All you need to know about Paris, the ICC and the advantages of proceedings in France
By Nadia Darwazeh
Paris has always enjoyed an outstanding reputation as a location for the seat of international arbitration proceedings. Although in the modern world, it would be difficult to say, as Heinrich Heine once wrote, that Paris is “die Hauptstadt der zivilisierten Welt,” (“the capital of the civilized world”) Paris could be considered the capital of international arbitration because the city offers a multitude of advantages as a place of arbitration.
What are the key considerations when choosing an effective seat of arbitration, assuming the terms “seat” and “place” of arbitration are synonymous? The key considerations are that the law and the courts at the seat are “arbitration-friendly,” which means that the law is supportive of arbitration and that the domestic courts’ interference in the arbitral process is limited. Only such a system ensures that the parties’ choice of opting out of the court system and agreeing on arbitration as a private method of dispute resolution is both respected and effective. The choice of Paris as a seat of arbitration more than achieves this goal. Indeed, the French legal framework and court system are both very supportive of arbitration, which combined with a plethora of favorable practical considerations make Paris a very – if not the most – attractive arbitration location.
The ICC, the leading international arbitral institution, is based in Paris
Paris’ long-standing reputation as a center of arbitration is closely intertwined with the fact that the global headquarters of the International Chamber of Commerce (ICC) and its Court of International Arbitration are located in the heart of the city and have been ever since its establishment in 1923.
It is fair to say that the ICC is the leading international arbitral institution having administered to date more than 19,000 arbitrations around the world. In 2013, ICC arbitrations were seated in 104 different cities across the globe, with the most popular seat being Paris, followed by London, Geneva and then Zurich.
German parties have systematically played a significant role in ICC arbitrations and consistently rank among the top two users of ICC arbitrations, after U.S. parties. By the same token, German arbitrators play an important role in ICC arbitrations since they are among those most frequently appointed. Interestingly, despite a strong contingent of German parties and arbitrators, a German seat of arbitration is comparatively rarely chosen in ICC arbitrations.
The fact that Paris has established itself as a major arbitral seat is no doubt due in part to the ICC’s radiance as well as the ICC’s continuous striving to stay on the cusp of innovation, as evidenced most recently by the 2012 ICC Rules of Arbitration. It was also the ICC that provided the United Nations with the first draft of what became perhaps the most successful and widely used international convention, namely the New York Convention on the Recognition and Enforcement of Arbitral Awards 1958 (more commonly known as just the “New York Convention”) over 60 years ago. This convention, to which 150 countries have since acceded, is of paramount importance for international arbitration as it provides a strong legal framework for the recognition and enforcement of arbitral awards around the world. Unsurprisingly, France was one of the inaugural countries that signed the New York Convention back in 1958. Indeed, Paris is also a preferred seat of arbitration because France is a country that has historically been and continues to be very much pro-arbitration.
French law strongly favors arbitration
Paris has long been recognized as an impartial and neutral jurisdiction within which to conduct arbitrations due to the fact that both French laws and courts are supportive of arbitration. Similar to Germany, France has codified these laws in its Code de procédure civile (Code of Civil Procedure). The provisions of the French Code of Civil Procedure dealing with arbitration, which date back to 1981, were revised in 2011 (the “2011 law”) in order to codify the well-established French case law developed over the past thirty years and to introduce a number of innovations.
Autonomy of the arbitration agreement
As a starting point, the 2011 law confirms the long-established principle of the autonomy of the arbitration agreement, whereby the arbitration agreement is deemed to be independent from the contract itself (Article 1447). Therefore, the arbitration clause is severable from the main contract, allowing an arbitration to proceed even if the contract is purportedly or actually invalid. Moreover, unlike many other jurisdictions, the agreement to arbitrate is not subject to any formal requirements (Article 1507), thus permitting parties to arbitrate with more ease and ultimately providing them with security that the clause detailing their agreement to arbitrate will be enforced. French law also established the principle of “competence-competence” very early on, pursuant to which the arbitral tribunal has the power to determine whether it has jurisdiction under an arbitration clause. Apart from these “bells and whistles” provisions that one would expect to see today in any modern arbitration law, the 2011 law introduces a number of innovative features, a few of which are discussed below.
Cost-efficiency and speed
For instance, the 2011 law sought to address the criticism voiced in recent years that arbitration was no longer providing parties with cost-efficient and speedy dispute resolution. Indeed, it was thought that arbitration was becoming more and more like litigation with arbitration counsel gradually filing more submissions and evidence, routinely requesting time extensions, and additional document production becoming a matter of course. At the same time, busy arbitrators who had to juggle heavy workloads did not necessarily always make their work as arbitrator a priority. In order to address these concerns, the 2011 law introduced a truly novel and unique provision specifically imposing on the arbitral tribunal and the parties the obligation of conducting the arbitration diligently and in good faith (célérité and loyauté) (Article 1464, para 3).
Independence of the arbitral process
The 2011 law also confirms the independence of the arbitral process from the influence of the French courts and actually encourages the courts to take measures to aid arbitral proceedings. In fact, the new law goes so far as to refer to the relevant court judge merely as a “supporting judge” (juge d’appui), thereby reflecting the well-established French tradition that judges shall not unduly interfere in the arbitral process. Rather, French judges view their role as one of supporting the arbitral process. Specifically, the law provides for the President of the Paris Court of First Instance (Tribunal de Grande Instance) to act as the supporting judge (Article 1505) and has thereby enshrined the approach that the French courts have developed over the last 30 years. The 2011 law goes one step further in that it allows the parties to choose a supporting judge, who is different from the French one (Article 1505, para 1). Similarly, the parties can convene that their arbitration, for which the seat is not in France, be conducted in accordance with French procedural law, and that the French supporting judge will be competent to assist with procedural issues (Article 1505, paras 2 and 3). These new provisions are truly avant-garde and reflect the law’s goal of according maximum flexibility to the parties.
In the same vein and in line with only a handful of other jurisdictions, the 2011 law grants parties the novel option of waiving their right to set aside an award (Article 1522). Indeed, while state courts may not review an award on the merits, a party may apply to have the award annulled at the seat of arbitration based on certain procedural grounds (Article 1520). This review is referred to as set-aside proceedings and the grounds for doing so in France are limited to serious procedural irregularities, as is the case in other jurisdictions. However, by providing parties with the ability to waive their right to annulment proceedings, French law allows them to further insulate the award from the state courts.
Efficiency of enforcement
The 2011 law has also further increased the efficiency of the enforcement of an award. Indeed, awards rendered in France are now directly enforceable even if set-aside proceedings are pending (Article 1526). Before 2011, one was not able to seek enforcement of an award until set-aside proceedings had been concluded. Accordingly, parties who were unsuccessful when the award was rendered could use such set-aside proceedings as a tactic to delay enforcement, even if they had no chance of getting the award set aside. The 2011 law therefore now dissuades parties from frivolously applying to set aside an award because even if such proceedings are initiated, enforcement measures will continue to run their course.
In addition to these innovative features, it is important to remember that the choice of Paris as a seat of arbitration does not equate with the use of French language or French law in the arbitration. Indeed, even though Paris is consistently the number one seat chosen in ICC arbitrations, in 2013, 80% of awards were rendered in English, 7% in French and 3% in German. By the same token, 15.6% were governed by English law, 7.6% were governed by French law and 7.3% were governed by German law. Furthermore, if the parties choose Paris as the seat of arbitration, they can of course agree to hold the hearings in Berlin, Cologne, Hamburg, Munich, Frankfurt, or anywhere else most convenient to them.
French courts have a reliable pro-arbitration track record
As those familiar with arbitration will know, in order to provide for a good seat of arbitration, a modern arbitration law is only one piece of the puzzle. The other equally important piece is state courts at the seat that apply the arbitration law properly, meaning they refrain from interfering with the arbitration process and instead support it.
France’s court system provides for a neutral and impartial jurisdiction with specialized courts accustomed to dealing with issues arising out of arbitrations at all stages of the proceedings. Indeed, French courts are very experienced in handling all kinds of applications, from requests for provisional measures before an arbitration has commenced, to assisting with the constitution of an arbitral tribunal and the enforcement of an arbitral award.
A number of renowned French court decisions illustrate particularly well how supportive the French courts are of arbitration. For example, in the Dallah v. Pakistan case, unlike the United Kingdom Supreme Court, the Paris Court of Appeals (Cour d’appel) gave full effect to the underlying arbitration agreement (in the UK:  UKSC 46; in France: docket No 09/28533). In this case, an arbitral tribunal sitting in Paris rendered an award against the respondent, the government of Pakistan. The claimant brought enforcement proceedings in England to enforce the award, which Pakistan sought to resist. The English courts applied French law and ruled that contrary to the Tribunal’s decision Pakistan was not bound by the arbitration clause because the actual signatory of the agreement was a trust created by the Ministry of Religious Affairs. Accordingly, the English courts refused to enforce the award. At the same time, Pakistan had applied to the French courts to have the Paris-seated award set aside. The Paris Court of Appeals, which was confronted with the same question, namely whether Pakistan was bound by the arbitration clause as a matter of French law, reached the opposite conclusion to that of the English courts. The French court ruled that Pakistan was bound by the arbitration clause by virtue of its actions both before and after the contract was concluded. The French court’s decision in Dallah is a good example of the courts’ more liberal approach to upholding arbitration clauses.
This pro-arbitration stance of the French judicial system is further exemplified by the decisions of the French Supreme Court (Cour de cassation) in the Hilmarton and Chromalloy line of cases. In these cases, the French courts enforced the respective arbitral awards even though they had been annulled in the country where the seat of arbitration was located. According to the New York Convention, countries “may” (but do not have to) refuse enforcement of an award on the grounds that the award was set aside (Article V(1)(e)). However, French law does not include the set-aside ground as one of the grounds for refusing to enforce an award. Thus, an award that has been set aside outside of France will be enforced pursuant to Article VII of the New York Convention under this more favorable French enforcement regime. This fact shows that the French judicial system pays a considerable amount of deference to the arbitral award, and the French courts are in fact prepared, once the award is rendered, to delocalize it from the seat of arbitration. Indeed, they consider an international award by definition not integrated into the legal order of the country of the seat. This French approach has been controversial elsewhere and has generated some debate. While some parties may prefer to have more court protection than what the French courts offer, these cases illustrate the goal of the French judicial system of ensuring that the parties’ choice of arbitration is a truly effective method of alternative dispute resolution.
Paris offers a plethora of practical advantages
Finally, there are also numerous practical considerations that combine to make Paris an excellent choice for the seat of arbitration. It offers a central location in Europe and has excellent transportation connections. It also offers numerous facilities for conducting arbitrations including the ICC Hearing Centre founded in 2008, and the European headquarters of the World Bank for investor-state arbitrations administered under the rules of the international center for the settlement of investment disputes (ICSID).
Another important advantage is that Paris houses a high number of competent legal professionals of different nationalities and from various backgrounds that regularly serve as counsel or arbitrator. Indeed, Paris is home to many international full-service law firms and a number of boutique firms, which not only have deep arbitration expertise but also offer know-how in other fields such as international sales, M&A, investment, oil and gas, construction, IP, and insurance. Paris also hosts counsel and arbitrators that are able to conduct arbitrations in English, German, French and Spanish as well as other languages and is home to related support professionals such as interpreters, translators and court reporters. An important point for parties to bear in mind is that the cost of conducting arbitrations in Paris is quite competitive, especially when compared with that of other leading arbitration seats.
Last but not least, apart from the favorable legal framework for international arbitrations that Paris offers, choosing Paris also has the benefit that once a long day of meetings or hearings is over, one can enjoy an apéritif at one of Paris’ quintessential sidewalk cafés and hopefully close off a successful day with a memorable dinner at one of the many fine Parisian restaurants.
Nadia Darwazeh, Solicitor Advocate (England & Wales) and Rechtsanwältin (Germany), Counsel, Curtis Mallet-Prevost, Colt & Mosle LLP, Paris
Mrs. Darwazeh also serves as Secretary General of the Jerusalem Arbitration Center, an ICC joint venture. She wishes to thank Julie Audoux, Jeremy Eichler and Benjamin Ross for their research assistance.