Legalpedia Journal ROLE OF JUDICIARY IN THE ENFORCEMENT … · In this paper the author will try to bring out the major factors which are responsible for these distinctive approaches

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®Legalpedia Journal Vol .2 Issue 1

ROLE OF JUDICIARY IN THE ENFORCEMENT OF ARBITRATION CLAUSE IN

INDIA AND IN FRANCE

Arpit Vihan*

Abstract

An arbitration agreement is a pre-condition for commencement of arbitral proceedings. An

arbitration agreement may be a clause in a contract or a separate agreement to arbitrate all or

certain disputes which have arisen or may arise in respect of a dened legal relationship. In

general, the arbitration agreement provides the basis for arbitration. It is dened as an

agreement to submit present or future disputes to arbitration. The implementation of the

general principles governing arbitration differs in certain respects in India and France.

While dealing with arbitration clause, the role of the judiciary plays a vital role. The

interpretation of the arbitration clause could greatly impact the liability of a party to the

agreement. Compliance of strict interpretation or liberal interpretation may vary in different

regions, accordingly with the general principle governing the application of aids to

interpretation. Indian courts are known to restrict the role of an arbitrator. They tend to

encroach upon the matter which must solely be heard by the arbitrator. Under the French

legal regime, the scenario regarding arbitration and interpretation of the arbitration clause is

very different. Judges in France unequivocatingly give respect to the arbitration clause and do

not intervene with the arbitration proceedings. The role of the judges is restricted to the laws

as mentioned in black and white.

In this paper the author will try to bring out the major factors which are responsible for these

distinctive approaches towards arbitration under the Indian and the French regimes. Author

will also examine and reect upon the role of judiciary regarding arbitration in the common

law and civil law countries. Further, the implementation and application of the bare

provisions relating to arbitration will also be discussed. The author will also bring out the

inspirations which the Indian courts could take from the other parts of the world when it

comes to the implementation of the principles of arbitration law, having universal application.

�Arpit Vihan , Assistant Professor, Geeta Ins�tute of Law, Panipat .

INTRODUCTION

An arbitration agreement is a pre-condition for commencement of arbitral proceedings. An

arbitration agreement may be a clause in a contract or a separate agreement to arbitrate all or

certain disputes which have arisen or may arise in respect of a dened legal relationship.

In general, the arbitration agreement provides the basis for arbitration. It is dened as an

agreement to submit present or future disputes to arbitration. This generic concept comprises

two basic types:

a) A clause in a contract, by which the parties to a contract undertake to submit to arbitration

the disputes that may arise in relation to that contract (arbitration clause); or

b) An agreement by which the parties to a dispute that has already arisen submit the dispute

to arbitration (submission agreement).

Enforcement of arbitration agreement:

By entering into an arbitration agreement, the parties commit to submit certain matters to the

arbitrators’ decision rather than have them resolved by law courts.

Thus, the parties:

a) Waive their right to have those matters resolved by a court;

b) Grant jurisdictional powers to private individuals (the arbitrators).

We can call these two main effects of the agreement “negative” and “positive.”1

1. Negative enforcement: Lack of jurisdiction of courts

An arbitration agreement precludes judges from resolving the conicts that the parties have

agreed to submit to arbitration. If one of the parties les a lawsuit in relation to those matters,

1 < R Caivano, Dispute se�lement: United na�ons conference on trade and development , UNITED NATIONS

JOURNAL , h�ps://unctad.org/searchcenter/Pages/Results.aspx?r=unctadlanguage%3D%22en%22%20unctadlanguage%3D%22English%22%20unctadconten�ype%3D%22Document%22%20fileextension%3D%22pdf%22%20%22owstaxIdProductx0020Taxonomy%22%3D%23564af62b%2Dbf21%2D498a%2D95b0%2D535aa�791cf%3A%22Training%20Material%3ADispute%20Se�lement%20%2D%20Course%20Modules%22>

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the other may challenge the court’s jurisdiction on the grounds that the jurisdiction of the

courts has been waived.

The judge’s lack of jurisdiction is not automatic, nor can it be declared ex ofcio. Instead, it

must be raised by the defendant no later than when ling the answer to the complaint. That is

so because arbitral jurisdiction is waivable, and the waiver would be presumed if the plaintiff

led a complaint and the defendant failed to challenge the court’s jurisdiction.

To sum up, once a conict has arisen over any of the subjects included in the arbitra tion

agreement, the courts will have no jurisdiction to resolve it unless both parties expressly or

tacitly agree to waive the arbitration agreement.

2. Positive enforcement: the “submission agreement”

The arbitration agreement grants jurisdiction to arbitrators. By “jurisdiction” it means the

powers conferred on arbitrators to enable them to resolve the matters submitted to them by

rendering a binding decision.

The negative enforcement of the arbitration agreement is universally accepted and does not

depend on the kind of agreement. Conversely, the positive enforcement is inextricably linked

to the applicable law. That is so because some traditional laws require that, even when there

is a previous arbitration clause, the parties execute a new agreement called “submission

agreement”, which must contain the names of the arbitrators and clearly identify the matters

submitted to them2. When a submission agreement is required, the arbitration clause becomes

insufcient. However, since this obligation is not always complied with voluntarily, such

laws provide for a court’s intervention to enforce the arbitration clause.3

Enforcement of an arbitration agreement under the UNCITRAL Model Law and the

New York Convention :

The Model Law denes the arbitration agreement as:

2 <As an example, the Arbitra�on Law of Brazil> 3 <h�p://unctad.org> accessed on 01/07/2019

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“An agreement by the parties to submit to arbitration all or certain disputes which have

arisen or which may arise between them in respect of a dened legal relationsh ip, whether

contractual or not.”4

According to the New York Convention,

“Each Contracting State shall recognize an agreement in writing under which the parties

undertake to submit to arbitration all or any differences which have arisen or which may

arise between them in respect of a dened legal relationship, whether contractua1 or not,

concerning a subject matter capable of settlement by arbitration.”5

Concerning the enforcement of an arbitration agreement, the Model Law establishes that:

“(1) A court before which an action is brought in a matter which is the subject of an

arbitration agreement shall, if a party so requests not later than when submitting his rst

statement on the substance of the dispute, refer the parties to arbitration unless it nds that

the agreement is null and void, inoperative or incapable of being performed.

(2)Where an action referred to in (1) has been brought, arbitral proceedings may nevertheless

be commenced or continued, and an award may be made, while the issue is pending before

the court”.6

Article 8.1 of the Model Law mostly follows the text of Article II.3 of the New York

Convention. However, the provision of the Model Law is more specic, since it establishes

that the request must be made “not later than when submitting his rst statement on the

substance of the dispute”. The Convention, on the other hand, does not say when the petition

must be made.

REQUIREMENTS FOR THE ARBITRATION AGREEMENT:

· It must arise out of mutual consent.7

4 <Ar�cle 7.1 of UNCITRAL Model Law> 5 <Ar�cle 2.3 of NY conven�on> 6 <Ar�cle 8 of UNCITRAL Model Law> 7 < The New York Conven�on (ar�cle II.1) requires that in their agreement the par�es “undertake to submit to arbitra�on” their disputes. This expression means that: • The agreement must contain a mandatory, rather

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· The parties must have legal capacity.8

· The agreement must be made in writing.9

· It must arise out of a dened legal relationship.10

· The subject matter must be arbitral.11

LAWS REALTING TO ARBITRATION AGREEMENT IN INDIA

Arbitration Agreement Dened:

An arbitration agreement has to be in writing, and may be even contained in an exchange of

letters or any other means of telecommunication which provide a record of the agreement.

The agreement need not be signed and the unsigned agreement afrmed by the parties’

conduct would be valid as an arbitration agreement.12 An arbitration agreement would also be

considered to be in writing if there is an exchange of a statement of claim and defense in

which the existence of the agreement is alleged by one party and not denied by the other.13

According to the observation of the Supreme Court, the arbitration agreement is not required

to be in any particular form. An arrangement between the parties to refer a dispute between

them with respect to a contract to arbitration would spell out an arbitration agreement.14

Section 8 of the Arbitration and conciliation Act, 1996 says “A judicial authority, before

which an action is brought in a matter which is the subject of an arbitration agreement shall,

than permissive, undertaking, and • The agreement must provide for arbitra�on, rather than another process of dispute resolu�on. The agreement must have originated from the par�es’ free will. Therefore, if one of them has acted induced by error or as a consequence of fraud, coercion or undue influence, there has been no real consent and the agreement to arbitrate is not valid> 8 <Ar�cle 8.1, Ar�cle 34 of Model law and Ar�cle 2.3 of NY conven�on> 9 <Ar�cle 7.2 Model law; Pacific Interna�onal Lines (PTE) Ltd. & Another v. Tsinlien Metals and Minerals Co. Ltd> 10 < Both the New York Conven�on (ar�cle II.1.) and the Model Law (ar�cle 7.1.) establish that the arbitra�on agreement must refer to differences which have arisen or which may arise between them in respect of a defined legal rela�onship, whether or not contractual> 11 < Labinal v. Mors, Revue de l’arbitrage, 1993, p. 957; Rev. Vasca de Derecho Procesal y Arbitraje, N° 1, San Sebas�án, 1997, p.184> 12 < Smita Conductors Ltd v Euro Alloys Ltd 2001 (7) SCC 728> 13 < Asia Interna�onal Arbitra�onal Journal, Volume 1, Number 2, Pages 105 -126> 14 < Visa Interna�onal Ltd vs Con�nental Resources (Usa)Ltd 2005>

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if a party to the arbitration agreement or any person claiming through or under him, so

applies not later than the date of submitting his rst statement on the substance of the dispute,

then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer

the parties to arbitration unless it nds that prima facie no valid arbitration agreement exists”.

Section 8 of the Arbitration and Conciliation Act, 1996 is peremptory in nature. It provides

that a judicial authority shall, on the basis of the arbitration agreement between the parties,

direct the parties to go for arbitration. It also enlists conditions precedent, which need

fulllment before a reference can be made as per the terms of the 1996 Act. 15

The conditions which are required to be satised under Sub-sections (1) and (2) of Section 8

before the Court can exercise its powers are (1) there is an arbitration agreement; (2) a party

to the agreement brings an action in the Court against the other party; (3) subject matter of

the action is the same as the subject matter of the arbitration agreement; (4) the other party

moves the Court for referring the parties to arbitration before it submits his rst statement on

the substance of the dispute. The language of Section 8 is peremptory.16

If the intention of the parties to refer the dispute to arbitration can be clearly ascertained from

the terms of the agreement, it is immaterial whether or not the expression “arbitration”

“arbitrator” or “arbitrators” has been used in the agreement. However, the intent cannot be in

the nature of a mere possibility of agreeing to arbitrate in the future. It must be determined

and obligatory to refer future disputes to arbitration.17

A valid arbitration agreement is separable from the main contract and the invalidity or

rescission of the main contract does not necessarily entail the invalidity or recession of the

arbitration agreement.18

As most arbitrations take place pursuant to an arbitration clause in the ‘main contract’, it is

important to know that an arbitration clause which forms part of the entire contract is as an

15 < SECTION 8 OF THE ARBITRATION AND CONCILIATION ACT, 1996: A SAVING BEACON - LITIGATION, MEDIATION & ARBITRATION

- INDIA, h�p://www.mondaq.com/india/x/449400/Arbitra�on+Dispute+Resolu�on/Sec�on+8+Of+The+Arbitra�on+And+Concilia�on+Act+1996+A+Saving+Beacon> 16 <P. Anand Gajapathi Raju & Ors. v. P.V.G. Raju 2000> 17 <M Dayanand Reddy case, 1993 AIR 2268, 1993 SCR (2) 629> 18 < House of Lords in Premium Na�a Products Ltd. and Supreme Court in SMS Tea Estates (P) Ltd 2011>

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agreement in its own right; and is considered collateral to and separable from, the main

contract. It survives even if the main contract stands terminated or is considered a nullity.

This principle of severability is not only interesting and useful in practice as it ensures

efcacy of arbitration as an alternate to litigation but more importantly the principle also lays

the foundation on which parties may choose to have the dispute governed by one system of

law while elect another to govern the arbitration agreement and/or the procedure of

arbitration.

Indian law recognizes the principle of severability of an arbitration clause and consequently

allows parties to elect the substantive law governing the dispute and/or substantive law of the

entire contract as different from the law governing the arbitration agreement.19

The substantive law of the contract between the parties is the law which the arbitrators shall

apply for deciding the disputes between the parties; whereas, the governing law of arbitration

covers matters relating to the arbitration agreement.

Indian law also recognizes the difference between juridical seat of arbitration and venue of

arbitration for reasons of convenience and therefore it is perfectly permissible to have an

arbitration clause which categorically identies the juridical seat of arbitration in one country

while at the same time prefers to hold the arbitration elsewhere for reasons of convenience. In

such a scenario, the law governing the arbitration agreement shall be the juridical seat of

arbitration and not the venue of arbitration.

Theoretically, parties may also choose a different procedural or curial law to govern the

arbitration proceedings inasmuch as the same is not in conict or inconsistent with any

express choice of law governing the arbitration agreement i.e. law at the juridical seat of

arbitration.20

On 23rd October, 2015, the President promulgated the Arbitration and Conciliation

(Amendment) Ordinance, 2015. The amendment to Section 8 requires that the judicial

19 < Union Of India vs Reliance Industries Limited And others, 2015> 20 < ARBITRATION LAW AND PROCEDURE | INDIAN ARBITRATION LAW - LAKSHMISRI, h�ps://www.lakshmisri.com/prac�ces/corporate/Exper�se/Arbitra�on accessed on 03/04/2019

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authority compulsorily refer parties to arbitration irrespective of any decision by the Supreme

Court or any other court, if the judicial authority nds that a valid arbitration clause prima-

facie exists. The amendment essentially nullies the judgment of the Supreme Court in Booz

Allen Hamilton v. SBI Home nance 21, where it had ruled that serious allegations of fraud

are not arbitral.

JUDICIAL ASSISTANCE AND INTERVENTION IN THE ENFORCEMENT OF

ARBITRATION AGREEMENT IN INDIA

Under Section 45 of the Act, the court shall, at the request of either party, refer the dispute to

arbitration, unless it nds that the arbitration agreement’ is null and void, inoperative and

incapable of being performed. Thus, even where allegations of misrepresentation and fraud

have been made, the court cannot interfere unless it nds that the arbitration agreement is null

and void, or otherwise inoperative and incapable of being performed.22

The dispute would be referred to the arbitrator and obtaining an anti-arbitration injunction

from the court would be difcult. While giving a boost to foreign arbitrations, the Supreme

Court made a clear distinction of the ‘arbitration agreement’ as severable from the main

agreement and upholds the ability of the arbitrators to decide issues of fraud.23

Under section 5 of the Arbitration and Conciliation Act, it is explicitly mentioned that no

judicial authority shall intervene except where so provided in the I Part of the Act.

Though not implicit in the reading of Section 8 of the Act, the Court in the case of Haryana

Telecom Ltd. v. Sterlite Industries 24 (India) Ltd brought in the competence of the arbitral

tribunal as one of the grounds for the grant of reference. The proposition that Section 8,

despite providing the explicit grounds on which reference can be made, also lays down the

implicit ground of competence of the Arbitral Tribunal, was also read in the afrmative by

21 < (2011) 5 SCC 53 > 22 < ARBITRATION LAW AND PROCEDURE | INDIAN ARBITRATION LAW - LAKSHMISRI, h�ps://www.lakshmisri.com/prac�ces/corporate/Exper�se/Arbitra�on accessed on 03/04/2019 23 <World Sport Group (Mauri�us) Ltd vs Msm Satellite(Singapore) 2014> 24 < 999 (3) SCR 861>

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the Court in the case of Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd25 wherein it

was held that where the cause/dispute is not arbitral, the court where a suit is pending, will

refuse to refer the parties to arbitration, under Section 8 of the Act.26

The Act states that the relationship between the parties need not be contractual27. Hence, a

dispute in tort can also be referred. The Supreme Court in the case of Renu Sagar Power Co v

General Electric Co28 stated this as follows:

The question is not whether the claim lies in tort but the question is whether even though it

has lain in tort it ‘arises out of’ or is ‘related to’ the contract, that is to say, whether it arises

out of the terms of the contract or is consequential upon any breach thereof.

The court also approved an English decision in the case of Woolf v Collis Removal Service29

where the Court of Appeal held that though the claim in negligence was a claim in tort and

not under contract, yet there was a sufciently close connection between that claim and the

transaction to bring the claim within the arbitration clause.

Citing this, the court in Renu Sagar I continued: this authority clearly shows that even though

a claim may not directly arise under the contract which contains an arbitration clause, if there

was sufcient close connection between that claim and the transaction under the contract, it

will be covered by the arbitration clause. Hence, whether an action lies in tort or contract, it

would lie before an arbitral forum, unless it can be demonstrated that the cause of action is de

hors the contract which contains the arbitration clause.

A controversy arose as to whether arbitrators would have jurisdiction to order specic

performance of a contract.

25 < (2011) 5 SCC 532> 26 < SECTION 8 OF THE ARBITRATION AND CONCILIATION ACT, 1996: A SAVING BEACON - LITIGATION, MEDIATION & ARBITRATION

- INDIA, h�p://www.mondaq.com/india/x/449400/Arbitra�on+Dispute+Resolu�on/Sec�on+8+Of+The+Arbitra�on+And+Concilia�on+Act+1996+A+Saving+Beacon > 27 <Arbitra�on and concilia�on Act 1940> 28 < 1994 AIR 860 > 29 < [1948] 1 KB 11, [1947] 2 All ER 260>

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The High Court of Delhi held that the power to grant specic performance is discretionary

and statutorily conferred on civil courts under the Specic Relief Act 1963. Hence, an arbitral

tribunal would have no such power. On the other hand, the High Courts of Punjab, Bombay

and Calcutta took the view that arbitrators could grant specic performance.30

The Supreme Court put to rest the controversy in Olympus Superstructures Pvt Ltd v Meena

Vĳ Khetan31 and held that arbitrators do have the power to order specic performance of a

contract. The court relied on Halsbury’s Laws of England which states that the differences or

disputes which may be referred must consist of ‘a justiable issue triable civilly. A fair test of

this is whether the difference can be compromised lawfully by way of accord and

satisfaction.’

In the case of Hindustan Petroleum Corporation v Pink City32, the respondent resisted

arbitration on the ground that the cause of action made out by the claimant (ie short delivery

and tampering with weights and measures and seals) was essentially a criminal offence under

special statutes. It was contended that the respondent’s conduct could be investigated only by

ofcers so authorized under statute and that the offence, if any, can be tried only by a court of

competent jurisdiction and not by an arbitrator.

The Supreme Court negate this contention, holding that the claimant had rights under the

contract which are independent of the statutory provisions and hence the contractual rights

could be enforced through the arbitration process and observed that the existence of dual

procedure; one under the criminal law and the other under the contractual law is a well-

accepted legal phenomenon in Indian jurisprudence.33

The Supreme Court has, however, held that a claim for winding up is not arbitral in nature

and hence a court action for winding up cannot be dismissed on a contention that the parties

had entered into an arbitration agreement.34

30 < h�p://www.kaplegal.com> accessed on 05/08/2019 31 < 2000 101 CompCas 51 Bom> 32 < SLP © No.21154 of 2002> 33 Sumeet Kachwaha, 'The Arbitration Law of India: A Critical Analysis' (2005) 1 Asian International Arbitration Journal, Issue 2, pp. 105–126 > 34 < 1999 (5) SCC 688>

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The case of Man Roland v Multicolour Offset35 made a signicant inroad into the sanctity of

an arbitration agreement. Here the Supreme Court held that the Monopolies and Restrictive

Trade Practices Commission of India would have jurisdiction to entertain a claim for

damages arising out of an alleged ‘unfair trade practice’ (in this case, sale of alleged defective

goods and deciency in services). The contract between the parties contained an arbitration

agreement providing for arbitration in Paris, under ICC Rules with German law applying.

The Supreme Court held that the Monopolistic and Restrictive Trade Practices Act 1969

(‘MRTP Act’) provides for statutory remedies in respect of statutorily dened offences and

these remedies are in addition to the usual remedies available to the parties under the

Contract Act. Hence, the complaint for damages under the MRTP Act would be maintainable

despite an arbitration agreement between the parties. This case assumes signicance, for an

‘unfair trade practice’ is dened rather widely under the MRTP Act. It includes any ‘unfair or

deceptive practice’ for sale of goods or services. The Indian claimant here was thus able to

bypass the arbitration agreement and sue for damages in India (with Indian law applying) by

adapting the MRTP route.

By and large the Indian courts have well understood the spirit and intent behind the principle

of nonintervention. Thus, in CDC Financial Services (Mauritius) Ltd v BPL

Communications36 the respondent obtained an anti arbitration injunction from the High Court

on the ground that the pledge of shares which was sought to be enforced through arbitration

would enable the claimants to take control of a telecom company which (as it was a foreign

company) would be contrary to Indian law. On appeal, the Supreme Court rejected this

contention, stating that this was a plea on merits and thus within the sole jurisdiction of the

arbitrators. Interestingly, the court not only vacated the injunction, it also restrained the

respondent from moving any further applications ‘which would have the effect of interfering

with the continuance and conclusion of the arbitration proceedings’. In Sukanaya Holdings v

Jayesh Pandya37, however, the Supreme Court refused to stay the court action on the ground

that the subject matter of the arbitration agreement was not the same as the subject matter of

the civil suit. Besides, the parties in the two actions were not identical. The court held that the

entire subject matter of the suit should be the subject matter of the arbitration agreement in

order for the mandatory provisions of s 8 to apply.

35 < 2004 (7) SCC 447> 36 < 2003 (12) SCC 140> 37 < 2003 (5) SCC 531>

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LAWS RELATING TO ARBITRATION AGREEMENT IN FRANCE

Previously there was a traditional distinction in French domestic arbitration law between

arbitration agreements to arbitrate future disputes (clause compromissoire or clause

d’arbitrage) and arbitration agreements to submit existing disputes to arbitration (compromis

d’arbitrage). Some matters could only be resolved by arbitration on the basis of an arbitration

agreement which had been concluded after the dispute had arisen.

The 2011 Decree abandons that distinction. As a result, the arbitrability of a matter no longer

depends on whether the dispute has or has not already arisen between the parties.

Importantly, this traditional distinction has never existed in the context of international

arbitration.

An arbitration agreement is valid even if they are not in writing. Courts have found that an

arbitration agreement may, for instance, result from the conduct of the parties at the time of

negotiating and performing the contract,38 or from a party’s submission to the jurisdiction of

an arbitral tribunal. Since the entry into force of the 2011 Decree, the CPC contains an

express provision that “an arbitration agreement shall not be subject to any requirements as to

its form”.39

This new provision constitutes a codication of case law. The courts also recognized that an

arbitration agreement could be incorporated by reference to another document even if the

latter was not signed by a party, if evidence of the true consent of that party could be adduced

by other means.

An arbitration agreement should, nevertheless, exist in some tangible form, as a party seeking

to enforce an award must produce an original or copy of both the award and the arbitration

agreement. As to the proof of the arbitration agreement, it may be considered, in light of

Article VII of the New York Convention,40 that the existence of an arbitration agreement may

be established by any means admitted by French law.

38 <Cour d’appel de Paris, 17 February 2011, No 09/2828533, Government of Pakistan v. Dallah AS> 39 <CPC, art 1507> 40 <CMS Guide to Arbitra�on, vol II, appendix 1.1>

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As a general rule set out in Article 2061 of the Code Civil, arbitration agreements in domestic

arbitration are valid in contracts concluded “by reason of a professional activity”. In other

words, regardless of the object of the contract (e.g. sale of goods, shareholders’ agreement or

partnership, etc), parties are free to arbitrate as long as the contract containing the arbitration

agreement is concluded in the course of the professional activity of the parties.41 This means

that consumer contracts are not arbitral in nature. It also means that the scope of arbitrability

is no longer limited to commercial contracts. Disputes relating to civil contracts, as long as

entered into for professional purposes, can also be submitted to arbitration.

In accordance with well-established principles of case law, most of the restrictions on the

scope of arbitral matters in domestic arbitration do not apply in international arbitration.

Unlike in domestic arbitrations, the requirement that contracts be concluded “by reason of a

professional activity” does not apply to international arbitration.42

The principle of the autonomy of the arbitration clause from the main contract, which is

equivalent to the principle of separability, has long been maintained by French courts. This

principle is now expressly recognised by statute in Article 1447 of the CPC, which provides:

“An arbitration agreement is independent of the contract to which it relates. It shall not be

affected if such contract is void.” The consequence of the autonomy of the arbitration clause

is that arguments as to the nullity of the main contract containing the arbitration clause shall

not affect the validity of the arbitration clause or the competence of the arbitral tribunal to

rule on these arguments.43 Autonomy from the law governing the main contract The French

principle of autonomy of the arbitration agreement goes beyond the classic principle of

separability. French law also recognises that an arbitration clause can be subject to a different

applicable law than the law governing the main contract. Not only is the arbitration clause

independent from the contract, it is also independent from the law governing that contract.

Consequently, an arbitration agreement could survive despite provisions of the law governing

the main contract that would arguably invalidate that contract. Through a consistent line of

41 <Code Civil (Law No 72-626 of July 1972, supplemented by Law No 75-596 of 9 July 1975 and Law No 2001-420 of 15 May 2001), art 2061> 42 < CMS EXPERT GUIDES - IN-DEPTH LEGAL RESEARCH AND INSIGHTS, h�ps://cms.law/en/INT/Expert-Guides (last visited Aug 7, 2019) > 43 <Cour de cassa�on (Civ. 1ere), 11 July 2006, No 04-14.950, Na�onal Broadcas�ng c/ Bernadaux et autres, Rev Arb, 2006, p 870>

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case law, the Cour de cassation has based the validity of the arbitration agreement on a

substantive rule of validity.44 This substantive rule or règle matérielle allows the French

courts to bypass any conict of laws rule that would identify the national law governing the

validity of the arbitration agreement. As a result, arbitration agreements are governed by this

règle matérielle of validity instead of a national law. In practice, an international arbitration

agreement will be valid if the consent of the parties is established and if it does not purport to

violate international public policy.45

Where there is a binding arbitration agreement, the parties are obliged to refer their dispute to

an arbitral tribunal pursuant to the terms of their arbitration agreement and the courts must

decline jurisdiction over that dispute. An arbitration agreement only creates obligations on

the parties to it, and has no binding force on third parties who cannot rely on it.

French law prohibits a limited number of types of disputes from being resolved via

arbitration. These disputes include those relating to (Article 2060, Civil Code):

· Civil status and capacity of natural persons.

· Divorce and judicial separation of spouses.46

In addition, disputes involving certain categories of public authorities and entities cannot be

arbitrated.

In principle, disputes relating to public policy issues cannot be arbitrated. However, French

courts have dened "public policy" very restrictively. Parties are free to arbitrate anti-trust

and intellectual property disputes, for example.

Before November 2016, to be valid, an arbitration clause had to be concluded in relation to a

professional activity (old Article 2061, Civil Code). As a result, certain types of consumer

and employment disputes could not be resolved through arbitration, and any arbitration

clauses contained in such contracts were considered null and void. However, the Court of

44 <Cour de cassa�on (Civ. 1ere), 20 December 2003, Municipalite de Khoms El Mergeb c/ Dalico, Rev Arb, 1994, p 116 > 45 <Fouchard Gaillard Goldman on Interna�onal Commercial Arbitra�on, (Gaillard and S avage (ed.)) (1999) Kluwer Interna�onal, pp 218–240> 46 < Alexandre Bailly et al., Arbitra�on procedures and prac�ce in France: overview | Prac�cal Law , 3 THOMAS

REUTER PRACTICAL LAW (2018), h�ps://content.next.westlaw.com/7-501-9500?transi�onType=Default&contextData=(sc.Default)&__lrTS=20190626120801673&firstPage=true&bhcp=1 (last visited Sep 17, 2019) >

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Cassation has held that this provision does not apply in the same way to international

arbitration.47

In November 2016, the French Parliament redrafted Article 2061 of the Civil Code, which

now provides that, in order to be valid, an arbitration clause must have been accepted by the

party against which it is enforced, unless that party was assigned or otherwise transferred the

rights and obligations of the party who initially accepted the clause. In addition, when one of

the parties did not enter into a contract directly related to his/her professional activities, the

arbitration clause is valid in principle but cannot be enforced against that party if he/she

decides to go to court. In other words, a non-professional party has an option between the

courts and arbitration. The precise consequences of the redrafting of Article 2061, including

its application to international arbitration, remain to be determined by the French courts.48

In domestic arbitration, an arbitration agreement must be in writing to be valid (Article 1443,

Code of Civil Procedure (CCP)). In international arbitration, French law does not impose any

formal requirements, and the arbitration agreement does not need to be in writing or in any

specic form (Article 1507, CCP). However, is it easier to prove the existence of an

arbitration agreement where there is a written document. For both domestic and international

arbitration, there are no substantive requirements, apart from the requirement that the

underlying dispute be arbitral.

Separate arbitration agreement

In domestic arbitration, the CCP provides that an arbitration agreement can be in the form of

either a:

· Clause in the contract (clause compromissoire).

· Separate agreement entered into after the dispute arises (compromis d'arbitrage).49

47 < h�ps://uk.prac�callaw.com> accessed on 06/09/2019 48 <ibid> 49 < Alexandre Bailly et al., Arbitra�on procedures and prac�ce in France: overview | Prac�cal Law , 3 THOMAS

REUTER PRACTICAL LAW (2018), h�ps://content.next.westlaw.com/7-501-

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There are no specic provisions for international arbitration. There is therefore no

requirement for a separate agreement. Arbitration clauses can also be incorporated into a

contract by reference to another document, such as general terms and conditions, provided it

is established that the parties have effectively consented to arbitrate their disputes. French

courts consider this to be the case when the parties were aware of the existence of an

arbitration clause when they entered the contract and did not object to it50.

JUDICIAL ASSISTANCE AND INTERVENTION IN FRANCE

Jurisdiction of the courts

The courts’ obligation to decline jurisdiction because of an arbitration agreement

Where a party attempts to bring proceedings in a French court despite the existence of an

arbitration agreement, the French courts will not stay their proceedings (in contrast with other

court systems, e.g. the English courts), but rather, will decline jurisdiction. In cases involving

international arbitration where the arbitral tribunal has not yet been seized of the matter, the

court will decline jurisdiction if the arbitration agreement is not manifestly null and void, or

inapplicable to the dispute.51

It is important to note however that the court may not decline jurisdiction of its own accord;52

this decision must be made upon the demand of a party. The court’s decision on jurisdiction

may be appealed within 15 days under a special procedure designed to avoid costs and delay.

In France, there is no option of obtaining a preliminary court ruling on jurisdiction. Article

1465 of the CPC, which is applicable both to domestic and international arbitration, provides

that “the arbitral tribunal has exclusive jurisdiction to rule on objections to its jurisdiction”. It

is a general principle of French international arbitration law that the validity of the arbitration

agreement is decided by the arbitrators applying the competence-competence principle,

unless the clause is manifestly null and void.53

9500?transi�onType=Default&contextData=(sc.Default)&__lrTS=20190626120801673&firstPage=true&bhcp=1 (last visited Sep 17, 2019> 50 < C Cass, First Civil Chamber, 3 June 1997, No. 95 -17.603> 51 <art 1448(1)> 52 <, art 1448(2)> 53 <art 1448>

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Claims relating to the constitution of the arbitral tribunal

In disputes before the courts relating to the constitution of the arbitral tribunal, if the

arbitration agreement is manifestly void or manifestly not applicable, the judge acting in

support of the arbitration (the juge d’appui) shall declare that no appointment needs to be

made.54

The supporting role of the courts

The 2011 Decree created a judge whose task is to support the arbitral proceedings:

The judge acting in support of arbitration or juge d’appui, this judge helps to ensure the

effectiveness of the arbitration process.

Article 1505 of the CPC provides that the judge acting in support of an international

arbitration shall be the President of the Tribunal de Grande Instance of Paris where:

· the arbitration is taking place in France;

· the seat of the arbitration is in another country but the parties have agreed that French

procedural law should apply to the proceedings;

· the parties have expressly granted jurisdiction to French courts over disputes relating

to the arbitral procedure; or

· One of the parties is exposed to a risk of denial of justice.55

French courts are very supportive of arbitration in general and international arbitration in

particular. The principle of kompetenz-kompetenz prevents them from intervening in the

arbitration proceedings after the constitution of the tribunal. However, courts can still act in

support of the proceedings on the request of the parties.56

In principle, the arbitration proceedings are not affected by a party ling an application

before French courts. The arbitral tribunal has sole discretion to stay the arbitration

proceedings if it considers it necessary to do so.57 Therefore, delaying tactics are not likely to

be successful in France.

54 <art 1455> 55 <art 1505> 56 <Art 1448> 57 <art 1472>

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The supporting role of the French courts in case of risk of a denial of justice

One of the most progressive innovations of the 2011 Decree is to confer on the courts the

power to support any international arbitral proceedings including arbitral proceedings which

have their seat in a foreign country, if a party is at risk of a denial of justice. The judge acting

in support of the arbitration can be seized if it is shown that a party is at risk of a denial of

justice.58

In these circumstances, the judge can be asked to act as an appointing authority; extend the

time limits for arbitration; or decide on the incapacity, removal or resignation of an arbitrator.

There is no requirement to establish any connection with France to obtain this jurisdiction.

This supporting role of the court is meant to reinforce the authority of the arbitral tribunal and

enable the parties to conduct the arbitral proceedings in accordance with the principles of due

process and equal treatment of the parties.

Interim protective measures

Pursuant to Article 1468 of the CPC, provisional and protective measures are in principle

ordered by the arbitral tribunal itself. Conservatory attachment and judicial securities on the

other hand must be ordered by the courts at the request of the arbitral tribunal or the parties.

58 <art 1505(4)>

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