In a recent decision[1] issued by the International Commercial Chamber of the Paris Court of Appeal, the court quashed a judgment of the Paris First Instance Tribunal (Tribunal judiciaire),[2] which found that it lacked jurisdiction to hear a liability claim filed against the arbitrator, by one of the parties to the arbitration proceeding.
The decision rendered in the case at hand is a new episode in the Saad Buzwair Automotive Co (SBA) versus Audi Volkswagen Middle East Fze (AVME)‘s saga. The case stems from proceedings which were earlier commented upon here.
A Qatari company SBA entered into two agreements in 2007 with an Emirati company AVME for the distribution of vehicles and their related spare parts in Qatar, as well as for the provision of after-sales services for these products. In 2011, AVME notified SBA of the termination of these agreements after 30 June 2012. On 8 February 2013, SBA initiated an ICC arbitration pursuant to the arbitration clauses in the agreements, which provided for a Paris-seated arbitration with German law as the applicable law.
The arbitral tribunal rendered its award on 16 March 2016, in favor of AVME. On 27 March 2018, the arbitral award was set aside by the Paris Court of Appeal on the ground that the Arbitral Tribunal was wrongfully constituted. The annulment judge ruled that one of the arbitrators failed to comply with his duty to disclose circumstances likely to affect his independence and impartiality. The judge noted the fact that the arbitrator’s law firm had assisted a related entity of AVME during the arbitration proceedings, was likely to create a reasonable doubt regarding the arbitrator’s independence and impartiality.[3]
AVME challenged this decision before the French Supreme Court (Cour de cassation) and by its decision of 3 October 2019, the First Civil Chamber of the French Supreme Court (Cour de cassation) rejected the appeal and upheld the decision of the Paris Court of Appeal.[4]
At the same time, on 30 October 2018, SBA filed a liability claim against the impugned arbitrator before the Paris courts. The impugned arbitrator challenged the jurisdiction of the French courts to hear the matter, and on 31 March 2021 the Paris First Instance Tribunal ruled for the first time on its jurisdiction to hear such a claim.
On the basis of the provisions of the Brussels I bis Regulation and of the case law of the Court of Justice of the European Union (CJEU), the court ruled that the provisions of Brussels I bis Regulation were applicable to a claim related to the contractual liability of an arbitrator for non-performance of his obligations under the arbitration contract. As per the provisions of Article 7.1 b) of this same regulation, the court with jurisdiction over this type of claim was the court of “the place where the defendant [the impugned arbitrator] has concretely performed, in a preponderant manner, his intellectual services as arbitrator.”
The Paris First Instance Tribunal conducted an examination to determine the place where the impugned arbitrator mainly performed his activity in this case and it considered that the parties had expressly “agreed that the hearing shall take place in Germany“, and that the evidentiary hearing, the arbitrators’ meetings and the arbitral tribunal’s deliberations had also been held in Germany. Considering these elements and the time spent in Germany by the impugned arbitrator, where he lived during the two years of the arbitration proceedings, the Paris First Instance Tribunal concluded that the “place of effective performance of the arbitrator’s intellectual services” was Germany.
Thus, the Paris First Instance Tribunal ruled that it did not have jurisdiction to hear this claim over the impugned arbitrator’s contractual liability. It allowed the arbitrator’s challenge, and referred SBA to the appropriate German court.
SBA lodged an appeal against this judgment on 26 April 2021 before the Paris Court of Appeal, which rendered its decision on 22 June 2021.
On the one hand, the court considered, pursuant to Recital 12 of the Brussels I bis Regulation and according to the relevant case law of the CJEU, that “the liability action filed against an arbitrator after the setting aside of an arbitral award on the basis of the arbitrator’s failure to disclose is very closely related to the constitution of the arbitral tribunal and the conduct of the arbitration, as it seeks to assess whether the arbitrator has performed its duties in accordance with its obligations under the arbitration contract which is part of the arbitration’s performance“[5].
Therefore, it found this action was a matter of arbitration falling within the scope of the exclusion provided for by Article 1.2 of the Brussels I bis Regulation, and the Brussels I bis Regulation was inapplicable to this action in order to determine the competent court.
On the other hand, the court stated that, pursuant to Article 46 of the French Code of Civil Procedure, applicable in international matters, the competent court can be the court of the place where the defendant lives or in contractual matters, the court of the place where the service is performed. It reminded that “in international arbitration, except otherwise agreed by the parties, the state court of the place where the service is performed has jurisdiction to rule over a liability action filed against an arbitrator for the performance of the arbitration contract and is the one where the arbitration’s seat is located“[6].
For the Paris Court of Appeal, the place where the arbitrator performed his services was the seat of the arbitration, regardless of the fact that the arbitration proceedings and the work of the arbitrators may have been performed in other places with the consent of the parties[7]. Since the ICC arbitration proceedings was seated in Paris, the International Commercial Chamber of the Paris Court of Appeal concluded that the Paris First Instance Tribunal had jurisdiction to decide the claim regarding the impugned arbitrator’s liability, and allowed SBA’s appeal and overruled the previous judgment. The case was referred back to the lower court, the Paris First Instance Tribunal (Tribunal judiciaire).
The issue of the arbitrators’ liability remains a delicate topic. While it has been established that an arbitrator’s liability stems from his/ her contract, case law has also established that the arbitrator benefits from a certain immunity in exercising his/ her judicial functions[8].
Thus, following the approach adopted by the French Cour de cassation, the arbitrator’s contractual liability will only be engaged in case of an intentional fault, a gross negligence, a fraud or a denial of justice.[9] In any event, an arbitrator cannot be held liable for a misjudgment or even for an error of fact or of law.[10] This immunity of the arbitrator and the necessity of a serious fault made by the arbitrator in order to engage his/ her liability are necessary requirements for proper conduct of the arbitration proceedings by the arbitrators, who can therefore only be sued before state courts in very serious circumstances.
[1] Paris Court of appeal, 22 June 2021, n°21/07623 available at: https://files.lbr.cloud/public/2021-06/22%20juin%202021%20CCIP-CA%20RG%202107623.pdf?VersionId=lju4gjxAHp.yu2WrCxlWaTFLsD1VTYHt
[2] Paris Tribunal, 31 March 2021, n°19/00795, available at: https://www.dalloz-actualite.fr/document/tj-paris-31-mars-2021-n-1900795.
[3] Paris court of appeal, 27 March 2018, n°16/09386.
[4] Civ. 1ère, 3 October 2019, n°18-15756.
[5] §26 of the decision.
[6] §30 of the decision.
[7] §33 of the decision.
[8] J-B RACINE, Droit de l’arbitrage, PUF, 2016, §547-550; C. SERAGLINI et J. ORTSCHEIDT, Droit de l’arbitrage interne et international, DOMAT, 2nd Ed., §759 et 799; P. FOUCHARD, E. GAILLARD et B. GOLDMAN, Traité de l’arbitrage commercial international, LITEC, 1996, §1085 et s.
[9] Civ. 1ère, 15 January 1994, n°11-17196.
[10] J-B RACINE, op. cit, spe. §550; C. SERAGLINI et J. ORTSCHEIDT, op. cit., spe. §799.
