In a decision delivered on 11 March 2014, the Lyon Court of Appeal refused to annul the award issued in the commercial arbitration commenced by E.U.R.L. Tesco (Tesco) against S.A.S. Neoelectra Group (Neoelectra). The challenge was based on the arbitrators’ failure to disclose facts allegedly likely to call into question their independence and impartiality in the eyes of the parties. The Court considered that the professional relationship between one arbitrator and Neoelectra’s counsel on one hand, and the Facebook friendship between this same counsel and another arbitrator on the other hand, were not likely to create doubts in the parties’ minds.
This decision plays an important role in the evolution of French arbitration law. Impartiality and independence of arbitrators are the corner stone of arbitration. In this respect, French law, like other national legislations and international instruments, contains a disclosure requirement. The French Supreme Court indicated that an arbitrator should reveal any circumstance creating reasonable doubts in the parties’ minds as to his or her independence and impartiality. It is the role of the French Courts of Appeal to determine what can or cannot reasonably create such doubts in the parties’ minds. The Lyon Court of Appeal’s reasonable analysis shows its intent to break with the severe case law on the matter and promotes the effectiveness of international arbitration.
This paper first provides an explanation of the facts and procedure of the case (I). It then explains the Court’s decision (II) and examines its input for the French law of arbitration (III).
I. Facts and Procedure
In 2006, Tesco and Neoelectra entered into a commercial agreement. Soon after, in 2007, a dispute arose out of the agreement. In order to resolve their dispute, the parties had recourse to arbitration (1) and later post-arbitration proceedings before the French Courts (2).
1) Arbitration Proceedings
Pursuant to the arbitration clause contained in their agreement, the parties started arbitration proceedings. On 4 June 2009 in Paris, the arbitral tribunal (the Tribunal) composed of Mr. Morin and Mr. Larroumet as co-arbitrators and Mr. Degos as President of the Tribunal, issued an award ordering both parties to pay various amounts.
2) Annulment Proceedings
Unsatisfied with the award, Tesco requested the Paris Court of Appeal to annul it. It argued the Tribunal had been irregularly constituted: two arbitrators had failed to reveal circumstances that created doubts in its mind regarding their impartiality and independence. First, Mr. Larroumet had been “of counsel” of Freshfields Bruckhaus Deringer (Freshfields), the law firm for which Neoelectra’s counsel, Ms. Lallemand, was working. After leaving Freshfields, he kept in touch with the firm by notably providing legal consultations. Second, Ms. Lallemand was also friend on Facebook with another arbitrator, Mr. Degos. She supported his candidacy for the Paris Bar elections by “liking” his Facebook status.
The Paris Court of Appeal accepted Tesco’s arguments and set aside the award. Consequently, Neoelectra appealed to the French Supreme Court, which issued a widely noticed decision on 10 October 2012. It decided that the Paris Court of Appeal had not explained the reasons why these facts could create reasonable doubts in the parties’ minds, and considered it could not exercise its legal control on the decision. The Supreme Court reversed the decision of the Paris Court of Appeal and remanded the case to the Lyon Court of Appeal.
Unlike the Paris Court of Appeal, the Lyon Court of Appeal refused to set aside the award. It considered that both the undisclosed law firm relationship (1) and the Facebook friendship (2) were not likely to create doubts in the parties’ minds as to the arbitrators’ impartiality and independence.
1) Past “of counsel” position at a law firm and occasional consultations do not create doubts
The Lyon Court’s reasoning is based on three elements. First, Mr. Larroumet was not working at Freshfields anymore when Ms. Lallemand joined the firm. He was “of counsel” of Freshfields until 2000, 8 years before the start of the arbitration, and Ms. Lallemand started working at the firm in 2005, 5 years after Mr. Larroumet left it. Second, Mr. Larroumet’s contacts with Freshfields after he left the firm were occasional: he gave “2 or 3 consultations” in 10 years. Finally, Neoelectra’s lawyer was defending her client in her personal name, not in the firm’s name.
The Court’s decision appears to be reasonable. Setting aside the award for non-disclosure of these circumstances would be too harsh. As the Court pointed out, the link between Mr. Larroumet and Ms. Lallemand is too tenuous. They did not work at Freshfields simultaneously. Moreover, it seems like the Court is taking into account Mr. Larroumet’s good faith. If Mr. Larroumet had thought this circumstance could create a doubt in the parties’ minds, he would very likely have disclosed it. Indeed, purposefully refraining from disclosing a litigious circumstance does not serve an arbitrator’s interest. It would undoubtedly harm his or her reputation, preventing him or her from being nominated in subsequent arbitrations.
2) Counsel “liking” an arbitrator’s Facebook status after the award was issued does not create doubts either
The Lyon Court of Appeal decided that Tesco’s Facebook argument was irrelevant because Ms. Lallemand’s support to Mr. Degos on Facebook took place after the award was issued. However, the Court did not say a word about the Facebook friendship between them. Tesco’s argument was both based on the fact (i) that the counsel and the arbitrator were friends on Facebook, and (ii) that the counsel had “liked” the arbitrator’s status relating to the upcoming Paris Bar elections. The facts do not specify whether they became friends on Facebook before or after the arbitration, and the Court did not investigate that issue further.
The Lyon Court of Appeal’s decision plays an important role in the evolution of French arbitration law by reasonably narrowing the scope of the disclosure requirement, thus promoting the effectiveness of international arbitration (1). However, it does not put an end to the debate over the scope of the disclosure requirement (2).
1) The decision promotes the effectiveness of international arbitration
a) A little bit of background
The French law on the disclosure requirement has been described as extremely severe. French law adopts a strict standard of apparent impartiality and independence. In reality, this approach relies on a confusion between the failure to disclose an element that could give rise to doubts on one hand, and an actual lack of impartiality or independence of the arbitrator on the other hand. It follows that any failure to disclose a litigious circumstance leads to the annulment of the award, regardless of the existence of an actual conflict of interest. The reason for such a strict position might be the intent of the French legislator to ensure France’s legitimacy as a reliable forum. Making sure arbitrators are independent and impartial promotes due process, and enhances people’s trust in the arbitration system.
It follows that a court considering a statement of independence insufficiently detailed is likely to automatically set aside the award. The burden on arbitrators is thus extremely onerous. Notably, arbitrators practicing in large international law firms have to proactively research links of any kind that the firm has or may have with the parties.
However, in its 2012 decision, the French Supreme Court attempted to mitigate the strictness of this standard by requiring Courts of Appeal to explain why a fact that was not revealed was likely to create a reasonable doubt in the parties’ minds. Absent such proof, the arbitral award cannot be annulled. The standard is still apparent impartiality, but the appearance has to be reasonable and the party challenging the award needs to prove it.
b) Promoting the effectiveness of international arbitration
The problem is that there has not been a clear line yet on what is likely to create doubts in the parties’ minds. The Supreme Court’s decision could have been followed by another severe decision, even though justified. But the Lyon Court of Appeal adopted a reasonable approach on what is likely to create doubts. Its decision has an impact on the effectiveness of arbitration on tow levels: the award and the arbitrators’ designation process.
First, its decision protects the award. It avoids an automatic annulment of the award, thus bringing proportionality to the remedy for non-disclosure. It is more serious for an arbitrator to be partial than to fail to disclose an element that would make the parties doubt of his impartiality, especially when the element is so minor that it would not create doubt in a reasonable person’s mind. However, there is only one remedy available: the annulment of the award. Because annulment can be disproportionate, the Lyon Court of Appeal mitigated the severity of this only remedy. It rightly considered the undisclosed circumstances invoked by Tesco were insufficient to justify the annulment of the award.
Second, the decision has an impact on the designation of arbitrators. As explained before, the Court refused to consider the links between Mr. Larroumet, Ms. Lallemand and Freshfields as a problem. Its decision makes sense. As French authors pointed out, “the international arbitration community is a small world, where it is not uncommon for the arbitrators, often lawyers themselves, to know and meet the parties’ counsel, or for them to be appointed with the agreement or even the support of the latter”. Moreover, arbitrators working in law firms do not always know all their firm’s clients. This is particularly true for global international firms that have offices and clients all over the world. At the same time, it is legitimate for the parties to choose a specialist in arbitration to resolve their dispute, not a random person found in a telephone directory. Therefore, requiring arbitrators to disclose every single detail about their career and network, even details they do no know about, constitute a burden that would both slow down the designation proceedings tremendously and threaten the validity of arbitral awards.
2) The decision does not solve all the problems relating to the scope of the disclosure requirement
a) What about Facebook and other social media networks?
The decision does not address the issue as to whether an arbitrator has to disclose his Facebook friendship with a counsel for one of the parties, leaving the question unanswered under French law. Since the creation of Linkedin in 2003, Facebook in 2004 and Twitter in 2006, lots of authors have written on the subject. On 23 October 2014, the International Bar Assocation adopted revised Guidelines on Conflicts of Interests in International Arbitration (the IBA Guidelines). To promote greater consistency in the arbitrators’ disclosures and avoid unnecessary challenges, the Guidelines have established three non-exhaustive lists of circumstances: the “Red list” of circumstances that should give rise to doubts in the eyes of the parties, the “Orange list” of situations that may give rights to doubts, and the “Green list” of elements that do not show any apparent conflict of interest. The IBA notably decided that relationships between an arbitrator and a counsel through social media networks belong to the “Green list” of elements that do not need to be revealed, without distinguishing between the various networks. I believe that practitioners and legislators should further develop their understanding of this issue.
Social media networks can be very different. It would make sense to classify them into two categories: personal networks on one hand, and professional networks on the other hand. It appears to me that doubts on the impartiality of arbitrators are likely to be more serious in the presence of a personal network relationship than a professional one.
Facebook, for instance, is a personal network that I believe is clearly likely to call into question an arbitrator’s impartiality in the eyes of the parties. Although the IBA Guidelines have classified social media networks in the Green list, “close personal friendships” between an arbitrator and a counsel are part of the Orange list of situations which “may, in the eyes of the parties, give rise to doubts as to the arbitrator’s impartiality or independence”. Facebook may be a social network, but I think it rather belongs to the “close personal friendship” category. On Facebook, people post their holidays pictures and comment on their friends’ status. Facebook even describes itself in the following way: “People use Facebook to stay connected with friends and family”. It is thus legitimate for parties to have doubts when they see that the opposing counsel’s Facebook friends list includes the arbitrator. And because “any doubt as to whether an arbitrator should disclose certain facts or circumstances should be resolved in favor of disclosure”, a Facebook friendship should be disclosed.
Linkedin may also be a problem. Unlike Facebook, it is a professional network where people stay connected with their former and current colleagues, with people they have studied with or with people they have met in the course of their work. However, Linkedin may, like Facebook, create reasonable doubts in the parties’ minds. Under French law, arbitrators need to disclose their professional links with either a party or a counsel for a party because of a potential intellectual dependence. It seems that few judges have a Linkedin profile, probably because of their obligation to be neutral. One may argue that, an arbitrator being a private judge, arbitrators should adopt a similar attitude. However, contrary to judges, arbitrators are nominated by parties and a Linkedin profile may be useful in this regard. Even if Linkedin may be more useful to arbitrators than to judges, both have to be impartial and independent. Because their online professional connections may still give rise to reasonable doubts in the parties’ minds on their intellectual independence, it would be worth engaging in a debate over the issue.
How will the French Courts decide the issue of Facebook and social media networks in general? Future decisions will tell us sooner or later…
b) Predictability regarding the scope of the disclosure requirement. Really?
One may wonder whether Courts will in the future follow the same reasonable approach and create a coherent and stable case law. Indeed, one author believes that the obligation for the Courts of Appeal to explain why the non-disclosed elements were likely to create doubts will bring more predictability. But will the obligation to explain in itself bring more predictability to the decisions? Determining the existence of doubts in the parties’ minds implies a very subjective analysis. It depends on the parties, but also the judge examining the case. Courts may have different interpretations of the same circumstances. This case is a very good example: although the Paris Court of Appeal did not explain its findings, it considered the elements were sufficient to create doubts in Tesco’s mind, whereas the Lyon Court of Appeal considered it was not enough. Notably, the Paris Court took into account the fact that Mr. Larroumet still had a Freshfields email address at the time of the proceedings. This element was excluded by the Lyon Court’s decision.
To conclude, the Supreme Court’s decision to require Courts of Appeal to justify their decisions is not enough to reach a uniform and liberal case law. French Courts of Appeal need to apply a common principle in each of their decisions: ensuring the effectiveness of international arbitration. It is the principle on which the Lyon Court of Appeal’s decision is based, and we can hope Courts of Appeal will do the same in subsequent disclosure cases. Courts have placed the effectiveness of arbitration as the number one priority in their decisions on recognition and enforcement of awards. They consider that international awards are international decisions of justice that should be enforced in France, regardless of whether the award was annulled at the seat of arbitration. In addition, French Courts or French law will have to regulate the disclosure of media-based relationships. The issue needs to be clarified, as the use of media networks is increasing everyday.
The author is a Class of 2015 LL.M. student in the International Business Regulation, Litigation and Arbitration program at the New York University School of Law. She obtained her first law degree in 2011 at the University of Paris Ouest Nanterre La Défense, in the bilingual Anglo-American Law / French Law program. She then obtained a graduate degree in Business Law at the University of Paris II – Panthéon Assas in 2013. The author can be contacted at email@example.com.
 CA Lyon, 11 March 2014, n°13/00447.
 Article 1456 of the French Civil Procedure Code applying to both domestic and international arbitration via Article 1506 of the French Civil Procedure Code.
 Article 12(1) of the Model Law; §1036 of the German ZPO.
 General Standard 3 of the IBA Guidelines on Conflicts of Interest in International Arbitration, 23 October 2014; Art. 9 UNCITRAL Rules, 1976.
 Cass. Civ. 1e, 16 March 1999, n°96-12.748, État du Qatar c/ Société Creighton.
 Pursuant to Article 1520, 2° of the French Civil Procedure Code.
 CA Paris, 10 March 2011, n°09/28537.
 Cass. civ. 1e, 10 October 2012, n°11-20299, FS-P+B+I* (*decision published in the Report of the Civil Chamber of the Supreme Court, in the Information Report of the Supreme Court and on its website).
 The French Supreme Court can only examine legal issues, not factual issues.
 CA Lyon, 11 March 2014, n°13/00447, quoting Mr. Larroumet’s testimony.
 French lawyers are not employees of their law firm: they are allowed to have their own personal clients in addition to the firm’s clients.
 “Indépendance des Arbitres et Conflits d’intérêts”, D. Cohen, Rev. Arb. 2011, p. 611, paras. 59-62; “Le devoir de révélation dans la jurisprudence récente: de la rigueur à l’excès ”, M. Henry, LPA, 21 February 2011, p. 17 s.
 This view has been supported by T. Clay in Note under CA Paris, 12 February 2009, Rev. arb. 2009, p. 186.
 “Indépendance des Arbitres et Conflits d’intérêts”, D. Cohen, Rev. Arb. 2011, p. 611, para. 59.
 CA Reims, 2 November 2011, SA J&P Avax c/ Tecnimont SpA.
 Cass. civ. 1e, 10 October 2012, n°11-20299.
 While E. Loquin adopts a subjective approach, recommending the judge to put himself into the parties’ shoes with reasonableness, C. Jarrosson explains the undisclosed circumstance should be an element that could allow the parties to challenge the arbitrator.
 Ph. Fouchard, E. Gaillard et B. Goldman, Traité de l’arbitrage commercial international (1999), para. 1031.
“Social Media and Arbitration Conflicts of Interest: A Challenge for the 21st Century”, J. E. Kalicki, Kluwer Arbitration blog, 23 April 2012; “Arbitration Disclosure in the Internet Age: some guidance concerning the obligation to disclose internet activity and online relationships”, R. V. Glick, L. J. Stipanowich, Dispute Resolution Journal, vol. 67, n°1, Feb.-Apr. 2012, American Bar Association; The College of Commercial Arbitrators, “The Guidance Note: Arbitration and Social Media”, 15 August 2014.
 Part II, para. 4.3.1 of the IBA Guidelines, 23 October 2014.
 Part II, para. 3.3.6 of the IBA Guidelines, 23 October 2014.
 Part I, General principle 3(d) of the IBA Guidelines, 23 October 2014.
 “A propos de l’obligation de revelation: une leçon de méthode de la Cour de cassation, note sous Cass. Civ. 1e, 10 octobre 2012”, C. Jarrosson, Rev. Arb. 2013.
 “La dualité des fonctions de l’obligation de révélation”, E. Loquin, Dalloz, 2013, p.487.
 Cass. civ. 1e, 23 March 1994, n° 92-15137, Hilmarton c/ OTV; Cass. civ. 1e, 29 June 2007, n° 05-8053 and n° 06-3293, Putrabali Adyamulia c/ SA Rena Holding.