Bird & Bird’s French Dispute Resolution team is pleased to present the March 2017 issue of “The Arbitration Minute”.
- Can one refrain from paying the arbitrators’ fees?
- Are due process rights protected in arbitration?
Can one refrain from paying the arbitrators’ fees?
No. Most institutional arbitration rules provide that the arbitral award shall be notified to the parties only after full payment of the arbitration costs (including the arbitrators' fees). This is the case, for example, of the ICC Rules (Article 34.1), the CEPANI Rules (Belgian Center) (Article 31.2), the CMAP Rules (Center of Mediation and Arbitration of Paris)(Article 27.1) and the OHADA Rules (Article 25.1). Arbitral institutions may therefore rely on these clauses for you to settle the costs still due.
The rules of the Hong Kong International Arbitration Centre (HKIAC) are even more explicit and state in Schedule 2, Article 7 that "HKIAC and the arbitral tribunal shall have a lien over any awards issued by the tribunal to secure the payment of their outstanding fees and expenses, and may accordingly refuse to release any such awards to the parties until all such fees and expenses have been paid in full, whether jointly or by one or other of the parties."
Things apparently did not unfold this way at the end of an OHADA arbitration. Although the arbitrators’ fees had not been paid in full, the award was communicated to the parties. The arbitrators subsequently sued the parties and were successful in a judgment handed down by the French Supreme Court (Cour de Cassation) on 1 February 2017. The Court underlined that the parties’ obligation to pay the arbitrators’ costs and fees was of a joint and several nature. Hence, the successful party was obliged to settle not only its arbitration costs but also those of the unsuccessful party who refused to do so.
Judgment cited: French Supreme Court (Cour de Cassation), Chamber 1, Judgment no. 145 of 1 February 2017, Pourvoi no. 15-25.687
Are due process rights protected in arbitration?
Yes. Arbitrators have the obligation to provide each party with a reasonable opportunity to present its case, including evidence, in conditions that do not place it at a substantial disadvantage vis-à-vis its opponent. This is known as the principle of equality of arms.
This principle enabled the Paris Court of Appeal to set aside an arbitral award in a judgment dated 8 November 2016. The Court of Appeal considered that in the present case, one of the parties, namely the Government of the Republic of Iraq, had been unable to prepare its defense, as it was in a state of war at the relevant time, which placed it in a "substantially disadvantageous position with respect to its opponents."
It should be well noted that the party requesting the annulment of the award had already raised before the arbitral tribunal that it was not in a position to effectively prepare its defense.
The Court therefore recalled that the arbitral tribunal was bound to adapt the duty of celerity to the factual situation to secure the fairness of the proceedings. Indeed, the duty of celerity (which can be found in Article 1464 (3) of the French Code of Civil Procedure) is not absolute and is overridden by the requirement that the parties must be in a situation of substantive equality and not only formal equality.
The principle of equality of arms, which is an element of due process, is part of international public policy. As this principle had not been respected, the arbitral award was set aside for violation of international public policy.
Judgment cited: Paris Court of Appeal, pôle 1, Chamber 1, 8 November 2016, no. 13/12002