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Does the Brussels I Recast apply to liability claims against arbitrators?
Does the Brussels I Recast apply to liability claims against arbitrators?
27 July 2021
Series
Blogs
27 July 2021
In a recent decision, the Paris Court of Appeal ruled that liability claims against arbitrators fall within the “arbitration exception” of Article 1(2)(d) of the Brussels I Recast, with the result that French private international law rules applied to determine jurisdiction. On that basis, it concluded that the French courts had jurisdiction to hear the claim as the seat of the arbitration, located in France, was the place where the arbitrator's services were performed.
Background
A Qatari company and an Emirati company were involved in an ICC arbitration. The seat of the arbitral tribunal was in Paris, but the three arbitrators were domiciled in Germany and the hearing and the deliberation were held in Germany. The award, rendered in favour of the Emirati company, was challenged by the Qatari company before the French courts on the basis that one of the arbitrators omitted to mention the links between his law firm and the group of the Emirati company. In 2018, the Paris Court of Appeal annulled the award because of the arbitrator’s breach of his disclosure obligations and that was confirmed by the French Supreme Court.
The Qatari company then claimed damages against that arbitrator before the French Court of First Instance (Tribunal judiciaire). In determining its international jurisdiction over the claim, that court held that the Brussels I Recast was applicable, but that no jurisdictional ground therein applied to the French courts. In particular, in the opinion of the Tribunal judiciaire, the fact that the award was legally rendered in Paris (being the seat of arbitration as stated by the applicable terms of reference and the ICC Rules (see e.g. Article 32(3) 2021 ICC Rules)) would be “fictitious” and insufficient to base jurisdiction in France under Article 7(1) of the Brussels I Recast, which permits, in matters relating to a contract, the courts of the place of performance to take jurisdiction. Instead, it ruled that the arbitrator’s activities were primarily performed in Germany, which was the country of domicile of the arbitrator and where the hearing and the arbitral tribunal’s deliberation were held.
The Qatari company appealed this decision to Paris Court of Appeal (Cour d’appel) which handed down a decision on 22 June 2021.
Is the Brussels I Recast applicable to liability claims against arbitrators?
According to Article 1(2)(d) of the Brussels I Recast, “arbitration” is outside its scope. This provision has been debated but is generally understood to capture proceedings which are integral or ancillary to an arbitration. Recital 12 provides examples, although, in the view of the Cour d’appel, these were non-exhaustive.
Furthermore (and with reference to the CJEU’s Marc Rich decision (Case C-190/89)) the Cour d’appel considered that (translated from the original French):
“An action to hold an arbitrator liable after the annulment of an arbitral award based on the arbitrator's failure to disclose is closely linked to the constitution of the arbitral tribunal and to the conduct of the arbitration, since it aims at assessing whether the arbitrator has carried out, in accordance with their obligations under his arbitration contract, his mission, which is part of the implementation of the arbitration.
This action is thus an arbitration matter, even if it is governed by general tort law”
Where do arbitrators provide their services?
That being the case, the Cour d’appel had to apply French private international law. In particular, in this case, Article 46 of the French Code of Civil Procedure was relevant which allows a claimant to sue in the country where the contractual services were performed.
The Cour d’appel ruled that the seat of the arbitration was the place in which the arbitrator had provided its services (irrespective of whether any hearings or deliberations took place). Fundamentally, this conclusion was derived from the connection between an arbitrator’s role and the parties’ arbitration agreement; which stipulates for an award to be rendered at the seat of arbitration (paragraphs 30-33 of the judgment).
As the seat of the arbitration was Paris (France), the Court held that French courts had international jurisdiction over the claim and quashed the Tribunal judiciaire’s decision.
Comment and Conclusions
As to the Cour d’appel’s views on the scope of the Brussels I Recast, it could be argued that developments in CJEU case-law since Marc Rich (which focus more closely on the nature of the rights which the proceedings seek to protect) mean that it would be uncertain as to whether the CJEU would, if the question came before it, reach the same conclusion (on this view the claim is about the contractual relationship between the party and arbitrator, rather than the arbitration itself).
So the point may not be settled. Either way, however, it is one with real practical implications for liability claims against arbitrators in EU courts. First, for determining jurisdiction over such disputes: If the Brussels I Recast applies that, for example, would mean that the CJEU would have competence to give a uniform answer to questions such as whether, under Article 7(1), the seat is the place at which the arbitrator’s services are provided (whether this question is posed under the Brussels I Recast or, as before the Cour d’appel, a rule of national law, a conclusion in favour of the seat carries the benefit of certainty; the physical place of hearings/deliberations can fluctuate, and are often left to the tribunal to decide). Also, the trend of some institutions to manage their liability through forum selection clauses embedded in their rules would be assessed thereunder. And, second, the question also determines whether a resultant judgment against an arbitrator can be enforced under the Brussels I Recast, or whether national law also applies to that.
Click here for the Cour d’appel’s judgment.
A version of this article originally appeared on Kluwer Arbitration Blog (click here)