Mediation and international arbitration

International arbitration is an alternative method of dispute resolution whereby parties agree to submit their dispute to an arbitral tribunal, which is not part of any national court order.

Mediation

Principle

Mediation is a practice that aims to involve a neutral and impartial third party to facilitate the resolution of disputes, and find an amicable agreement between the parties.

Thus, mediation happens (often) before litigation.

Indeed, and most often, this mediation is provided by a premediation clause provided in the contracts between professionals. Although there is no obligation to reach a compromise, it is necessary to carry out this clause of premediation in good faith (ie bona fide), because the refusal to go to mediation despite this clause will be potentially prejudicial to the following the procedure.

Prescription

Mediation normally stops the prescription (Article 8, Directive 2008/52 / EC of the European Parliament and of the Council of 21 May 2008 on certain aspects of mediation in civil and commercial matters).

Effect of mediation

The mediator can not make a decision, in the legal sense of the word.

Indeed, it is only a facilitator of the consent of the parties: thus, the result of a mediation can only be an agreement or a transaction.

Execution of agreements

Principle

We could say that the means available to enforce the contract (ie the agreement) resulting from a mediation are the traditional means in international commercial law.

You probably would not be wrong.

Nevertheless, for greater security, an international convention (Singapore Convention, taken under the umbrella of UNCITRAL) was signed in August 2019 by some 50 countries in order to facilitate the implementation of the agreements reached during the mediation.

Resolution clause

We can question the applicability of this convention if a contract resolution clause exists in the mediation agreement (eg the court of Vesoul is competent): does the Singapore Convention applies?

It seems that opinions differ on the question.

Refusal by a State

The execution of the agreement may be refused in a Member State (Article 5 of Singapore Convention) for a number of reasons, for example:

  • the inability of one of the parties to sign the mediation agreement;
  • the agreement is not final;
  • the obligations set out in the agreement have been met (eg the amount has been paid, etc.)
  • the mediator was not impartial;
  • the agreement is contrary to the public order of the country where the execution is sought;
  • the subject of mediation is not likely to be settled by mediation according to the law of the country where the execution is sought.

Arbitration

Principle

Unlike mediation, the arbitrator has the power to decide a dispute: he has jurisdictional power.

Therefore, the decision (ie the award) of the arbitrators is binding.

It is all the more "funny" that we must never lose sight of the fact that the arbitral tribunal exists only by the will of the parties: the arbitral tribunal is not a State creation and without the agreement of the parties to submit to arbitration, the arbitral tribunal has no power.

Likewise, arbitration is not linked to a given country: it is anchored in a system that goes beyond the notion of countries (even if by definition, arbitration will take place physically somewhere ... but this is simply for practical and not legal reasons).

Choice of type of arbitration

When the parties choose an arbitration, it is possible to choose between several types of arbitration:

  • institutional arbitration,
  • ad hoc arbitration.

In fact, these two arbitrations are very similar. The only major difference is the fact that institutional arbitration takes place under the auspices of an international institution.

Law applicable to arbitration and law applicable to litigation

Law applicable to arbitration (lex arbitri)

During an arbitration, it is possible to choose the lex arbitrari, ie the law that will regulate the procedure, the necessary skills of the arbitrators, the manner of summoning the parties, etc.

It is not necessarily a national law.

Most often, if the arbitral tribunal is under the auspices of an international institution (such as the Paris International Arbitration Chamber, the London Court of International Arbitration or the Swiss Chambers' Arbitration Institution), this institution proposes a procedural regulation that plays the role of lex arbitri.

Law applicable to the dispute (the ex causae)

Principle

It is also possible to choose the law applicable to the dispute.

Most often the parties determine it in a special clause of the contract and their choice is free.

If the contract is silent, and if the parties can not agree, the determination of the law applicable to the dispute is most often the decision of the arbitral tribunal to determine depending on the contractual context.

Exclusion from public order

The only limitation of the parties concerning the lex causae is the public order: it is not possible to dismiss the application of public order.

However, this is not very simple ... indeed, what public policy to consider?

In reality, it is most often necessary to consider public order in the countries for which the link with the dispute is… sufficient: it is therefore on a case-by-case basis that the question must be studied.

Fortunately, there are still some principles common to a large number of states:

  • the impartiality of the arbitral tribunal,
  • the contradictory nature of the debates,
  • etc.

This question of public order is particularly important in the event that one wishes to enforce the arbitration award in a given country (so that the judges of this state do not dismiss the arbitration award as being contrary to the order public).

Arbitral awards

Legal framework

The legal framework for arbitration awards is multiple:

  • The New York convention from 1958;
  • National legislation
    • These laws may deal with national and / or international arbitrations in the same text or in different texts;
    • Many national laws (around 90) have been inspired by UNCITRAL Model law This is an example of legislation to simplify the convergence of laws.

Definition

Let's go no further: there is no definition of what an arbitral award is, nor in the New York conventionnor in the majority of national laws.

In the end, only the national judge can affirm whether a document is an arbitral award or not.

Examples

But, it is possible to say that the following are not arbitral awards:

  • a procedural order,
  • a decision concerning the jurisdiction of the arbitral tribunal,
  • an interim measure ordered by the arbitral tribunal,
  • an interlocutory award (ie a decision that intervenes without definitively ruling on the parties 'claims, for example a decision ruling on the parties' liability, pending the decision on the amount of damages and interest),
  • etc.

On the contrary, is an arbitral award:

  • a decision rendered by default (ie in the absence of a party),
  • an award by consent (ie registration of the parties' agreement on the dispute),
  • etc.

Form

There is no mandatory form.

However, it is necessary that the sentence (A31 (1) UNCITRAL Model law) :

  • be written,
  • signed by a majority of the arbitrators on condition that the absence of signatures is explained (eg the arbitrator who did not sign does not agree with this award),
  • indicate the date of the sentence and
  • specify the place of arbitration.

Of course, the reasons for the award (ie the reasons) must be indicated except that the parties waive this indication. (A31 (2) UNCITRAL Model law) (but it is difficult to see why they would give it up).

Effect

Arbitration awards are final and binding on the parties involved.

In this case, it must be recognized that 90% of the awards are applied without reluctance on the part of the parties (but there remains 10%… these 10% will be dealt with in the “enforcement of decisions” part)

In addition, arbitral awards have a res judicata effect: one party can not raise the same dispute against the same defendants (same claim, same ground, same parties).

Annulment of an arbitral award

Impossible call

Most often (ie in the national laws of the place of the institution of arbitration or the law provided by the rule of procedure of arbitration), it is not possible to appeal an arbitration award .

Nevertheless, if the law of arbitration is the English law, it should be noted that an appeal is possible for points of law (and not of fact).

Therefore, it is more common to request the annulment of the sentence.

Jurisdiction

The cancellation must be requested in the court of the seat of the arbitral institution:

Thus, it is possible to avoid having to resort to multiple annulment proceedings in a large number of countries.

Applicable law

The law applicable to an action for annulment is the law of the judge (lex fori).

Reasons for Cancellation

The principle remains to presume the validity of the arbitral award (ex. Eco Swiss China Time Ltd. 1999 ECJ).

For the rest, the reasons for cancellation are limited, but each country can decide its own reasons ...

For example :

  • the lack of capacity to sign the arbitration agreement,
  • the arbitration agreement is invalid (eg lack of consent),
  • the parties were not properly called or could not present their file,
  • the decision concerns points that have not been requested (ie ultra petita decision),
  • the court has a composition or rules which are not in agreement with the agreement of the parties or in default of the law of the arbitration seat,
  • the points of the decision were not arbitrable according to the law of the judge of the annulment,
  • the decision is contrary to public order according to the law of the judge of the annulment (eg A34 (2) b) ii) UNCITRAL Model law , Article 1520 (5) CPC, 190 (2) (e) Swiss PILA) (ex. Cass. Civ. 1st, June 12, 2013, RG No. 12-16864, Victocor Technologies).

Waiver of the right of action for annulment

We may ask ourselves whether it is possible to waive in advance (in the contract, for example) its right to seek the annulment of an arbitral award.

The answer is: it depends…

Indeed :

  • according to UNCITRAL Model lawthis is not possible;
  • according to Article 192 of Swiss PILAthis is possible if no party is domiciled in Switzerland;
  • according to the article 1522 CPC, it is possible to waive unconditionally the action for annulment (provided, however, the conditions of the execution of the article 1522 CPC together 1520 CPC will continue to apply)

Effect of cancellation

A cancellation allows a new arbitration.

In addition, the annulment of an arbitration award makes it possible to avoid the execution of an arbitral award:

  • in the country that made the cancellation;
  • in countries that recognize this cancellation, ie:
    • countries that have joined the New York convention (Article V (1) (e))
    • and who have no more favorable national provisions for the party seeking enforcement (eg, who recognize that enforcement may be requested even if the award is quashed, Article VII and recommendation concerning the interpretation of that article) .

Enforcement of arbitral awards

Principle

The New York convention organizes the rules on the recognition and enforcement of foreign arbitral awards.

This convention has been signed by more than 161 countries.

Of course, as in virtually all international conventions, countries can make reservations on particular points (Article I (3) of the New York convention), and in particular may provide for the application of the Convention only:

  • arbitrations in member countries;
  • whether the nature of the arbitration is of a commercial nature under the national law.

In addition, Article VII of New York convention provides that Member States may have more favorable provisions vis-à-vis the person requesting the enforcement of an arbitral award in their territory.

Reasons for refusing execution

According to New York convention (Article V), there are only 7 grounds for refusing the application of an arbitral award:

  • the dispute was not arbitrable according to national law (may be raised ex officio by the judge)
  • the sentence is contrary to the public order of the country where the execution is sought (may be raised ex officio by the judge)
  • the parties were unable or the arbitration clause is invalid
  • the arbitration did not proceed correctly (eg non-adversarial arbitration)
  • the award goes beyond the original framework of the arbitration;
  • the arbitration did not follow the rules applicable to it;
  • the decision is not yet binding or has been annulled by the competent court.

Reasons for refusing execution (in France)

In France, we find globally these same reasons in the articles 1514 CPC and 1522 CPC which refers to the causes of cancellation of the article 1520 CPC.

But we will note immediately that the cause of non-execution relating to the annulment of a decision by the competent court has not been reproduced in French law. This is possible because it is more favorable to the person who requires enforcement (Article VII of New York convention).

I insist, because this will have an importance in a lower example (big teasing…).

Small example of complexity (in France)

We can summarize the Putrabali case (Court of Cass, 1st ch civ., June 29, 2007, RG n ° 05-18053) as follows :

  • Putrabali sold a shipment of white pepper to Rena Holding;
  • this cargo sank when transported by boat;
  • Rena Holding therefore refused to pay the price of the cargo;
  • a first arbitration (2001) took place in London, ruling that Rena Holding had the right to refuse to pay;
  • this first arbitration was annulled by the English Supreme Court because it considered that the refusal to pay was a contractual breach;
  • a second arbitration (2003) was still held in London, ruling that Rena Holding had to pay for the cargo.

And it is now that it gets a little tougher ...

  • Rena applied in France for the execution of the 2001 arbitration award (which had been annulled by the English), which was granted;
  • Putrabali appealed against this execution, because this sentence had been annulled;
  • Nevertheless, the French courts have indicated that the annulment of an arbitral award is not a ground in French law to refuse the execution of the arbitration award.

But whereas the international award, which is not attached to any state legal order, is a decision of international justice whose regularity is examined in the light of the rules applicable in the country where its recognition and execution are requested; that pursuant to Article VII of the New York Convention of 10 January 1958, Rena Holding was entitled to present in France the award made in London on 10 April 2001 in accordance with the Arbitration Convention and the Regulations of the IGPA, and founded to avail itself of the provisions of the French law of international arbitration, which does not provide for the annulment of the award in its country of origin as a ground for refusal of recognition and enforcement of the award rendered abroad

Of course, the execution of the 2001 arbitral award makes it impossible to enforce the 2003 award at the same time: this last sentence can not have any effect in France.

We can see the limits of international arbitration and the possibility left to member states to have a more favorable law for the person applying for the execution of international arbitration awards.

Effect of an appeal against an execution (in France)

Appeals against the enforcement of an arbitral award in France have no suspensive effect (Article 1526 CPC).

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