In 2017, the Paris Court of Appeal set aside an award against Kyrgyzstan at the seat of arbitration on international public policy grounds (ie prohibition of money laundering).
Kyrgyzstan argued that the enforcement of the award would contradict international public policy, more specifically on the prohibition of money laundering (Article 1520(5) of the French Code of Civil Procedure). In the underlying proceedings, the arbitral tribunal had decided that allegations of fraud and money laundering had not been sufficiently established. In reaching its decision, the Court of Appeal considered it could rely on documents and evidence that had not been produced before the arbitral tribunal and, in particular, documents which became available after the arbitral award was rendered. In a recent decision, the Cour de cassation upheld the decision of the Court of Appeal, holding that, when asked to determine whether the enforcement could hinder the international public policy of prohibition of money laundering, the Court of Appeal had been right not to limit itself to the evidence that was before the arbitral tribunal or to the latter’s findings. This reinforces the previous line of jurisprudence of French courts setting aside awards tainted by corruption, even when such allegations of corruption had been considered and denied by the arbitral tribunal.
What are the practical implications of this case?
In annulment proceedings, the highest French court considered that it could rely on documents that had not been produced before the arbitral tribunal and, in particular, documents which became available after the arbitral award was rendered. It further reinforces the principle that domestic courts deciding whether the enforcement of an award could hinder international public policy are not bound by the arbitral tribunal’s findings as to the facts of the case in annulment proceedings.
Although the Paris Court of Appeal and Cour de cassation both appear to have reached a different conclusion than the arbitral tribunal on the question of money laundering, it is important to highlight that the issue in the arbitration proceedings and the issue in the annulment proceedings before the local courts do not arise from the same legal framework. As this author already noted in his analysis of the Court of Appeal decision, the question before the enforcement court is not whether the tribunal was right or wrong at the time it made its award, but whether the award is now consistent with international public policy. There is no reason for the court to limit the scope of the materials it should review to those that happen to have been presented to the arbitral tribunal, or to those that were already in existence at the time of the award.
The decision nevertheless raises issues that are very topical in the international arbitration world. Although not related to annulment proceedings per se, the question of the type of control domestic courts enjoy in proceedings where a party is challenging an award on jurisdiction after failing to do so before the arbitral tribunal itself (and whether new documents or arguments that had not been put before the Arbitral Tribunal can be adduced/put forward before the domestic court) is a particularly debated one. For instance, in England these questions are currently being reviewed as part of the Law Commission’s work to modernise the Arbitration Act 1996.
On a more practical note, again as this author had noted in his analysis of the Paris Court of Appeal decision, while the decision does not go as far as saying that arbitrators have a duty to investigate money laundering allegations beyond the parties’ submissions, this decision will serve as a warning for arbitrators to proceed very carefully when such allegations are made and, as the case may be, to request further submissions on the matter or accept documents being added late to the proceedings.
What was the background?
In the set-aside proceedings, Kyrgyzstan argued that the enforcement of the award would contradict international public policy, more specifically on the prohibition of money laundering. Article 1520(5) of the French Code of Civil Procedure provides that: ‘An award may […] be set aside where [...] recognition or enforcement of the award is contrary to international public policy’.
The Paris Court of Appeal noted that it was not within its jurisdiction to establish whether or not the bank had committed money laundering as a matter of Kyrgyz law. Its jurisdiction was limited to ascertaining ‘whether the recognition or enforcement of the award appear[ed] to contradict the international public policy principle of prohibition of money laundering’. The French courts’ purposefully arbitration-friendly approach meant that the court would stay clear of reviewing the merits of the case. Nonetheless, the court found that it was entitled to rely on elements of fact beyond those produced by the parties before the arbitral tribunal, and that it was not bound by the tribunal’s findings as to the facts of the case.
Relying on new documents which became available after the award was rendered, the Paris Court of Appeal decided that the enforcement of the award would contradict the international public policy of prohibition of money laundering. Mr Belokon then appealed to the Cour de Cassation (the highest court for civil proceedings in France).
What did the court decide?
The Cour de cassation upheld the decision of the Court of Appeal. The Cour de cassation held that when asked to determine whether the enforcement of an award could contravene the international public policy of prohibition of money laundering domestic courts do not have to limit themselves to the evidence that was before the arbitral tribunal or the latter’s findings. The domestic courts can indeed rely on documents not put to the arbitral tribunal or even created after the arbitral tribunal rendered its award.
In addition, it is to be noted that in its decision, the Cour de cassation uses the broader standard of ‘characterized breach of international public policy’ rather than the more stringent test of ‘manifest, concrete and effective breach of international public policy’ the French lower courts had previously used (including the Paris Court of Appeal in the Belokon case). In a very recent judgment (Groupement Santullo—Paris, 5 April 2022, No 20/03242), the Paris Court of Appeal followed this standard to decide to annul an award on international public policy grounds. With the Court of Appeal’s recent decision, the French jurisprudence now appears more aligned than ever on this question.
This article was first published by LexisPSL on 6 April 2022.