- Introduction
When resorting to arbitration, parties choose their applicable rules of procedure, often by referring to those of an arbitral institution. Such arbitration rules set time limits regarding the challenge of the arbitrators. The ICC rules, for example, provide for a 30-day time limit to challenge an arbitrator’s appointment.[1] Once an award is rendered, the question as to whether a party may try to have the award set aside on the grounds of lack of impartiality and independence of a member of the tribunal may arise. A fundamental part of such question, is whether that is possible even when the arbitrator had not been previously challenged pending the arbitration or such challenge occurred beyond the agreed upon time limits. In France, the question was most recently answered by the Cour de Cassation[2] and by the Cour d’Appel de Paris[3] in the latest episodes of Tecnimont v. Avax. Both courts confirmed the strict application of the principle of procedural estoppel. Such principle has been defined as “the procedural behavior [of a party] […] constituting a change in position, on the merits, the nature of which misleads [the opposing party] on the intentions [of the challenging party]”.[4] Such principle was introduced into French legislation by Article 1466 of the French Code of Civil Procedure,[5] which provides that: “a party who abstained from asserting an irregularity in due time before the arbitral tribunal, is deemed to have waived its right to assert such irregularity at a later stage”.[6]
The principle is aimed at preventing parties from raising, in the setting aside stage before the French Courts, procedural challenges which should have been raised, or could have been raised, during the arbitration. Article 1466 of the French Code of Civil Procedure refers to all types of procedural irregularities, such as, for example, the improper constitution of the arbitral tribunal, as in the Tecnimont v. Avax case,[7] or violations of due process, as in Democratic Republic of Congo v. FG Hémisphère Associates LLC.[8]
- Tecnimont v. Avax – a long journey towards the strict application of the parties’ agreement
The decision rendered by the Cour d’Appel de Paris on 16 April 2016 was the fifth decision of a long line of judgments by the French Courts on Avax’s attempt to set aside the partial award rendered by the ICC administered tribunal in 2007.
Société Tecnimont S.p.A. (“Tecnimont”) had entered into a contract with S.A.J.&P. Avax (“Avax”) for the construction of a plant in Greece. A dispute arose between the parties and, pursuant to the arbitration clause contained in their contract, Tecnimont commenced ICC proceedings in Paris. Pending such proceedings, in September 2007, Avax challenged the chairman of the tribunal alleging his lack of impartiality and independence. In October 2007, the tribunal dismissed Avax’s challenge, holding that, in any event, the challenge had been made after the 30-day time limit set by the ICC rules. On 10 December 2007, the tribunal rendered a partial award on liability in favour of Tecnimont. Avax soon initiated annulment proceedings before the Cour d’Appel de Paris. The court quashed the award by holding that the chairman had a “continued obligation” to disclose facts which could give rise to a challenge and that the appealing party had become aware of these facts solely after the arbitral tribunal had dismissed the challenge.[9] Tecnimont then appealed the decision before the Cour de Cassation, which reversed the judgment. However, the decision by the Cour de Cassation was rendered on the technical grounds that such facts had already been discussed before the arbitral tribunal. The case was then remitted to the Reims Court of Appeal, which set aside the award.
The Reims decision was considered controversial in light of the reasoning adopted. [10] Indeed, the Court held: first, that arbitrators were bound by a duty to disclose all facts which could give rise to questions of impartiality and independence at any time during the arbitration proceedings; second, that it was not bound by the ICC tribunal’s decision on the challenge. On this second point, the court reasoned that the decision on the challenge was administrative in nature, thus it did not have res iudicata effect.[11] Moreover, the court found that since Avax had discovered new facts regarding the chairman’s lack of independence and impartiality pending the arbitration, but had not brought a new challenge before the arbitral tribunal, it could not be barred from filing for annulment of the award on those same grounds.[12]
It is the author’s opinion that such approach seems to encourage dilatory tactics. Indeed, by allowing parties to ignore agreed upon time limits, they may strategically plan to save relevant information for the possible setting aside stage, thus ignoring the time limits’ protective function.[13]
The case was remitted once more to the Cour de Cassation and once more, on 25 June 2014, the Cour de Cassation reversed the decision. In that instance, the Cour de Cassation ruled on the res iudicata effect of the arbitral tribunal’s decision on the challenge and held that: “[A] party who knowingly refrains from challenging an arbitrator on the grounds of circumstances related to his alleged lack of independence and impartiality within the timeframe provided for by the applicable arbitration rules is deemed to have waived the right to invoke such facts before the annulment judge”.[14]
With this judgment of the Cour de Cassation determined that the arbitration rules chosen by the parties should be complied with and are binding on the parties throughout the arbitration. The decision thus forces the parties to be more active in complying with the set time limits when bringing their challenges.
Since the Cour de Cassation may only decide on points of law, the case was remitted to the Cour d’Appel de Paris to decide on “whether, for each of the facts and circumstances that it retains as constitutive of a breach of the arbitrator’s duty of independence and impartiality, the 30-day time limit provided for by the arbitration rules to challenge the arbitrator had been complied with”.[15]
- The 2016 decision of the Cour d’Appel de Paris
The Cour d’Appel de Paris ruled once more on the proper constitution of the arbitral tribunal and dismissed the application to annul the award. The Court dismissed the request for annulment on three different grounds.
First, it maintained that Avax could not invoke circumstances which it had already raised in its original challenge to the arbitrator. Indeed, the Court reiterated that such original challenge was untimely. Second, as to the ties between Sofregaz, a company belonging to Tecnimont’s same group, and the chairman’s law firm, it found that such circumstances could not be taken into account not only because, even being aware of these facts, Avax did not ground its original September 2007 challenge upon them, but also because the facts raising doubts on impartiality and independence “were public and easily accessible”.[16]
Third and finally, the Court held that although there were some facts invoked by Avax which had come to light after the challenge, specifically other ties between the chairman’s law firm and Sofregaz, they “were not of a nature to intensify the doubts on the arbitrator’s independence and impartiality in a significant manner that could have resulted from the information already available to Avax before its request to challenge”.[17] It follows that although such ties had not been known by the parties, they still could not lead to the annulment of the award.
The Cour d’Appel de Paris thus dismissed Avax’s request to set aside the award on the grounds that Avax had failed to timely challenge the arbitrator according to the agreed upon arbitration rules. Indeed, this meant that unless Avax had discovered new circumstances, which were not in the public’s domain, and substantially increasing doubts as to the independence and impartiality of the arbitrator, it would have had to submit its challenge within the time limit set by the agreed upon rules.
- Conclusion
The final episode of the Tecnimont v. Avax saga confirms a return to a strict application of the principle of procedural estoppel. Indeed, by affirming that parties will be deemed to have waived their right to challenge an arbitrator if they did not do so on time pending the arbitration proceedings, strengthens the biding nature of the time limits set by the agreement of the parties and firmly applies Article 1466 of the French Code of Civil Procedure. Parties will no longer be allowed to circumvent their agreement by holding onto information which may lead to the obstruction of the correct circulation of the arbitral award.
Although the decision seems to impose upon the parties a significant obligation to inquire extensively on the existing ties between the parties and the arbitrators, it is a welcome confirmation of the French courts’ deference to the arbitration rules selected by the parties. Indeed, the decision evidences the central importance of party autonomy in arbitration, which is expressed by the possibility granted to the parties to freely select the arbitration rules applicable to their dispute and have them expect that those rules be binding throughout the proceedings.[18]
This however does not mean that parties are no longer allowed to bring challenges once the time limit to do so has expired. The Paris Court of Appeals leaves the door open to challenges which are brought on the basis of new facts which give rise to fundamental doubts as to the arbitrator’s independence and impartiality. If the contrary were true, parties would be deprived from their ability to challenge an arbitrator for facts arising after the expiration of the time limit provided by the applicable rules, which could compromise a party’s right to due process.[19]
Eva Paloma Treves, 2013 J.D. Università degli Studi di Milano, IBRLA Candidate (2017).
[1] ICC 2012 Arbitration Rules, Article 14.2: “For a challenge to be admissible, it must be submitted by a party either within 30 days from receipt by that party of the notification of the appointment or confirmation of the arbitrator, or within 30 days from the date when the party making the challenge was informed of the facts and circumstances on which the challenge is based if such date is subsequent to the receipt of such notification”.
[2] Cour de Cassation, Chambre Civil 1, Société Tecnimont S.p.A. v. J.&P. Avax (Case No. 11-26529), 25 June 2014.
[3] Cour d’Appel de Paris, Société J.&P. Avax v. Société Tecnimont S.p.A. (Case No. 14/14884), 12 April 2016.
[4] Cour de Cassation, Chambre Civil 1, Société Merial v. Société Klocke Verpackungs (Case No. 08-21288), 3 February 2010. The French original text states as follows: “le comportement procedural […] constitutive d’un changement de position, en droit, de nature à induire [l’opposant] en erreur sur ses intentions”. The Principle of Procedural Estoppel, although not explicitly expressed, was already part of French Case Law: v. Cour d’Appel de Paris, Sociétés T.A.I, E.S.W. et I.E.C. v. sociétés S.I.A.P.E., Engrais de Gabè and others (Case No. 88/8256), 2 June 1989, Revue de l’Arbitrage, Vol. 1991 Issue 1, p. 87.
[5] Article 1466 of the French Code of Civil Procedure was introduced by Decree 48/2011 of 13 January 2011.
[6] The French original text reads as follows: “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”.
[7] v. infra, 2. Tecnimont v. Avax – a long journey towards the strict application of the parties’ agreement.
[8] Cour d’Appel de Paris, Républic Démocratique du Congo v. FG Hémisphère Associates LLC (Case No. 11/20732), 12 April 2016. The Democratic Republic of Congo claimed that the award rendered in Switzerland could not be enforced in France since it was contrary to due process. The Paris Court of Appeal dismissed such claim on the basis of the principle of procedural estoppel by holding that the Democratic Republic of Congo had not raised such claim during the arbitration proceedings, and thus it was barred from doing so in the enforcement stage.
[9] Cour d’Appel de Paris, J.&P. Avax v. Société Tecnimont S.p.A. (Case No. 07/22164), 12 February 2009, Revue de l’Arbitrage, Vol. 2009 Issue 1, p. 186.
[10] M. Henry, Note – 2 novembre 2011, Cour d’appel de Reims (Aud. solennelle), Revue de l’Arbitrage, Vol. 2012 Issue 1, p. 120.
[11] Cour d’Appel de Reims, J.&P. Avax v. Société Tecnimont S.p.A. (Case No. 10/02888), 2 November 2011, Revue de l’Arbitrage, Vol. 2012 Issue 1, p. 112.
[12] Ibid.
[13] C. Koch, Standards and Procedures for Disqualifying Arbitrators, Journal of International Arbitration, Vol. 20 No. 4 (2003), p. 330.
[14] Cour de Cassation, Chambre Civil 1, Société Tecnimont S.p.A. v. J.&P. Avax (Case No. 11-26529), 25 June 2014.
[15] Cour de Cassation, Chambre Civil 1, Société Tecnimont S.p.A. v. J.&P. Avax (Case No. 11-26529), 25 June 2014.
[16] Cour d’Appel de Paris, Société J.&P. Avax v. Société Tecnimont S.p.A. (Case No. 14/14884), 12 April 2016.
[17] Ibid.
[18] G. Born, International Commercial Arbitration (Second Edition), Kluwer Law International 2014, p. 83; M.L. Moses, The principles and practice of international commercial arbitration, Cambridge University Press 2012, p. 1.
[19] Cour de Cassation, Chambre Civil 1, Chambre Arbitrale Maritime de Paris v. Nycool AB (Case No. 14-20396), 31 March 2016.