: Because of the history of France as being at the forefront of international arbitration law and the presence of the headquarters of the Court of International Arbitration of the ICC in Paris, a significant body of skilled and experienced arbitrators exists in Paris. The experience of the majority of these persons is wide covering all industry sectors and all types of arbitration, whether institutional, ad hoc, or treaty based. The individuals work either out of the Paris offices of international law firms, in specialised boutique firms, or as sole practitioners – which is the case in particular for law professors who practise as arbitrators. In my experience, the commercial and legal expertise of the large majority of these practitioners is of a high standard.

Peterson: France offers a large choice of arbitrators with varied backgrounds and extensive arbitration experience. Whilst arbitrators with civil law training are obviously abundant in France, there are a number of experienced arbitrators with common law backgrounds who practise within the Paris international legal community. There are perhaps two main profiles of arbitrators in France with a legal background: practitioners and law professors, some of whom practise with law firms or consult for them. The choice of an arbitrator will depend on the type of case. One might not chose the same arbitrator for a treaty arbitration, as for a commercial case raising intricate questions of contract law, or a technical construction case which will turn on the facts and expert evidence. There exists a good range of options in France for each type of case.

FW: Is there sufficient precedent and predictability in French arbitration proceedings from a procedural point of view to give some comfort to disputing parties?

Portwood: The difficulty with talking about precedent and predictability of the procedural aspects of arbitration is the lack of any publicly available records. Whilst the Secretariat of the ICC in Paris may be able to give some guidance at the commencement of arbitration once the tribunal has been constituted, the guiding rule in all arbitration is that of due process. France is no different here from any other jurisdiction. What can be said, however, is that the wealth of experience among the arbitration professionals in Paris is such that counsel can predict with a reasonably satisfactory degree of certitude what due process should mean and how it will be applied by a tribunal in any given circumstance. The likelihood of an experienced tribunal diverging wildly from such standard is small.

Peterson: In France, there is a wealth of case law on arbitration issues from the specialised chamber of the Paris Court of Appeal and the Cour de cassation, the highest court in France. This provides a significant degree of predictability of results in the context of court applications, since most of the fundamental issues have already been addressed. The principles derived from the case law have now been rendered more accessible, notably to parties outside France, with the reform of French arbitration law this year. Many of the new provisions constitute a codification of solutions to problems that were established by the French courts in case law. The previous arbitration Decrees of 1980-1981 were particularly laconic with regard to international arbitration. The new Decree, which maintains the distinction between domestic and international arbitration, now sets out the basic principles and procedural framework for an international arbitration seated in France, while preserving the ability of the parties to agree upon the arbitration procedure, if they so desire.

Richardot: The important case law developed by French Courts since 1930 in international arbitration, as well as our French code of civil procedure, provide for a solid predictability. French courts have a long-standing reputation as excellent courts dealing with arbitration proceedings. They have been supportive of arbitration for years and judges are specialists in arbitration. French courts commonly deal with all aspects of arbitral proceedings. Since 1981, hundreds of decisions have been rendered by the specialised Court of Appeal together with the Supreme Court in Paris. Many countries have decided to take advantage of French case law on arbitration.

FW: What advice would you give to parties on how to control their arbitration costs in France and generally?

Peterson: Controlling arbitration costs begins with a well-drafted dispute resolution clause. This can help to avoid expensive arguments over jurisdiction and, in some cases, parallel proceedings. The composition of the arbitral tribunal can also have an impact on costs. An arbitrator’s approach to procedure and case management should be taken into consideration when selecting arbitrators. The costs associated with an arbitration can be controlled, to some extent, through the adoption by the arbitral tribunal of streamlined procedures that are adapted to the needs of the particular case. The ICC publication on Techniques for Controlling Time and Costs in Arbitration contains a number of sensible suggestions.

Richardot: There is a need for strong case management at the early beginning of the process. First of all, this involves the careful drafting of the arbitration clause. We have recently been involved in a never-ending proceeding due to the fact that the arbitration clause was referring to two arbitration institutions thus blocking the entire proceedings for years. Therefore, the early identification of issues, the preparation of detailed statements of claims, the full disclosure of evidence, the choice of arbitrators and the type of arbitration – ad hoc or institutional – are as many elements that should be carefully considered. Moreover, having suffered from criticisms, institutions such as the ICC have issued guidelines for controlling time and costs worth referring to.

Portwood: The first step for a party to take when considering its own arbitration costs is to work out with counsel a careful and detailed flow diagram of the different steps that need foreseeably to be taken throughout the arbitration and to set estimates of the costs of each of these steps. This flow diagram should be updated from time to time as the proceedings progress. Any significant divergence from the estimates should be addressed immediately by and between the party and counsel. As for the costs of the proceedings themselves, in institutional arbitration, control of such costs is usually out of the hands of a party. In ad hoc arbitration, however, it is important to agree on the arbitrators’ fees and any other arbitration costs that are to be borne by the parties at the outset immediately upon constitution of the tribunal. That agreement must be recorded in writing and signed by the tribunal and the parties.

FW: How does Paris measure up as an arbitration centre for resolving international disputes, compared to other major centres around the world?

Richardot: Paris has long been the pre-eminent place of arbitration as France has supportive and innovative law towards arbitration – whether domestic or international. Paris undoubtedly competes with other cities, such as London, in attracting international arbitrations, especially regarding business operations in Europe but France has confirmed, with its new legislation, its leadership as a friendly forum. Moreover, France, and Paris in particular, can be seen as competitive in terms of costs for both arbitrators and lawyers compared to Anglo-Saxon cities. For all these reasons Paris should help to ensure the success of the proceedings.

Portwood: In my experience, Paris measures up extremely well as an arbitration centre as it has done in the past. The decision of the ICC Court to maintain its headquarters in Paris is an important one for the city and for its arbitration professionals. Likewise, the reformed law on arbitration has sent an important signal to the rest of the arbitration world that not only the French judiciary but also the French legislature and governments are keen to promote Paris as an arbitration centre. It would perhaps be going too far to say that Paris is at the top of the ladder, but it is certainly ex aequo with a number of other centres.

Peterson: The Queen Mary, University of London, 2010 International Arbitration Survey reported that London, Paris, New York and Geneva were the seats most frequently used by respondents to the survey over the preceding five years. Paris compares well with the other prominent arbitration centres for a number of reasons. These include the fact that it is a neutral, arbitration-supportive jurisdiction, with a good track record on enforcement of agreements to arbitrate and awards. Rivalry between arbitration seats is particularly intense in the case of Paris and London. London is often said to be preferred by companies for disputes involving contracts governed by English law or the law of other common law jurisdictions. Given the number of international firms that are represented in Paris, and the range of expertise available, I would not view governing law as a reason not to choose Paris.

FW: Have there been any significant legal developments in France affecting arbitration? What impact, for example, will the French Decree of 13 January 2011 have on the process going forward?

Portwood: Apart from the decision of the ICC to maintain the headquarters of the Court in Paris, the main recent development has been the passing on 13 January 2011 and the coming into force on 1 May 2011 of a reform of the French law on arbitration. The purpose of the legislature was openly to render the law more user friendly and to codify much of the previous 30 years’ judicial development of arbitration law. The result has received much praise from the academic and professional circles in France and elsewhere. France, although not a Model Law country, continues to have perhaps the most modern of all arbitration laws and certainly one of the most forward looking judiciaries in the world.

Peterson: Another element that deserves mention is the treatment of confidentiality, since it is frequently cited by commercial parties as a reason for choosing arbitration and is often assumed to exist. The new Decree specifically provides that, subject to legal obligations and unless the parties provide otherwise, domestic arbitration proceedings are to be confidential. By contrast, the Decree is silent with respect to international arbitration. This was a deliberate choice on the part of the drafters of the Decree, which appears to have been influenced by the trend towards greater transparency, particularly in investor-state arbitration. It remains to be seen how the French courts will interpret this silence in the text. A party that wishes to ensure the confidentiality of any aspect of arbitration proceedings would be well advised to provide for it contractually.

Richardot: France was one of the first countries to adopt favourable legislation on arbitration and there has been abundant innovative case law from the French Supreme Court and the Paris Court of Appeal since then. The new arbitration law which came into force on 1 May 2011, aims to speed up the arbitration process. Not only does it clarify French law, notably the role of French courts, it also reinforces the well-established principle of recognition enforcement of awards by facilitating exequatur proceedings, making the whole process all the more accessible to all both foreign and domestic practitioners.

Tim Portwood is a partner at Bredin Prat, and a French qualified English barrister. He specialises in international arbitration and international litigation. His practice also includes cross-border M&A transactions, joint ventures and private equity transactions. Born in the United Kingdom, Mr Portwood graduated from Cambridge University. He was admitted to the Bar of England and Wales in 1988 and to the Paris Bar in 1998. Mr Portwood can be contacted on + 33 1 44 35 35 35 or by email: timportwood@bredinprat.com.

Jérôme Richardot is a partner at Fasken Martineau. Mr Richardot is a seasoned litigator with over 25 years' experience mostly in international law firms. Over the years his practice has included business and corporate litigation and international arbitration. Mr Richardot is a member of the Association Française d'Arbitrage (French arbitration association) and he is a registered ‘mediator’ with the Centre de Médiation et d'Arbitrage de Paris (CMAP). He also has an extensive experience in international arbitration as counsel. Mr Richardot can be contacted on + 33 (0) 1 44 94 96 98 or by email: jrichardot@fasken.com.

Patricia Peterson is counsel at Linklaters LLP in Paris. She is a member of the Paris Bar, a solicitor of the Senior Courts of England and Wales and a member of the Ontario and Quebec Bars, specialising in international arbitration and cross-border litigation involving both civil law and common law legal systems. Ms Peterson is a Fellow of the Chartered Institute of Arbitrators, a Chartered Arbitrator and a CEDR Accredited Mediator. Ms Peterson can be contacted on +33 1 56 43 56 06 or by email: patricia.peterson@linklaters.com.

THE PANELLISTS

Tim Portwood

Bredin Prat

Jérôme Richardot

Fasken Martineau

Patricia Peterson

Linklaters LLP