In Tribunal des Conflits, 24 April 2017, C4075, the Tribunal des Conflits considered whether the administrative or ordinary courts had jurisdiction to hear an application to enforce an arbitral award made in respect of disputes arising under two public services contracts.
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, while 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
As a matter of principle, Article 1516 of the French Code of Civil Procedure (CPC) grants the ordinary courts exclusive jurisdiction in respect of the enforcement (exequatur) of foreign arbitral awards (that is, awards made outside France) and international arbitral awards made in France.
France is a party to the 1958 New York Convention, Article III of which 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 (i.e. the CPC rather than the New York Convention). Article VII of the Convention permits reliance on a national law which is more favourable toward international arbitration than the Convention itself.
Facts
The dispute and issue of the arbitral awards
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.
The proceedings before the French Courts
On 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. This ultimately resulted in the Conseil d'Etat, the highest administrative court, and the Cour de cassation, the highest ordinary court, issuing conflicting decisions (see Enforcement of foreign award involving public procurement contract falls within jurisdiction of the ordinary courts (France Supreme Court)).
- Conseil d'Etat judgment of 19 April 2013
Before the Conseil d'Etat, SMAC sought (among other things) both the setting-aside of the award and a ruling that it could not be recognised or enforced in France.
On 19 April 2013, the Conseil d'Etat rejected SMAC's submissions on the grounds that: (i) the French courts (whether administrative or ordinary) do not have jurisdiction over an application to set aside a foreign award, as the courts of the seat alone have jurisdiction in that respect; and (ii) since Ryanair had yet to seek enforcement of the award, SMAC's submissions regarding the recognition or enforcement of the award were, in the circumstances, premature.
However, in reaching its decision, the Conseil d'Etat also indicated 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); and
- 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 of 10 September 2013
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: (i) the agreements between SMAC and Ryanair were public procurement contracts; and (ii) in consequence, the administrative courts had exclusive jurisdiction over an application for enforcement of the award. Accordingly, the Court of Appeal affirmed that the ordinary courts did not have jurisdiction, and overturned the enforcement order of 21 May 2012.
Ryanair appealed to the French Supreme Court.
- The Supreme Court judgment of 8 July 2015
In a judgment issued on 8 July 2015, the Supreme Court overturned the Court of Appeal decision, affirming 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.
It was in this context that the issue was, eventually, referred to the Tribunal des Conflits.
The Decision of the Tribunal des Conflits
The Tribunal des Conflits issued its judgment on 24 April 2017. The Tribunal first outlined, and clarified, the basic principles:
- Where a foreign arbitral award has been made in connection with a dispute related to the performance or termination of a contract entered into 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, any application for enforcement must be brought before the ordinary courts. Similarly, where such an award has been made in France, the ordinary courts have jurisdiction over an application for the award to be set aside.
- However, where the contract which is the source of the dispute is subject to mandatory French public law rules relating to public procurement or the occupation of public land, any application to enforce in France an arbitral award (whether made in France or not) or to set aside an award made in France falls within the jurisdiction of the administrative courts.
In this instance, the agreements concluded between Ryanair and SMAC constituted public services contracts within the meaning of the Code des marchés publics then in force. Accordingly, they were subject to mandatory French public law rules relating to public procurement, with the result that the administrative courts had jurisdiction over Ryanair's application for the enforcement of the first award.
Comment
The ruling of the Tribunal des Conflits is clearly in line with its 2010 Inserm decision, which had adopted the same approach in respect of setting aside proceedings against an award made in France. Following the Ryanair judgment, it is now clear that the same principles apply in the context of proceedings for the enforcement of foreign awards and awards made in France.
In addition, the Tribunal de Conflits ruling puts an end to the divergence between the Supreme Court and the Conseil d'Etat, and, at least on that basis, is therefore to be welcomed. However, as certain French arbitration practitioners have observed, a system in which the identity of the court reviewing an international award (and, ultimately, the nature of that review) depends upon its subject matter is likely to be less predictable than one in which a single court has exclusive jurisdiction over all claims – particularly in light of the Conseil d'Etat's recent ruling in Fosmax, in which it clarified for the first time the scope of its power to review international arbitral awards where mandatory French public law rules apply. As such, it will be interesting to see whether the recently formed Macron government takes steps to grant the ordinary courts exclusive jurisdiction over such matters.
A version of this post was first published by Practical Law.
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