Enforcement of foreign award involving public procurement contract falls within jurisdiction of the ordinary courts (France Supreme Court)

 In Cass. Civ. 1^re, 8 juillet 2015, n° 13-25.846, the Cour de cassation (French Supreme Court) considered an appeal against a Paris Court of Appeal judgment. The appeal concerned whether the enforcement of a foreign arbitral award, which involved a public procurement contract, fell within the jurisdiction of the ordinary (as opposed to administrative) courts. In a landmark decision, the French Supreme Court overturned a Paris Court of Appeal judgment and affirmed that the enforcement of a foreign award, which involved a public procurement contract, fell within the jurisdiction of the ordinary courts.

The Paris Court of Appeal had ruled that the parties’ agreements in this case were public procurement contracts and, consequently, the administrative courts had exclusive jurisdiction over an application for enforcement of the award. The Court of Appeal decision followed a ruling by the Conseil d'Etat (the highest administrative court in France), concerning the same dispute, that had found that the administrative courts have exclusive jurisdiction over the enforcement of a foreign award involving contracts subject to French administrative law's mandatory rules.

The Supreme Court overturned the Paris Court of Appeal decision and ordered the case to be re-heard by the Versailles Court of Appeal. Particularly noteworthy was the court’s reliance upon the fact that international arbitration is an autonomous "international arbitral order" and as such, an international arbitral award is not linked to the legal system of a particular state. Also significant was the Supreme Court's express rejection of the Conseil d'Etat's analysis. As a result, France's highest ordinary and administrative courts have now issued conflicting decisions regarding the enforcement of foreign awards relating to certain public law contracts. This divergence gives rise to considerable uncertainty. It means, for example, that it is not clear whether a party wishing to enforce a foreign award relating to a public procurement contract should seek an enforcement order in the ordinary or administrative courts. Given the importance of the issue, and the number of awards potentially concerned, it is to be hoped that the Tribunal des Conflits (the specialised court charged with resolving issues of jurisdiction between these courts) will be given an opportunity to settle the debate – perhaps in connection with the Versailles Court of Appeal's re-hearing of the case. (Cass. Civ. 1^re, 8 juillet 2015, n° 13-25.846.)

Background

Ordinary and administrative courts under French law

The French court system is divided into ordinary (ordre judiciaire) and administrative (ordre administratif) courts. The ordinary courts have jurisdiction over civil, commercial, social and criminal cases. Public law cases are heard in the administrative courts. The French Supreme Court (Cour de cassation) is the highest ordinary court. The Conseil d'Etat is the highest administrative court. In the event of a dispute as to whether a case falls within the jurisdiction of the ordinary or administrative courts, the Tribunal des Conflits is the specialised court charged with resolving the issue.

Enforcement of a foreign award in France

Article 1516 of the French Code of Civil Procedure (CPC) grants the Paris Tribunal de grand instance exclusive jurisdiction in respect of the enforcement (exequatur) of foreign arbitral awards (that is, awards made outside France). 

Article III of the New York Convention prohibits any form of procedural discrimination between domestic and foreign arbitral awards in respect of recognition and enforcement.

Article V of the same Convention sets out the limited grounds on which the recognition and enforcement of a foreign arbitral award may be refused. A review of the merits of the award is not permitted.  French law on arbitration is regarded as being even more liberal than the New York Convention and French ordinary judges (juges judiciaires) generally refer to French law on arbitration (that is, the CPC rather than the New York Convention, Article VII of which permits reliance on a national law that is more favourable toward international arbitration than the Convention).

Facts

The Syndicat mixte des aéroports de Charente (SMAC) is a French public law entity. In February 2008, it concluded two agreements with Ryanair Limited and its wholly-owned subsidiary Airport Marketing Services Limited (together, Ryanair) concerning the development of a regular air link between London and Angoulême, and related publicity services.

The two agreements provided for London-seated arbitration under the rules of the London Court of International Arbitration (LCIA). Ryanair terminated both agreements in February 2010, and subsequently instituted LCIA arbitration. In parallel, SMAC commenced proceedings before the Poitiers Administrative Tribunal. In an award issued on 22 July 2011, the sole arbitrator found that he had jurisdiction over the dispute, and refused to stay proceedings until the Poitiers Administrative Tribunal had ruled on the same dispute. In a second award, issued on 18 June 2012, the sole arbitrator found that the agreements had been validly terminated.

By an order dated 21 May 2012, the President of the Paris Tribunal de grande instance issued an order granting enforcement of the first award. SMAC appealed against the order before the Paris Court of Appeal and, in parallel, also applied to the Conseil d'Etat.

Conseil d'Etat judgment

Before the Conseil d'Etat, SMAC sought, among other things:

• The setting-aside of the award.
• A ruling that the award could not be recognised or enforced in France.

The Conseil d'Etat issued its judgment on 19 April 2013. It rejected SMAC's application on the grounds that:

• The French administrative courts do not have jurisdiction over an application to set aside a foreign award. The same is true of the ordinary courts, since the power to set aside an award is limited to the courts of the seat.
• Equally, since Ryanair had yet to seek enforcement of the award, SMAC's submissions regarding the recognition or enforcement of the award were premature.

In reaching its decision, the Conseil d'Etat also confirmed that:

• The French administrative courts have jurisdiction over any challenge to an award made in France involving contracts subject to the mandatory rules of administrative law (such as public procurement contracts). This element of the Conseil d'Etat's ruling built upon principles outlined by the Tribunal des Conflits in its Inserm decision of 17 May 2010 (Tribunal des Conflits, 17 mai 2010, INSERM c/ Fondation Letten F. Sausgstad, n° C3754). Inserm established that, in principle, an application to set aside an arbitral award made in France under a contract between a French public law entity and a foreign company, in circumstances where the contract concerns international trade interests and has been performed in France, must be brought before the ordinary courts (even if the contract is a public law contract under French law). However, where the agreement in question falls within a mandatory administrative law regime that is a matter of public policy, the administrative courts have jurisdiction over any challenge to the award.
• Irrespective of where it is made, the administrative courts have exclusive jurisdiction over the enforcement of an award involving contracts subject to the mandatory rules of French administrative law.

Paris Court of Appeal judgment

In its judgment of 10 September 2013, the Paris Court of Appeal adopted the Conseil d'Etat's reasoning. The court stated that, although Article 1516 of the French CPC grants the Paris Tribunal de grand instance exclusive jurisdiction over the enforcement of awards issued abroad, its scope is limited to questions of jurisdiction within the ordinary court system. As such, it is not relevant to questions concerning the division between the ordinary and administrative courts. The Court of Appeal then went on to find, in keeping with the Conseil d'Etat, that:

• The agreements between SMAC and Ryanair were public procurement contracts.
• As such, the administrative courts had exclusive jurisdiction over an application for enforcement of the award.

Accordingly, the ordinary courts did not have jurisdiction, and the enforcement order of 21 May 2012 was overturned.

Ryanair appealed to the French Supreme Court.

Decision

In a landmark decision, the Supreme Court overturned the Court of Appeal judgment and affirmed that the enforcement of a foreign award falls within the jurisdiction of the ordinary courts.

The Supreme Court relied upon the fact that international arbitration is an autonomous "international arbitral order". As such, an international arbitral award is not linked to the legal system of a particular state; rather, it is an international decision whose lawfulness must be examined under the rules of the country in which recognition and enforcement is sought. In France, the enforcement of a foreign award falls within the jurisdiction of the ordinary courts, and any review of the merits of a foreign award is forbidden.

In this instance, the overturning of the enforcement order, and the Court of Appeal's refusal to uphold jurisdiction, breached this principle. Consequently, the Supreme Court overturned the Court of Appeal judgment pursuant to Article 1516 of the CPC and the New York Convention, and ordered the case to be re-heard by the Versailles Court of Appeal.

Comment

This decision is important for two reasons. The first is the court's wholehearted acceptance of the theory that international arbitration is an autonomous legal order. While the celebrated 2007 decision in Putrabali (Cass. Civ. 1^re, 29 juin 2007, n°05-18.05) had recognised that an international award is not attached to any state legal system, this decision goes further and explicitly accepts the existence of an independent "international arbitral order".

The second reason is the Supreme Court's express rejection of the Conseil d'Etat's finding that the enforcement of awards concerning certain public law contracts falls within the jurisdiction of the administrative courts. For the Supreme Court, the ordinary courts are responsible for the enforcement of all foreign awards. As such, the existence of a public law dimension is irrelevant. The ordinary courts have exclusive jurisdiction over the enforcement of foreign awards. This has the advantage of simplicity and predictability, and avoids a situation in which disputes concerning the enforcement of foreign awards are spread between the ordinary and administrative courts.

However, the Supreme Court's ruling also means that France's highest ordinary and administrative courts have now issued conflicting decisions regarding the enforcement of foreign awards relating to certain public law contracts. This divergence gives rise to considerable uncertainty. It means, for example, that it is not clear whether a party wishing to enforce a foreign award relating to a public procurement contract should seek an enforcement order in the ordinary or administrative courts. Given the importance of the issue, and the number of awards potentially concerned, it is to be hoped that the Tribunal des Conflits will be given an opportunity to settle the debate – perhaps in connection with the Versailles Court of Appeal's re-hearing of the case.

A version of this post was first published by Practical Law.

For further information, please contact Laurence Franc-Menget , Of Counsel, Vincent Bouvard, Avocat, Peter Archer, Associate or your usual Herbert Smith Freehills contact.