Obligation of disclosure and notorious fact: when the Court of Appeal recalls the extent of this obligation

On 27 March 2018, the Paris Court of Appeal ruled once again on the extent of the arbitrator’s obligation to disclose and notorious fact, underlining that a party ‘was not required to continue its research after the arbitration operations had begun and it was incumbent on the arbitrator to inform the parties of any circumstance likely to affect his independence or impartiality that has occurred after acceptance of his mission’.

The case dealt with the non-renewal of two agreements concluded between Saas Buzwair Automotive (SBA), a Qatari company, and Audi Volkswagen (AVME), an Emirati company, concerning the distribution of Audi and Volkswagen vehicles in Qatar.

On 8 February 2013, following AMVE’s intention not to renew the two agreements, SBA initiated arbitration proceedings against AVME in accordance with the arbitration clauses contained in the two contracts.

On 16 March 2016, the arbitral tribunal issued an award considering that AMVE was entitled not to renew the contracts and therefore dismissed SBA’s claim for 150 million dollars (Global Arbitration Review, Audi Volkswagen award set aside in Paris).

One month later, on 20 April 2016, SBA filed an action for annulment before the Paris Court of Appeal for improper constitution of the arbitral tribunal. Indeed, it states in particular that the 2015/2016 edition of a professional directory mentioned the representation of Porsche, a Volkswagen entity which was a party to the arbitration, by the firm of which one of the arbitrators is a partner, in another dispute. SBA alleges that the arbitrator failed to disclose this information during the arbitration, such that these circumstances created a reasonable doubt as to his independence and impartiality.

On 27 March 2018, the Paris Court of Appeal granted SBA’s request for setting aside the award, underlining the distinction between:

  • a notorious fact existing before the beginning of the arbitration proceedings, which does not necessarily need to be disclosed by the arbitrator;
  • a fact that occurred during the arbitration proceedings, for which the parties are not required ‘to continue [their] investigations after the commencement of the arbitration proceedings’, even if it is a notorious fact.

Thus, the Court of Appeal underlines that ‘while public and very easily accessible information, which the parties could not fail to consult before the arbitration began is likely to characterise the notoriety of a conflict of interest, it cannot, however, reasonably be required either that the parties systematically search for sources likely to mention the name of the arbitrator and the persons related to him or that they continue their search after arbitral proceedings have begun’, although in this case it was a fact ‘sufficiently notable that this firm made it an element of its communication and included it in the “top 5” of its most noteworthy files’. In other words, the notorious fact arising during the arbitration proceedings must also be disclosed by the arbitrator.

The Court of Appeal therefore set aside the award on the ground that the relationship between the arbitrator and Porsche, which took place ‘during the course of the arbitral proceedings’, was of ‘indisputable importance in the eyes of the firm’ to which the arbitrator belongs and was therefore a circumstance likely to create ‘reasonable doubt as to the arbitrator’s independence and impartiality’.

1.Obligation of disclosure and notorious fact upon the constitution of the arbitral tribunal

The Court of Appeal rightly points out that the arbitrator has an obligation of disclosure to ensure his independence and impartiality. Indeed, since the judgment of the Court of Cassation of 16 March 1999, it has been established that the arbitrator has the obligation to reveal ‘any fact likely to cause in the minds of the parties a reasonable doubt as to those qualities which are the essence of the judicial function’ (Cass. civ. 1ère, 16 March 1999, n°96-12.748).

According to the doctrine, ‘[T]his solution is systematically underlined by the judgments of the Paris Court of Appeal judging the respect by the arbitrator of his obligation of disclosure’ (E. Loquin, La notoriété du fait non révélé par l’arbitre, TRD. Com. 2016 p. 699).

Nevertheless, as the Court of Appeal underlines in this case, the duty of disclosure must ‘be assessed in the light of the notoriety of the situation under criticism’. In other words, ‘the case law considers that what is notorious does not need to be disclosed’ (C. Debourg, Compte Rendu de l’atelier du groupe de pratique arbitrale du Cfa : l’obligation de révélation : aspects pratiques pour les arbitres et pour les parties, Revue de l’arbitrage, 2016, p. 372).

Several judgments have subsequently confirmed this position (CA Paris, 14 February 2017, n°15-13.134; CA Paris, 14 October 2014; CA Paris, 2 July 2013, n°11-23.234).

However, the notion of notoriety cannot be easily defined as Bertrand Moreau points out: ‘notoriety is a concept that is difficult to define, so that assessment in this area is subject to variation’ (B. Moreau, Arbitrage international, Répertoire de procédure civile, August 2017 update, point 107).

However, the Paris Court of Appeal, by a decision of 14 October 2014, identified two criteria based on advertising and accessibility to determine the notoriety of a fact:

Considering, on the one hand, that if public and very easily accessible information, which the parties could not fail to consult before the beginning of the arbitration, is of such a nature as to characterise notoriety’ (CA Paris, 14 October 2014, n°13/13459, Rev. Arb. 2015. p. 151).  

Marc Henry points out with regard to these criteria that ‘the public nature of information presupposes that it is disseminated. It becomes notorious if it is widely disseminated, if the vector of this dissemination is easily accessible and if the use of this vector of information by the person in question is obvious’ (M. Henry, La connaissance en arbitre de l’indépendance et l’impartialité, note Cass. Civ. 1ère, 16 December 2015, Revue de l’arbitrage 2016, point 9).

Several cases have confirmed this case law, in particular on 14 March 2017 in which the Paris Court of Appeal considered that information was notorious when it was easily accessible from a website (CA Paris, 14 March 2017, n°15-19.525):

Considering that the SFE did not, at any time during the arbitration proceedings, express any reservations on the composition of the tribunal and in particular on the possible proximity of its members with Mr. [X], whereas the latter’s participation on the federation’s legal committee [Y] is consultable information that can be found on the federation’s website after a search which, contrary to what the claimant alleges, is very simple’.

2.Duty of disclosure and notorious fact during arbitral proceedings

The obligation of disclosure by the arbitrator also applies after the constitution of the arbitral tribunal. Indeed, article 1456 provides that ‘it is for the arbitrator, before accepting his mission, to disclose any circumstance likely to affect his independence or impartiality. He shall also be obliged to disclose without delay any circumstances of the same nature which may arise after acceptance of his mission’.

If it is recognised by case law that notorious facts, i.e. facts that are public or very easily accessible, do not necessarily need to be revealed by the arbitrator when the arbitral tribunal is constituted, is the notorious fact that occurred during the arbitration proceedings treated in the same way?

By this decision, the Court of Appeal highlights that once arbitration proceedings have been initiated, any fact likely to create doubt as to the independence and impartiality of the arbitrator – even if notorious – must be disclosed by the arbitrator.

By a judgment of 14 October 2014, the Paris Court of Appeal had already made this clear:

the parties shall not be reasonably required to conduct a systematic search of the sources likely to mention the name of the arbitrator and persons related to him/her or to continue their research after the start of the arbitral proceedings’.

In this case, the Court of Appeal had refused to consider that the notoriety of the information relating to the relationship between the arbitrator and one of the parties, published on the website of the firm of which the arbitrator is a partner and also published in a business magazine intended for lawyers, exempted the arbitrator from his obligation of disclosure during the arbitration proceedings (see our previous brief).

The Court of Cassation approved this position in its judgment of 16 December 2015 in response to the appeal:

In the course of the arbitral proceedings, the duty to investigate the arbitrator’s independence was not on the claimant, given the guarantees he had provided in his statement’ (see our previous brief).

Indeed, the Court of Cassation specifies that ‘if an arbitrator describes a situation in his declaration of independence, the parties have a priori no reason to doubt the reality of this situation because of the confidence they have in the arbitrator they appoint as a matter of principle’. (Cass. civ. 1ère 16 December 2015, 14-26279).

The decision of 27 March 2018 uses exactly the same terms of the 2014 decision in stating that:

while public and very easily accessible information, which the parties could not fail to consult before the arbitration began is likely to characterise the notoriety of a conflict of interest, it cannot, however, reasonably be required either that the parties systematically search for sources likely to mention the name of the arbitrator and the persons related to him or that they continue their search after arbitral proceedings have  begun’.

In any event, once the arbitration has been initiated, the notoriety of the links between the arbitrator and one of the parties to the arbitration is not such as to release the latter from his obligation to disclose, insofar as those links are considered as a circumstance ‘likely to create reasonable doubt as to the arbitrator’s independence and impartiality’.

Hence, if ‘[T]he parties are bound by a minimum standard of care at the time of the appointment of the arbitrator’ (M. Henry, La connaissance en arbitre de l’indépendance et l’impartialité, note Cass. Civ. 1ère, 16 December 2015, Revue de l’arbitrage 2016, point 12), this ‘obligation of curiosity’ which imposes that the parties ‘inform themselves about the arbitrator’s independence as soon as the concerned party can gain access effortlessly to knowledge of the facts in question’ (E. Loquin, autour de l’obligation de révélation, note sous Paris, Pôle 1- Ch. 1, 12 April 2016, Revue de l’arbitrage 2017, p. 240) no longer applies once the arbitration proceeding has been initiated.

The particularity of this case lies in the fact that there are circumstances likely to create doubt as to whether the impartiality and independence of the arbitrator arose after the acceptance by the arbitrator of his mission, the Court of Appeal specifying however that a certificate from Mr. W, legal director of Porsche’s distribution law department, also noted a mission in 2010, ‘of minor importance, but not declared by the arbitrator and not made public by the firm’.

Once the arbitration has been initiated, the arbitrator must therefore spontaneously disclose any fact – even after the constitution of the arbitral tribunal and which would be public and easily accessible – likely to give rise to reasonable doubt in the minds of the parties as to his independence and impartiality.

In these circumstances, the Court of Appeal set aside the arbitral award, sending again a strong message to the users of arbitration about the necessary trust that must be established between the parties and the arbitrators, from the constitution of the arbitral tribunal until the notification of the award.

The decision is available here.

Caroline Duclercq

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