Paris court rejects application for review and withdrawal of arbitral enforcement order, despite allegations of fraud

The Paris Court of First Instance has rejected an application for the review and withdrawal of an enforcement order of an arbitral award, despite allegations of fraud and collusion between the arbitrator and the claimant. It also refused to the state’s request to stay enforcement proceedings until the issuance of a decision in proceedings appealing the arbitral award before the Common Court of Justice and Arbitration.

The case demonstrates the deference given to international arbitral awards by French courts in enforcement proceedings and the limited ability of the courts to review the underlying award. It also reiterates that, as a matter of principle, the only recourse available against an order granting enforcement of a foreign award is an appeal on the grounds permitted under Article 1525 of the French Code of Civil Procedure (CPC). Courts will be restrictive in their interpretation of the CPC and any application for the review or withdrawal of an enforcement order of an international arbitral award is likely to fail. A party will have no means of challenging the enforcement order, absent an appeal under Article 1525 of the CPC, even in cases where allegations of fraud and collusion have been made. (La République du Niger v Africard Co Ltd, Tribunal de grande instance de Paris, summary judgment (ordonnance de référé)).

Background

Under Article 1525 of the French Code of Civil Procedure (CPC), an order granting (or denying) recognition or enforcement of a foreign award (that is, an award made outside France) may be appealed. However, the Court of Appeal may only refuse recognition or enforcement on the limited grounds listed in Article 1520.

Articles 1502 and 1506 of the CPC provide that applications for the review of arbitral awards may be made, in certain circumstances and under certain conditions, to the arbitral tribunal.

Facts

In 2011, Africard Co Ltd (Africard), a British Virgin Islands company, entered into a contract with the Republic of Niger (Niger, or the State) related to the production of biometric digital passports for the State.

Further to the unilateral termination of the contract by Niger, a dispute arose between the parties and Africard initiated arbitration proceedings under the auspices of the Common Court of Justice and Arbitration (CCJA).

On 9 June 2014, the sole arbitrator appointed by the CCJA issued an arbitral award declaring the termination of the contract by the State to be wrongful and unreasonable. The sole arbitrator ruled that Africard had a right to damages and appointed an expert to assess the losses suffered by the company (June Award). In December 2014, after the submission of the expert report, the sole arbitrator issued a further arbitral award ordering Niger to pay Africard compensation for the unlawful termination of the contract (December Award, and together the Awards).

Africard sought to enforce the December Award in France. On 26 January 2015, the Paris Court of First Instance (Tribunal de grande instance) issued an enforcement order of the December Award (Enforcement Order). Africard then commenced enforcement measures against Niger in France (and abroad).

Niger also commenced a number of proceedings appealing the Awards and the Enforcement Order.

It first sought to annul the December Award before the CCJA but was unsuccessful. Niger also filed an appeal against the Enforcement Order in France but the appeal was declared inadmissible on grounds that it was late.

In January 2017, Niger filed a petition before the CCJA for the review of the Awards and of the CCJA ruling dismissing its action for annulment of the December Award. The State notably alleged the existence of fraud and collusion between the sole arbitrator, Africard and the appointed expert. These proceedings are currently pending before the CCJA.

In parallel, on 7 February 2017, Niger started proceedings before the emergency judge (juge des référés) of the Paris Court of First Instance and requested, a stay of the enforcement proceedings pending the outcome of the parallel proceedings before the CCJA. It also sought the review and withdrawal of the Enforcement Order. To support its claims, the State relied on the allegations of fraud and collusion.

Decision

The Paris Court of First Instance rejected Niger’s claims.

The Court first rejected the State’s request to stay the proceedings until the issuance of a decision by CCJA on the petition filed by Niger in January 2017. The Court noted that given the number of enforcement proceedings underway, it was in the interests of the administration of justice that the application for the review and withdrawal of the enforcement proceedings was decided quickly.

The Court held that Niger’s request for review of the Enforcement Order was inadmissible. It noted that while enforcement orders of foreign arbitral awards could be appealed under Article 1525 of the CPC, the State’s appeal under that provision had already been declared inadmissible by the Paris Court of Appeal as it was late. The judge also pointed out that, although, the CPC entitles a party to file an application for review of an international award in the case of fraud, this legal remedy may only be brought in certain circumstances and before the arbitral tribunal (Articles 1502 and 1506, CPC). The Court finally ruled that it was for the CCJA to rule on the allegations of fraud or collusions in the context of the application filed by the State for judicial review of the Awards.

The Court further held that Niger’s request for the withdrawal of the Enforcement Order was inadmissible and noted that the provisions of the CPC do not provide for the withdrawal of an enforcement order of an arbitral award. Withdrawal is only permissible in the cases expressly provided for by the CPC and these do not include enforcement orders of arbitral awards.

Comment

This case demonstrates the deference given to international arbitral awards by French Courts in enforcement proceedings and the limited ability of the courts to review the underlying award. It also reiterates that, as a matter of principle, the only recourse available against an order granting enforcement of a foreign award is an appeal on the grounds permitted under Article 1525 of the CPC. Courts will be restrictive in their interpretation of the CPC and any application for the review or withdrawal of an enforcement order of an international arbitral award is bound to fail. A party will have no means of challenging the enforcement order, absent an appeal under Article 1525 of the CPC, even in cases where allegations of fraud and collusion have been made.

 

This article was first published on 2 October 2017 by Practical Law – click here for the article.

For more information, please contact Vincent Bouvard, Avocat, Rosalind Axbey, Associate, or your usual Herbert Smith Freehills contact.

Vincent Bouvard
Vincent Bouvard
Avocat
Email
+33 15 357 7859
Rosalind Axbey
Rosalind Axbey
Associate
Email
+33 15 357 6951

 

 

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