What is the impact on International Commercial Arbitration agreements after the introduction of French Arbitration Rules?
Note; This article is written as a proposal to a more detailed research of the above question.
Purpose of this article is to form an understating of the changes implemented by the French Civil Code Degree 2011-48 Title II (New French Law hereinafter) that has been implemented in May 2011 and to see how it has evolved from its previous version. The reader should obtain a critical analysis of the changes proposed, specifically the extent to which an arbitration agreement should not be in writing, by the New French Law. In addition to that a comparison shall be made to The Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention hereinafter) which states literally that an arbitration agreement needs to be in writing. In addition to that the long established, New York Convention will be discussed and compared with the New French Law. For the purpose of this proposal individual chapters and their objectives shall be explained later in relevant sections.
To discuss and explain the contents of this article, doctrinal methodology with inductive reasoning will be used and the reasons are as follows. Firstly, doctrinal approach is a black letter approach within which actual acts of parliament or equivalents are discussed, compared and evaluated. Therefore this methodology is most suitable to evaluate and discuses the New French Law against the New York Convention or vice versa. Secondly this dissertation not only emphasises a systematic analysis of the New French Law and New York convention but also shall explore the relationship between the rules of respective laws. Finally the investigation of those rules and principals will clearly elaborate the objectives of this article. Furthermore the literature review is assessed by way of qualitative view point to complement the doctrinal methodology.
Although there are no set rules how a detailed researched article or a literary piece of work should be formulated but it is important to have clearly defined objectives and a precise structure. Therefore to elaborate onto the methodological approach the following theoretical branches within shall be used.
Firstly historical approach will be deployed to clearly establish the current position of laws. For example it is important to understand why the New French Law that is introduced in May 2011 has proposed those reforms to its previous version. Most importantly, since it is a recently introduced legislation with very limited case law, historical approach will help explain its current position as well as its path of evolution. As set out in the objectives the reader, after reading the historical approach, shall be able to understand why the French law has been modified at all. Furthermore its origin will be examined along with its evolvement to explain how it can be better analysed against one of the established, New York Convention.
Secondly the New French law and the New York convention shall be compared to help illuminate and evaluate a specific issue that why the New French Law does not require an arbitration agreement in writing whereas New York Convention specifically needs one in writing? Therefore as the name suggests a comparative approach will be taken to help elaborate these legal issues. Inevitably this will emphasise the positions of respective laws and as a result reader will appreciate the understating of two different legal principles and their workings. This approach is most suitable for this dissertation as certain focus will be placed upon the New French Law and the New York Convention not merely from stating the law point of view but also presenting a critical comparison.
Thirdly, based upon the above historical and comparative approaches, impact and effectiveness approach shall be taken. It should complement the other approaches taken and should therefore formulate a projective argument. For example, as mentioned above, in the context of the New French Law that has recently been implemented this method will elaborate and help explain how its reforms will affect the overall sphere of international Arbitration. This method will also help establish whether the amendments may really work in reality. However when explaining the New York convention this method will identify what was the objective of it and since its implementation whether it has achieved all the expectations. Finally the critical discussion developed through this approach will shape the argument for further suggestions.
New York Convention is one of the most successful conventions as it has been indorsed by nearly one hundred and forty five countries. The very first chapter will explore the New York Convention in particular Articles II (1) and IV which requires arbitration agreement to be in writing and for the original agreement or a duly certified copy of the agreement to be submitted to the enforcing court. However it was always thought that at least theoretically an oral arbitration agreement is possible but in practice it will be cumbersome to pursue . Furthermore this section shall also explore and analyse the fact that if there is an arbitration agreement without formalities how could the contractual terms be ascertained, who should have the jurisdiction to construct an arbitration agreement and even if those hurdles are successfully negotiated when it comes to implementation of orbital awards, especially in different states, it is necessary to produce to the court of enforcement both the award itself (or an authenticated copy) and the agreement referred to in the New York Convention Article II. The need for this to be a valid agreement is emphasised in Article V (1) (a) of New York Convention, which provides that recognition and enforcement might be refused, if the parties to the agreement were under some incapacity or if the agreement itself is invalid.
As the plan of the article suggests, the next section is all about the New French Law that has been implemented in May 2011. In this section some historical back ground will be explained, especially in the absence of massive body of case law. It is imperative that the reader understands its path of evolution. This new French Law has introduced six key features of reforms. Firstly it eliminates requirements as to form for arbitration agreements and eases the conditions for recourse to arbitration . Secondly it confirms the key role to be played by the president of the Tribunal de Grande Instance in assisting with difficulties encountered during the arbitration procedure . Thirdly it reinforces the powers of the arbitration tribunal . Fourthly it consecrates the obligations of fairness and swiftness affecting both parties and arbitrators but excludes the principal of confidentiality from international arbitration . Fifthly it modifies the rules applicable to arbitration award annulment procedures and enforcement, including eliminating automatic stays of enforcement, and finally simplifies the procedural rules applicable to the recognition and enforcement of arbitral awards.
As explained above the New York Convention requires an arbitration agreement to be in writing whereas the French Law takes this formality away therefore serious complications can arise if an award is made in France but enforcement is sough in another country that implies strict interpretation of art II (1) and IV of the New York Convention. It seems that under these circumstances enforcement and recognition of award will be refused upon the grounds of lack of formality or public policy. In addition to that the rationale of arbitration is to resolve a dispute and commercially obtain an award for the grieved party. However if a party to the dispute knows that even if it goes through the trouble of arbitration it may not be able to enforce the award and therefore the whole process of commercial arbitration becomes point less. Furthermore complication can arise if the arbitration agreement is not in writing and one party denies its existence altogether under those circumstances who will construct an arbitration agreement or even an arbitration clause? However one could argue that the Juge d'appui may come to rescue under Article 1505 of the French Law. In any case the Juge d'appui, on the face of one party’s denial, will not have that extensive power to construe an arbitration agreement or an arbitration clause. Nevertheless judge would certainly be not promoting the idea of justice that is so forcefully professed by the French Law.
Since the French Law only came into force recently, one has to wait for the case law to develop on the above particular point of enforcement. Perhaps that is the reason legislatures envisaged and excluded confidentially of arbitration agreements so that more cases law could be reported.
The French Law has some modern and very liberal reforms but the reality is that most commercial organisations use forms of arbitrations to resolve their commercial disputes and if at the end of a dispute there is little or no chance of enforcement of arbitral award then perhaps it is far better to have arbitration agreements that are managed by the New York Convention. Although the New York Convention was signed up in 1958 but one has the certainty of process that has so been tried and vigorously tested over the years.
Article Research Plan
Chapter 1 - Arbitration Agreement and the New York Convention.
Chapter 2 - Arbitration Agreement and the New French arbitration law
Chapter 3 - Comparative Analysis of French and New York Laws
Chapter 4 - Implementation of Awards
Literature Review of Primary Sources
The Convention on the recognition and enforcement of Foreign Arbitral Awards or The New York Convention 1958
The two very basic actions contemplated by the New York Convention are the recognition and enforcement of foreign arbitral awards and the referral by a court to arbitration.
The first action is the recognition and enforcement of foreign arbitral awards, arbitral awards made in the territory of another Contracting State. This field of application is defined in the New York Convention Article I. The general obligation for the Contracting States to recognize such awards as binding and to enforce them in accordance with their rules of procedure is laid down in the New York Convention Article III. Moreover, according to the New York Convention Article IV a party seeking enforcement of a foreign award needs to supply to the court the arbitral award and the arbitration agreement. However the party against whom enforcement is sought can object to the enforcement by submitting proof of one of the grounds for refusal of enforcement that are listed in the New York Convention Article V (1). The court may on its own motion refuse enforcement for reasons of public policy as provided in Article V (2) of the New York Convention. Article VI of the New York Convention states that if the award is subject to an action for setting aside in the country in which, or under the law of which, it is made ("the country of origin"), the foreign court before which enforcement of the award is sought may adjourn its decision on enforcement. Finally, if a party seeking enforcement prefers to base its request for enforcement on the court's domestic law on enforcement of foreign awards or bilateral or other multilateral treaties in force in the country where it seeks enforcement, it is allowed to do so by virtue of the so called more favourable right provision of the New York Convention Article VII (1).
The second action contemplated by the New York Convention is the referral by a court to arbitration. Article II(3) provides that a court of a Contracting State, when seized of a matter in respect of which the parties have made an arbitration agreement, must, at the request of one of the parties, refer them to arbitration unless the arbitration agreement is invalid.
In both actions the arbitration agreement must satisfy the requirements of Article II (1) and (2) of the New York Convention which includes in particular that the agreement be in writing.
French Civil Procedure Rules Decree No. 2011-48 of 13 January 2011; Title II
The new french arbitration law aimed at increasing the efficiency of arbitration in France entered into force on 1 May 2011. It is incorporated in articles 1442 to1527 of the French Code of Civil Procedure degree 2011-58 Title II.The new law both consolidates the case-law principles from the past 30 years and introduces new provisions inspired by other legal systems, such as confirmation of the principle of estoppel found in common law jurisdictions. The law reforms both domestic and international arbitration law whereas the difference between the two has been maintained. However at present we are only concerned its reforms in particular its article 1507 that take away the need to have an arbitration agreement in writing or any other formality. There are lots of French expectations attached to this piece of legislations but it remains to be seen whether the global arbitration cliental, those mainly consists of commercial companies, accept France’s very liberal and perhaps ‘ahead of its time’ reforms.
Literature Review of Secondary Sources
Hong- Lin Yu, ‘How far can party autonomy be stretched in setting the grounds for the refusal of arbitral awards’, (2011), International Arbitration Law Review
This general article explains that by a recognised position of freedom of contract, parties contractually can agree to restrict the grounds for setting aside of arbitral awards. It also discusses the party autonomy prospective from the implementation of award point of view that parties are free to design all aspects of arbitration agreements. However it only discussed the Belgian, Swiss and USA perspectives. Therefore on a global arbitration scale it has taken a narrow approach. In any case for the purpose of this dissertation it explains very well different enforcement issues related to arbitration awards. Furthermore it discusses various arguments related to the link between the place of arbitration and the law of state where arbitration is held. Understanding of these arguments are very important as when it come to implement the arbitral awards result could be different depending upon one’s view point. This general article seems to be restricted to analyse Belgium, Switzerland and USA difficulties and has offered very little comparative analysis between the above state laws related to arbitration. It could be argued that author could have used broader jurisdictions to analyse the difficulties presented by the implementation of arbitral awards.
Hong-Lin Yu and Masood Ahmed, Legislative Comment, The new French Arbitration Law: an analysis, (2012) International Arbitration Law Review
This general article explains some historical back ground to the French Civil Procedure as well as the changes that have been implemented by way of reforms. Thereafter it critically analyses the reforms, namely, consolidation of previous French law and case law Arbitrator's power, Juge d'appui, Challenge of arbitral award that it does not automatically stop the enforcement proceeding and setting aside of arbitral awards. Through a comparative approach it clarifies the powers in making interim measures and simplifies the procedures for recognition, enforcement of arbitral awards and provides certainty to international arbitral awards. The article presents a somewhat comprehensive argument to analyse the relevant articles of the New York Convention against the French Civil Procedures. However the title of the journal is deceptive as it provides an impression that all the French arbitration rules will be discussed and analysed but it only presents a constructive debate about the reforms. Secondly and most importantly the journal only discusses the law against the law without the recourse to any academic articles. Having said that one could argue that there are not many general articles available as the French Civil Procedures have only been introduced in May 2011. Finally and most importantly the article states very little about the future of arbitration under the New French Civil Procedures and therefore substantially lacks the debate on impact and effectiveness of this new piece of legislation in global context. Despite these short comings, in this dissertation, this general article remains the most important source of literature that will be relied upon where it has shown strength in argument mainly in the area of comparative analysis of French and New York Convention Laws.
Lucy Greenwood, ‘The Rise, fall and rise of international arbitration, a view from 2030’ (2011)
As the title suggests author has presented the historical view point that how arbitration was born and how it became popular. Briefly it came into existence, firstly when two businessmen had dispute instead of going to court they went to a third businessman to resolve it, author called it ‘the town elder model’. Secondly and most importantly courts were willing to allow people to resolve their dispute by way of discussions, agreements and out of court settlements. Thirdly it was far cheaper, confidential and not confined to legal formalities. The author discusses how this concept of arbitration evolved through history and became popular due to increase in global trade and commerce. However the arbitration, as a form of dispute resolution, declined around the year 2000. Authors has presented good lecture type general article in simple language and relax style but has failed to evolve a debate as to where arbitration could or should go from this point onwards. For the purpose of this dissertation this article provides a sound descriptive understating of the history of arbitration itself and the reasons for boom and doom. Therefore one could, on the basis of this historical and commercial debate, develop an argument as to the effectiveness of present arbitration regimes and there further evolution.
Redfern & Hunter on international Arbitration
A classic text book on arbitration that has been around since 1986. This has detailed chapters on arbitration agreements, power of the arbitrators, arbitral awards and enforcement. It provides relevant historical evolution and understating of arbitration agreements as well as it explores how in practice multi jurisdictional arbitration dispute could be handled. For the purpose of this dissertation this book will be good secondary source because of its historical applications and practical working of the New York convention to the arbitration agreements. Furthermore, since it has been used by various practitioners and has been updated to its fifth edition, the substantive and philosophical arguments related to arbitration, list of indexes and references are comprehensive. However it is a very descriptive book and has yet to be updated to include the new French Civil Procedure Code Degree 2011-48 Title II.
Arbitration of Commercial Disputes by Andrew Tweeddale and Keren Tweeddale
This book provides comprehensive and detailed aspects of International commercial arbitration. The text shall be used as a guide to explain different substantive and philosophical arguments related to international arbitration. It further has good analysis of how different state laws can effect commercial arbitration in terms of implementation of awards. Moreover the international arbitration, from the New York Convention point of view, will be the subject of comparison to the New French Law. However the text is very descriptive and for the purpose of this dissertation only few chapters are relevant. Secondly this book uses more of a practise approach and little analytical analysis. Having said that there is a section in this book which discusses conflicts of laws and it will be used to critically evaluate the New York Convention against the New French degree Title II.