On 9 November 2016 and for the first time, the French State Council (Conseil d'Etat) set aside an international arbitral award. The award related to a public contract performed in France. The award was partially set aside on the ground that the arbitral tribunal failed to apply a mandatory rule of domestic French public law.1
The decision of the Conseil d'Etat comes after an intriguing battle as to which of France's highest appellate courts should have jurisdiction to determine the challenge made to the arbitral award in question.
Courts vying for jurisdiction is not a new phenomenon. The history of the common law world is replete with examples. But in France, this situation is partly formalised as between civil and administrative courts, and has been for some time.
The French system is divided between the civil and administrative orders. Each order has its own supreme court: the Court of Cassation (Cour de cassation) and the Conseil d'Etat, respectively.
Where there is a jurisdictional issue between the two legal orders, the matter is resolved by the Court of Jurisdictional Conflicts (Tribunal des conflits), a role it has fulfilled for over 150 years. In this case, the Tribunal des conflits ruled in favour of the Conseil d'Etat, which in turn paved the way for the decision reported in this alert.
Historically, the administrative court system has been, and has been seen to be, an extension of the French administration. That is much less the case today, although ties between the Conseil d'Etat and the administration are still close. For example, the judges of the Conseil d'Etat often follow the same educational path as their civil service peers.
Given its historical and cultural background, the Conseil d'Etat's first decision on annulment of an international arbitral award was much anticipated by the French arbitral community. Would the Conseil d'Etat disturb the legal position carefully developed over the years by the Cour de cassation and the Paris Court of Appeal? Or would it chart a different route?
Gaz de France, a state-owned public industrial and commercial institution, entered into a contract with the STS group formed by several foreign companies for the construction of a methane terminal in France. The contract was later transferred from Gaz de France to Fosmax LNG, a private company. The parties then amended the contract to include an ICC arbitration clause.
A dispute arose between the parties. On 13 February...