Withdrawal of counterclaims due to non payment of the advance on costs is contrary to the right to access justice and to the principle of equality if the counterclaims are indissociable from the principal claims

French Supreme Court, 1st civil chamber, 28 March 2013, n°11-27.770, Pirelli c. Licensing Projects

28 March 2013 was prosperous for the 1st civil chamber of the French Supreme Court, which rendered six decisions concerning arbitration.

In one of these judgements, the Supreme Court decided whether the fact for an Arbitral Tribunal to consider counterclaims as withdrawn due to the absence of payment by one of the parties of its share of the advance on costs under Article 30(4) of the ICC Rules (today Article 36(6)) was in contradiction with a party’s right to access justice and to the principle of party equality, violation which would justify setting aside the award under Articles 1520, 5° and 455 of the French Code of Civil Procedure.

The facts of the case were the following: Pirelli and Licensing Projects had entered into an exclusive brand licensing contract which contained an ICC arbitration clause.  A dispute having arisen between them, Pirelli terminated the contract and commenced arbitration proceedings.  During the procedure, Licensing Projects failed to pay its share of the advance on costs due to the fact that it had become insolvent.  The ICC International Court of Arbitration informed the Arbitral Tribunal and the parties, in accordance with Article 30(4) of the ICC Rules then in force, that Licensing Projects’ counterclaims were considered withdrawn, without prejudice to the possibility of reintroducing them at a later date in another proceeding.

The Paris Court of Appeals, on 17 November 2011, set the award aside for violation of the right to access justice and of the principle of equality between the parties.

The Supreme Court, in a more nuanced way, held that an Arbitral Tribunal’s refusal to know of counterclaims is only contrary to the right to access justice and to the principle of party equality if such claims are indissociable from the principal claims.

It remains to be seen what is “indissociable”…

The decision is available here.

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