## Facts

- American Bureau of Shipping (ABS) inspected and approved a vessel’s seaworthiness under a classification contract with the vessel’s builder.
- The classification contract contained an arbitration clause.
- Jules Verne, a shipping company that was not connected to the builder and was not a party to the classification contract, later acquired ownership of the vessel.
- The vessel was damaged in an accident.
- Jules Verne (and related claimants) sued ABS in the Paris Commercial Court, alleging the damage was caused by ABS’s improper approval of seaworthiness and failure to detect design flaws.
- ABS objected to the jurisdiction of the French courts, arguing the dispute had to be referred to arbitration under the classification contract’s arbitration clause.
- ABS contended that, although Jules Verne was a non-signatory, it should be bound because it knowingly received benefits linked to the classification contract.
- The Paris Commercial Court rejected ABS’s jurisdictional objection.
- The Paris Court of Appeal also rejected ABS’s request to refer the case to arbitration, stating that the arbitration agreement did not apply to Jules Verne, but without explaining the legal reasoning for that conclusion.
- ABS appealed to the Cour de cassation.

## Issues

1. When an arbitration clause is invoked in an international dispute, may a French court decide that the clause does not apply and keep the case without determining that the clause is manifestly void or manifestly inapplicable?
2. Did the Court of Appeal err by refusing to refer the dispute to arbitration as to a non-signatory purchaser without giving reasons showing manifest inapplicability?

## Decision

- The Cour de cassation quashed the Paris Court of Appeal’s judgment and remanded the case.
- It held that, when an arbitration clause is invoked, the arbitral tribunal should rule first on objections going to the tribunal’s jurisdiction (including questions of scope and applicability), except where the clause is manifestly void or manifestly inapplicable.
- Because the Court of Appeal concluded the clause did not apply to Jules Verne without providing legal reasoning sufficient to show manifest inapplicability, its decision lacked an adequate legal basis.

## Legal Principles

- Under the negative effect of compétence-compétence in international arbitration, French courts faced with an arbitration agreement must, in principle, refer the parties to arbitration.
- A court may refuse referral only if the arbitration agreement is manifestly void or manifestly inapplicable.
- At the pre-arbitral stage, a court’s review of the arbitration clause is limited; disputed questions about the clause’s reach—such as whether it binds a non-signatory who acquired the vessel and claims through facts connected to classification—are generally for the arbitrators to decide first unless exclusion is obvious on the face of the record.
- An appellate court must give reasons supporting a finding that an arbitration clause is outside the dispute; a bare statement that the clause does not apply is insufficient where it bypasses the arbitral forum.

## Conclusion

American Bureau of Shipping v. Jules Verne et al. required French courts to give priority to arbitral jurisdiction when an arbitration clause is raised in an international case, allowing court retention of the dispute only when the clause’s invalidity or non-application is manifest; the Cour de cassation therefore set aside an appellate decision that denied arbitration as to a non-signatory owner without adequate reasons showing such manifest inapplicability.


American Bureau of Shipping v. Jules Verne et al., 2001 Rev. arb. 529, [2002] 7 Mealey’s Int’l Arb. Rep. 30 (2001)