SUPREME COURT: PARTIES ARE JOINTLY RESPONSIBLE FOR THE PAYMENT OF ARBITRATOR FEES

On 1st February 2017, the first civil chamber of the French Supreme Court rendered a decision – published in the Bulletin –on a question of obvious practical importance, yet rarely addressed in judicial decisions: are parties jointly liable for the payment of arbitrator fees?

Most arbitration rules provide that when one of the parties does not pay its part of the advance on costs during an arbitration, the other party can –to avoid the procedure being suspended – pay this part, with the possibility of being reimbursed later. This is also what the OHADA Arbitration Rules, applicable to the present case, prescribe:

“if the provisions are due in equal shares by the claimant(s) and the defendant(s), the payment can be made in full by either of the parties, if the other party refuses to pay its part”.

Two observations are in order: first, it is only a possibility, and not an obligation. Second, are only within the scope of application of Article 11.2 of the OHADA rules only the advance on costs, and not the final fees of the arbitrators.

Thus the question submitted to the Cour de cassation: when the arbitrators have not been paid by one of the parties after the notification of the award, can they request that the other party pay the entire amount?

In its decision of 1 February 2017, the Cour de cassation chose the affirmative.

In the case in question, three arbitrators had to decide a dispute between the Republic of Guinea and the company GETMA, within the framework of an OHADA arbitration. The award was rendered before the arbitrators’ fees were paid by the parties. GETMA paid, as required by the award, one half of the fees. The Republic of Guinea did not pay the other half.

In a rare occurrence, the arbitrators applied for interim measures before the Presiding Judge of the Paris Commercial Court, requesting to sentence GETMA to pay – in the place of the Republic of Guinea! – € 108,000 to the president of the arbitral tribunal and € 81,000 to each of the two co-arbitrators, as an advance. The President of the consular tribunal, considering that he was confronted with a serious dispute regarding the existence of a passive solidarity between co-litigants, rendered an order dismissing the application for interim measures on 16 February 2015.

The Paris Court of Appeal, on 30 June 2015, overturned the order. It judged, on the contrary, that:

“a joint obligation to pay the costs and fees of the arbitrators, whose mission is carried out in the common interest of the parties, results from a contract concluded for pecuniary interest.”

The court concluded that “GETMA’s obligation is not seriously disputable in principle” and condemned GETMA to pay, pursuant to this joint obligation, all of the arbitration fees.

GETMA consequently submitted an appeal in cassation. It argued, in particular, that since solidarity cannot be presumed, it must be expressly stipulated. It noted that the arbitrator’s contract did not contain any express stipulation in this sense. It maintained that there did not exist any “use of international arbitration entailing a joint liability of the parties at the time of payment of the balance of arbitrators’ final fees”. The judges were thus reproached for having deduced such a “use” from Article 11.2 of the OHADA Arbitration Rules, even though the text only evokes a possibility, moreover confined to the advance on costs during the course of the arbitration.

The application in cassation derived from these grievances a violation of Article 873 paragraph 2 of the French Code of Civil Procedure: facing a serious contestation, the Court of Appeal could not order GETMA to pay provisions on the final fees of the three arbitrators.

This application was rejected without ambivalence by the Cour de cassation, on the grounds that

“after having noted the international character of the arbitration, the Court of Appeal, who did not have to refer to the laws of a State, rightly concluded, by a substantiated decision, that the joint nature of the parties’ obligation to pay the costs and fees of the arbitrators arose from the arbitrator contract, so that this obligation, not discussed in its amount, was not seriously contestable”.

Several observations are drawn from this ruling.

On the one hand, joint liability is, in international arbitration, disconnected from all State laws. It was therefore futile to want to impose upon the arbitrator a French law reasoning, on the basis of (new) Article 1310 of the French Civil Code according to which “joint liability is legal or conventional, it is not presumed” (solution taken from the previous Article 1202 of the Civil Code). The first two parts of the plea are thus rejected. Since the arbitrator is not legally bound by French law, he can contend that a joint liability exists notwithstanding the cases of legal joint liability or joint liability expressly stipulated by agreement. Hence, the argument based on the fact that the arbitrator’s contract did not include an express stipulation of joint liability was destined to fail.

On the other hand, joint liability can, in international arbitration, be deduced not from a simple use but from the arbitrator contract. Contrary to the Court of Appeal, the High Court does not refer to a “usage of international arbitration” when it comes to the passive joint liability between co-parties. Nor does it concern Article 11.2 of the OHADA Arbitration Rules, manifestly inapplicable. No: the source of the joint liability is the arbitrator’s contract.

This arbitrator’s contract signed by GETMA and the Republic of Guinea did not clearly include any joint liability stipulation, as the application in cassation did not fail to underline. One may wonder whether, by detecting a tacit joint liability agreement in the arbitrator’s contract, the parties’ intent is respected, considering that they neither thought of nor consented to such a joint liability..

It is, moreover, surprising that the Cour de cassation here considers that “the joint nature of the obligation […] was not seriously contestable”. Indeed, neither the arbitrator’s contract nor the arbitration rules provide it. It is, furthermore, quite problematic to speak of a usage of international arbitration as the courts did. To our knowledge, there are only three precedents in the matter. The first dates from 1851 (Paris, 28 June 1851, D.1853, II, 78). The second from 2001, but its scope was considerably smaller, the Paris Court of Appeal judging that “awaiting a final decision on the allocation of fees, decision that will not occur in the current matter considering the termination of the arbitration proceedings, the fees are owed jointly and in equal portions” (Paris, 13 December 2011, RTD com. 2002, p. 282). The solution from 2001 is thus specific to a pathological situation: one wherein the allocation of fees is not decided in the award. There is nothing like this in the case judged by the Cour de cassation. One must not confuse the relationship of obligation to the debt and that of contribution to the debt. If the award, as was the case here, can decide the contribution of each of the parties, the question of joint liability concerns a different relationship: that of the obligation, which is to say the relationship between the creditors (here the arbitrators) and the joint debtors (here the co-parties). It is thus irrelevant that the award decides in which proportion each party must bear the fees. This does not impede joint liability. Let us suppose that the arbitral tribunal condemned party A to bear all of the arbitration fees and costs, and to pay damages to party B. This distribution only affects the relations between A and B. If A does not pay the arbitrators, the arbitrators may very well request B to pay all of the costs and fees, with the implication that B will seek reimbursement from A. A Pyrrhic victory!

The last precedent comes from the Versailles Court of Appeal that, in 2006, showed greater pedagogy. It based its decision, in fact, on the arbitrator’s common interest mission, which justifies a joint obligation. Notwithstanding, the reach of the decision was minimal, since at issue was “the joint obligation to pay him while awaiting a decision on the final distribution of his fees”.

To return to the decision of 1 February 2017, one will observe that, without bringing the slightest justification thereto, the Cour de cassation establishes the legitimacy of the parties’ passive solidarity on the “arbitrator’s contract”, although the latter does not provide for it.

The decision (in French) is available here.

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