French Cour de cassation, First Civil Chamber, 5 March 2014, No. 12-29.112
In this case, the company Diag Human SE supplied human plasma to the Czech Republic Ministry of Health.
Following a financial dispute which had arisen between the parties, the latter decided to enter into an ad hoc arbitration agreement on 18 September 1996 which provided for the possibility to have the award reviewed by different arbitrators, appointed in the same conditions as the former. The arbitration agreement also specified that the application for review was to be delivered to the opposite party within 30 days from the notification of the award, after which “the award will enter into force and the parties undertake to meet the time limit fixed by the arbitrators, otherwise the award could be enforced by the competent tribunal”.
After two partial awards, the arbitrators finally issued, on 4 August 2008, an award characterized as “final” and ordering the Czech Republic to pay various sums to Diag Human SE.
The Czech Republic then notified to Diag Human SE an application for review within the 30 day time limit as provided in the arbitration agreement. However, on 4 of August 2008, Diag Human SE managed to obtain the enforcement of the award.
Thereafter, the Paris Court of Appeal having reversed the enforcement order, Diag Human SE brought the dispute before the French Supreme Court, the Cour de cassation.
In its decision (No. 12-29.112) of 5 March 2014, the Cour de cassation noted that:
- Pursuant to the arbitration agreement, the award could not enter into force in the event a party submitted an application for review within the set time limit;
- The arbitrators characterized the award as final only because it settled the last issues in dispute between the parties;
- Res judicata is only attached to arbitral awards.
The Cour de cassation thus confirmed the Court of Appeal’s decision that the Czech Republic’s application for review had “squashed” the award and, consequently, that the enforcement order should be overturned.
It should be reminded that, when examining a challenge brought against an award, the Cour de cassation had already held that “only genuine awards may be set aside, i.e., the acts of the arbitrators which settle definitively, in all or in part, the dispute, whether on the merits, on jurisdiction or on the procedure which leads them to terminate the proceedings” (Cour de cassation, 1st Civil Chamber, 12 October 2011, No. 09-72.439).
In this decision, the Cour de cassation thus confirmed its previous position that when the parties agreed on a possible review of the award and the review process is properly initiated, the award cannot be considered as “final”. Therefore, such an award cannot be enforced, especially when the arbitration agreement expressly provided that the award would only be res judicata in the absence of requests for review within the set time limit.
This case also points out that the characterization of an award does not depend on the terms chosen by the parties or the arbitrators: therefore, even though the award has been characterized as being “final” by the arbitrators, the Court of Appeal had reasons to consider that the award could not be enforced.
The decision is available here.