Paris Court of Appeal, 25 February 2020, No 19/1507575; 19/15816; 19/15817; 1915818; 15/819

The International commercial chamber of the Paris Court of Appeal, created in February 2018, has recently issued a decision on the everlasting topic of arbitrators’ independence and impartiality.

The dispute arose between three Brazilian companies, members of a consortium operating on an offshore oil development project in Brazil: Dommo Energia S.A. (“Dommo” or “Claimant“), Barra Energia do Brasil Petróleo e Gás Ltda. (“Barra“) and Enauta Energia S.A. (“Enauta“). On 11 October 2017, Barra and Enauta excluded Dommo from the consortium agreement for an alleged non-payment of the operation fees under Article 8.4 of the Joint Operation Agreement. Dommo started an LCIA arbitration against Barra and Enauta (“Respondents“) to render said Article 8.4 void.

In the course of arbitration, Barra changed counsel. The three members of the tribunal therefore updated their statements of independence and impartiality, which allegedly led Dommo to update its own research on the arbitrators’ potential links with Respondent’s new attorney.  Dommo thus discovered that Respondents’ appointed arbitrator had indirect relations with the law firm regularly representing First Reserve Corporation, Barra’s controlling shareholder. Indeed, two and a half years before being appointed, the arbitrator at question had worked for three years as a counsel in a Saudi law firm affiliated with another law firm of which First Reserve Corporation was a client. None of this was disclosed by the arbitrator in the first statement. In the second statement, the arbitrator only disclosed that he had worked as a counsel and only after an additional inquiry from Claimant.

On 20 February 2019, the LCIA Court denied Dommo’s request to revoke the arbitrator for alleged lack of independence and impartiality. By that time, the tribunal has already issued the last partial award ordering Dommo to pay an amount of BRL 16,996,914.19 with interests to each of the Respondents.

On 5 April and 5 September 2019, Dommo applied before the Paris Court of Appeal to set aside all of the five awards issued by the tribunal on the same ground of lack of independence and impartiality.

French law requires that arbitrators disclose any circumstances likely to affect their independence or impartiality before accepting their mission, but also after, if any such circumstances arise during the proceedings.[1] Any fact that may lead a reasonable party to have justifiable or reasonable doubts as to the arbitrator’s independence and impartiality must be disclosed. However, failure by an arbitrator to disclose any such fact does not result automatically in improper constitution of the arbitral tribunal and thus setting aside of the award.[2] The effects of the non-disclosure need to be measured on the case at hand — French courts carry out an objective assessment of whether the undisclosed fact alone or together with other circumstances create a reasonable doubt of arbitrator’s lack of independence or impartiality. [3] In summary, the award will only be set aside if there is a sufficient assumption[4] of arbitrator’s lack of independence or impartiality.

In line with this case law, the Paris Court first examined whether (i) the arbitrator should have disclosed his past indirect relations with the law firm representing Respondent’s shareholder, before (ii) deciding whether the award should be set aside.

(i) Regarding the obligation to disclose, the Court reaffirmed a well-established exception to this obligation regarding notorious facts,[5] meaning that the facts are known and easily accessible, but not necessarily public. The Court confirmed that only easily accessible information may exempt arbitrators from the obligation to disclose. But in the case at hand, the Court refused to consider the undisclosed relation as a notorious fact. The Court noted that the arbitrator informed parties that it had worked as a counsel with the Saudi law firm only in the second statement of independence and impartiality. The information was not otherwise mentioned on his CV. It is only after careful research at the arbitrator’s website and a review of each of 12 conferences referenced in the “Dispute related experience” tab that the arbitrator’s past experience as a counsel at the Saudi Firm was found. And it is only after a detailed review of all of the publications referenced on the website, that the affiliation with the law firm representing Barra’s shareholder was discovered. The court therefore concluded that the information was accessible only after a thorough investigation of the website and therefore was not easily accessible. The arbitrator should have disclosed its past indirect relation to the law firm representing Barra’s majority shareholder from the beginning.

(ii) Nonetheless, the Court refused to set aside the award. The arbitrator indicated that he did not know First Reserve Corporation and had no knowledge of the work that would have been performed for this company. There was no contrary evidence. Indeed, the Court outlined absence of evidence showing “any direct or indirect, material or intellectual relation” between the arbitrator and Barra’s shareholder, nor any evidence that the arbitrator regularly worked for the latter. The mere fact of being a senior international counsel in the affiliated Saudi law firm or using the email address of the law firm representing First Reserve Corporation did not alone establish a reasonable doubt on the arbitrator’s independence and impartiality. Again, this is in line with French case law that objective doubt on an arbitrator’s lack of independence or impartiality results from a business flow or a relation of interest between an arbitrator and one of parties or a counsel of one of parties.[6] Finally, the Court observed that the alleged relation between the arbitrator and Barra’s shareholder was indirect and ceased two years and a half before arbitrator’s appointment, which according to the Court might be insufficient for a direct relation. But in the case at issue, the observation – although interesting to note – had no bearing because the alleged relation was not substantiated.

The international commercial chamber of the Paris Court of Appeal, together with the international chamber of the Paris commercial Court, was created in an after-Brexit effort[7] to enhance the attractiveness of Paris as a forum for arbitration and international litigation. Under the Protocol between the Paris Bar and the Paris Court of Appeal,[8] the international chamber has general jurisdiction for any appeals against decisions issued in international economic and commercial disputes, as well as international arbitration relating disputes. In addition, any appeal against a decision issued by the international chamber of the commercial Court of Paris will be referred to the international chamber in appeal. The chamber has also a particular jurisdiction for disputes relating to, among others, unfair competition, commercial contracts, termination of commercial relations, etc. Parties may also choose to submit their dispute to the international commercial chamber in a jurisdiction clause.

When litigating before the international commercial chamber, parties benefit from several advantages they otherwise would not have had in ordinary proceedings. First, they have the freedom to fix the procedural calendar during the first case management hearing, as they would have done before an arbitral tribunal. Second, they are allowed to put forward testimonial evidence and cross-examine experts and witnesses of the opposing party. Third, although oral arguments and briefs are to be made in French, exhibits may be filed in English, without a translation. Finally, experts and witnesses appearing before the chamber may also testify in English if they wish to do so. Overall, the procedure is more flexible and cost-efficient for international disputes.

 

[1] Articles 1456 and 1506 of the French Code of Civil Procedure.

[2] Under Articles 1492.2 and 1520.2 of the French Code of Civil Procedure, improper constitution of the arbitral tribunal is a cause for setting aside the award.

[3] Paris, 10 March 2011, Cah. arb. 2011, p. 787, note M. Henry; Cass. 1ère civ., 10 October 2012, Bull. civ. I, n° 193.

[4] Ch. Seraglini, J. Ortscheidt, Droit de l’arbitrage interne et international, 2nd edition, para. 245.

[5] E.g. Cass. 1ère civ., 28 May 2015, Rev. arb. 2015, p. 656; Cass. 1ère civ., 15 June 2017, n° 16-17.108.

[6] Cass. 1ère civ., 20 October 2010, n° 09-68.131 and 09-68. 997; Cass. 1ère civ. 18 December 2014, n° 14-11.085.

[7] Paris Bar website, International commercial chambers: ecofnomic attractiveness by law, 28 November 2019, http://www.avocatparis.org/les-chambres-commerciales-internationales-lattractivite-economique-par-le-droit accessed on 10 July 2020.

[8]Protocol relating to procedural rules applicable to the International Chamber of the Court of Appeal of Paris, accessible on the Paris Bar website, https://www.cours-appel.justice.fr/sites/default/files/2019-04/Traduction%20en%20anglais%20du%20protocole%20CCIP-CA%20-%20V4%20.pdf accessed on 10 July 2020.