The US District Court for the District of Columbia recently lifted a stay of proceedings to confirm an award issued by an ad hoc tribunal in Paris under the Energy Charter Treaty. The district court noted that the French Court of Cassation had overturned a decision of the Paris Court of Appeal setting aside the award. This article revisits the relevant facts and issues that gave rise to the setting aside of the award in France, and the subsequent reversal at the highest instance.
Consistent with France's reputation as a pro-arbitration jurisdiction, the French civil courts' review of arbitral awards on grounds of public policy is traditionally limited in terms of both standard and content. However, in recent years, the scope of the courts' review in this regard has been tested in certain Paris Court of Appeal decisions which reviewed the underlying evidence rather than the arbitral tribunal's own determinations in the relevant award.
Parties' ability to choose their arbitrators remains one of the most frequently mentioned advantages of arbitration over litigation. However, this freedom makes sense only if it preserves the overarching duties of arbitrators and judges alike – that is, the duty to be and remain independent and impartial from the parties.
The Paris Court of Appeal recently set aside an award on the grounds of a violation of the principle of equality of arms. The court had to rule on the Iraq war's impact on due process in arbitral proceedings between the Republic of Iraq and two German companies. This decision comes as a reminder that arbitration is a jurisdictional process where parties and arbitrators, while enjoying considerable freedom and flexibility, should be mindful of due process and fair trial guarantees.
The French courts recently supported the rigorous application of the principle of procedural estoppel and reiterated their commitment to the enforcement of agreements that govern arbitral proceedings. The principle prevents parties from relying on alleged irregularities that affect arbitration proceedings before the French courts if the requesting party has not initially raised them before the arbitral tribunal.
French drone legislation was recently updated to require telepilots who fly drones for leisure purposes to undergo specific training. In addition, Law 2016-1428 on enhancing drone operational safety recently entered into force. Among other things, the law requires telepilots who fly drones weighing more than 800g to undergo mandatory training and requires certain civil drones to be registered.
In 2016 French contract law was restructured to render it more predictable and commercially attractive. The reform extended to the currency limitation rule, which was considered both restrictive and unclear. A recently passed implementing law is expected to provide greater flexibility for aviation transactions, as the currency limitations no longer apply to transactions between professionals where payment in a foreign currency is common practice in the relevant industry.
While developing its French network, Ryanair received support from various regional airports, including the Mixed Syndicate of Charente Airports (SMAC). The European Commission ultimately found this financial support to be illegal and, as a result, Ryanair had to repay the illicit subsidy to the SMAC. When Ryanair failed to make the payment in full, the SMAC requested the Bordeaux court to order the arrest of a Ryanair aircraft on its arrival at Bordeaux-Merignac Airport.
Bird strikes are not uncommon in civil aviation: every year there are approximately 5,000 to 6,000 incidents costing $1.2 billion worldwide. But this begs the question of who should be held responsible for bird strikes where an airport subcontracts the prevention of bird risk to a third party. The Supreme Court for Administrative Law recently had to decide which party was responsible for this collision, as previous case law on the matter was unclear.
The Commercial Division of the Supreme Court has clarified how an assignment of business receivables, known as a 'Dailly assignment', operates. Through this decision, the Supreme Court has reinforced the effectiveness of the Dailly assignment mechanism by giving full effect to the assigned debtor's actual knowledge of the assignment and by giving no effect to contractual provisions that restrict assignment.
The new law on the duty of vigilance for parent companies and principal contractors aims to improve the accountability of multinational companies, prevent serious incidents in France and abroad and allow parties to obtain compensation for losses which they suffer as a consequence of non-compliance. To achieve these aims, the law requires companies to draft an awareness plan and implement a monitoring and whistleblowing system. It also introduces penalties for non-compliance.
The Sapin II Law aims to support transparency, modernise business activity and combat corruption. It introduces measures to regulate executive pay in listed companies, simplify company law and modernise bond issues. Among other things, it has simplified the procedure for contributions of goodwill, abolished the prior authorisation requirement for certain transactions and simplified the procedure for issuing bonds.
The concept of de facto management makes it possible to hold a parent company liable for its subsidiary by requiring that it make up any shortfall in its assets if the subsidiary is insolvent. This ultimately leads to a piercing of the corporate veil. A recent Supreme Court ruling points to a shift in case law towards a more restrictive interpretation of de facto management, thereby reinforcing the corporate veil.
A recent landmark European Court of Justice (ECJ) ruling calls into question the type of liability incurred when an established commercial relationship is suddenly terminated. According to the ECJ, the liability is contractual, whereas for the French Supreme Court, tortious liability arises. The practical consequences of this ruling are significant in that EU law on jurisdiction differs substantially, depending on whether the liability in question is tortious or contractual.
The rules and procedures for protecting the interests of French companies when it comes to foreign investments have been amended by Decree 2018/1057, which came into effect on 1 January 2019. The new decree has extended the control of foreign investments to new sectors and enabled targets to take an active part in the process by giving them the right to directly ask the Ministry of Economy and Finance whether the foreseen investment is subject to a prior authorisation.
In the context of the acquisition of group companies, the parties will carefully select what to insert in the bylaws of the company, whereas in separate private agreements, which are confidential, the parties may include further, more detailed information. If the advantage of such private agreements is their confidentiality, the drawback is their lack of enforceability against third parties. The Supreme Court recently held that a sale made in violation of a shareholders' agreement was void by application of the bylaws.
Over the past 10 years, the French M&A market has seen the rise of a powerful new player: the French state. A newly introduced bill would expand the state's ability to oppose the sale or transfer of assets by certain strategic companies in which it holds shares. The changes, which are of particular interest to the M&A community, are part of an omnibus reform of French corporations law known as the Action Plan for Business Growth and Transformation.
A recent Supreme Court decision has confirmed previous case law and explicitly recalled the importance that should be given to the drafting of provisions governing the duration of shareholders' agreements. The court highlighted the fact that shareholders' agreements concluded for as long as the signatories remain shareholders are considered concluded for an indefinite period and may be terminated by any party thereto at any time.
Ordinance 2017-1674 of December 8 2017 introduced into French law the legal framework for the use of a blockchain in order to record the ownership and transfer of unlisted securities. This groundbreaking reform is an essential step towards the modernisation of the existing rules governing the transfer of unlisted securities. Blockchain technology will considerably facilitate and secure the transfer of securities and will undoubtedly have an impact on private M&A deals.
In January 2019 France passed Act 2019-75, which authorised the government to take measures to prepare for the United Kingdom's departure from the European Union without a deal by way of ministerial orders, particularly in the area of financial services. Subsequently, in February 2019 the government adopted a ministerial order which, among other things, aims to ensure that International Swaps and Derivatives Association-type master agreements on financial services continue to be used.