In a judgment dated 18 December 2014, the French Supreme Court (“Cour de cassation”) ruled the issue of the irregularity of the arbitral tribunal’s constitution due to the existence of notable facts concerning tight professional links between an arbitrator and a counsel, omitted in the independence declaration of the arbitrator, and the existence of an arbitrator list.
In this case, two French companies had entered into an agreement for the lease of commercial premises. The plaintiff, Dukan de Nitya, initiated an arbitration procedure on behalf of JJ Holdings, and was disputing the termination of the contract notified by the defendant, VR Services. The arbitration agreement provided for the composition of the arbitral tribunal a list of four names of presidents of different professional organizations, with a possibility of delegation. The plaintiff thus appointed as co-arbitrator the president of an organization for “the promotion of specialized shops” (“Promotion pour les commerces specialisés”) also known as “Procos”.
The arbitral tribunal rendered two awards dated 10 August and 24 September 2012, holding that the plaintiff’s claims were inadmissible and ordering it to pay damages to VR Services until the vacation of the premises. Dukan de Nitya then challenged the two awards before the Paris Court of appeal.
On 29 October 2013, the Paris Court of appeal (1st pole, 1st Chamber, 29 October 2013, No 12/17423: SARL Dukan de Nitya vs. VR Services) annulled the two awards on the basis of Article 1520 2° of the French Civil Procedure Code. The Paris Court of appeal indeed held that since one of the arbitrators had voluntarily omitted to mention in its declaration of independence the business relationship he had with the other party’s counsel, “especially when”, the arbitration was “closed, limited to a list of four names”, such a situation was likely to create in the parties’ eyes a reasonable doubt on the impartiality and independence of this arbitrator.
The defendant then referred the Court of appeal’s decision to the Cour de cassation, arguing that the plaintiff had renounced to raising this argument under Article 1466 of the French Civil Procedure Code, since those facts were notable and had been “perfectly accessible” on the Procos website “from the beginning of the arbitral procedure”.
The Cour de cassation dismissed the defendant’s motion regarding the Paris Court of appeal’s ruling, thus confirming the annulment of the two awards rendered 10 August and 24 September 2012.
In this decision, the French Supreme Court held that:
- since “no specific circumstance justified, in the eyes of the parties, to question the elements disclosed within the declaration, when nothing, in light of the circumstances disclosed commanded an”, it could not be deduced that Dukan de Nitya had renounced to challenging the regularity of the arbitral tribunal’s composition;
- the arbitral tribunal was irregularly constituted since, on the one hand, the plaintiff had to “choose an arbitrator from a closed list of four names”, and on the other hand, “the business relationship between the arbitrator and the lawyer” was of such nature as to raise in the eyes of the parties a reasonable doubt as to the arbitrator’s impartiality and independence.
In this case, the Cour de cassation gives clarifies a previous ruling of the Paris Court of appeal (1st pole, 1st Chamber, 14 October 2014, No. 13/13459) which already delivered the parties from their investigation duty after the start of the proceedings. With this ruling, the Cour de cassation clearly states that the parties do not have to question the declarations of independence, even in presence of notable facts which were accessible during the constitution of the arbitral tribunal.
The Cour de cassation thus relieves the parties from any investigation obligation as long as the sincerity of the declaration made by an arbitrator is doubtful.
The Cour de cassation, for the first time to our knowledge, also raised the issue of a closed list of arbitrators as an element justifying doubts as regards the impartiality and independence of an arbitrator. If, to date, the arbitrator lists were stricken for breach of equality between the parties, in the present ruling, the Cour de cassation seems to target those lists on a different ground.
It can only be deplored that the Cour de cassation put, on the same level, a non-revealed business relationship and the existence of a list of four names attached to an arbitration agreement without further explaining how a closed list of arbitrators can raise reasonable doubts as regards the impartiality and independence of the arbitrators when the parties had previously agreed upon the existence of such list.
Nevertheless, we understand that the presence of a closed list would not be sufficient a ground to set an award aside, the ruling having clearly made on the basis of both grounds, i.e., the existence of the list and of the strong business relationship between the lawyer and the arbitrator.