(Putrabali v. Rena, Cass., 1ère civ., 29 June 2007)
On 29 June 2007, France's highest court may have given birth to the truly autonomous international arbitral award – that is, an award not subject to any particular national law. This new step towards autonomy was announced by way of a decision enforcing a foreign arbitral award that had been partially annulled by the courts in England, the country where the award was made. In holding that judicial annulment at the arbitral seat could have no impact on the French courts' obligation to enforce the award pursuant to domestic law and the New York Convention, the Cour de Cassation concluded that "an international arbitral award, which is not linked to any national legal order, is a decision of international justice, whose validity is reviewed in accordance with the rules applicable in the country where its recognition and enforcement is sought (emphasis added)." This bold step appears to have been the inspiration of the Court's retiring first magistrate, Judge Jean-Pierre Ancel. The clear wording of the decision (PT Putrabali Adyamulia v. S.A. Rena Holding, C.cass., 1ère civ., 29 June 2007) and the numerous commentaries that it has already provoked leave little doubt as to the impact it will have on France's arbitration law and perhaps on the evolution of international arbitration more generally towards a doctrine of a-national awards.
The simple facts of the case contrast with the breadth of its likely implications. Briefly put, goods sold by the Indonesian claimant PT Putrabali Adyamulia to the French respondent Société Française Est Epices (subsequently Rena Holding), were lost during a shipwreck. Respondent refused to pay the price of the lost goods, and claimant filed for arbitration before the International General Produce Association. An arbitral tribunal, with its seat in London, rendered an award unfavourable to claimant, which the latter appealed to the English High Court on a point of law in accordance with article 69 of the English Arbitration Act 1996. A High Court judge partially vacated the award and remanded the case to the original arbitral panel[1], which rendered a new award in conformity with the court's ruling and, therefore, inconsistent with the first award. Following issuance of the second award, respondent applied for recognition and enforcement of the first award in France, which the President of the Paris court of first instance granted. Claimant lodged an appeal against the recognition and enforcement decision, which was denied,[2] and subsequently filed recourse before the Cour de Cassation, which used the occasion to clarify and complete its position on the recognition and enforcement of annulled awards.
The French courts' power – and willingness – to enforce a foreign arbitral award that has been annulled is well established[3], which has led eminent commentators to note ironically that "If an award is set aside in the country of origin, a party still can try its luck in France"[4]. However, notwithstanding the quantity of comments generated worldwide by the French courts' earlier precedent on this issue –the famous Hilmarton case – the rationale behind the French approach to the recognition of annulled awards remained uncertain. The Cour de Cassation has now clarified the doctrinal basis for its position, which rests on the following two propositions.
First, the impact of an annulment decision by a national court is limited to its own jurisdiction. Second, courts in the jurisdiction where a party wishes to enforce an international arbitral award decide on its recognition and enforcement in accordance with their own rules. Under the New York Convention (Article V (1) (e)), annulment of an award at the seat of arbitration "may" constitute a ground for refusing recognition and enforcement but is not a mandatory ground for such refusal. Accordingly, contracting States to the New York Convention are free to provide that such annulment is not a ground for refusing enforcement in their territory.
The Putrabali decision is a reminder to practitioners and businesses using international arbitration worldwide that an award that has been nullified elsewhere may be recognised and enforced in France. But there is more than a mere clarification of prior case law in the Putrabali decision. Never in the past had the Cour de Cassation or any national court of justice stated in such broad terms that an international commercial arbitral award is a decision of international justice, which thus belongs to an autonomous international legal order.
Alain Farhad
Avocat à la Cour
Dewey & LeBoeuf
Paris, France
