Facts
- On 26 March 1981, Société Dutco Construction Company (Dubai), Siemens AG, and BKMI Industrieanlagen GmbH entered into a consortium agreement to construct a cement plant in Oman.
- The consortium agreement included an arbitration clause providing that disputes would be resolved under the ICC Rules by a three-arbitrator tribunal appointed in accordance with those rules.
- In 1986, Dutco filed a single request for ICC arbitration against Siemens and BKMI, asserting claims arising out of the consortium agreement.
- Applying then-current ICC practice for multiparty cases, Dutco was permitted to nominate one arbitrator, while Siemens and BKMI, as co-respondents, were required to agree on a single arbitrator jointly; the ICC would then appoint the president of the tribunal.
- Siemens and BKMI objected to this method of constitution and made the joint nomination only “under protest” and with express reservations about the tribunal’s validity.
- The arbitral tribunal issued a partial award holding that it was properly constituted and that the arbitration could proceed against both Siemens and BKMI in a single multiparty proceeding.
- Siemens and BKMI sought annulment before the Paris Court of Appeal, arguing that the constitution of the tribunal violated the parties’ equality in the appointment of arbitrators.
- By judgment of 5 May 1989, the Paris Court of Appeal rejected the challenge, reasoning that the multiparty nature of the consortium agreement and the clause for three arbitrators contemplated the adjustments required for a single tribunal.
- Siemens and BKMI filed separate pourvois in cassation, which were joined because they raised similar grounds.
Issues
- Whether, in an international arbitration seated in France, requiring two respondents to jointly appoint a single arbitrator while the claimant appoints its own arbitrator breaches the principle of equality of the parties in the designation of arbitrators.
- Whether an arbitration clause referring disputes to ICC arbitration, in a contract involving three parties, amounts to a valid pre-dispute waiver of equality in the arbitrator-appointment process.
Decision
- The Cour de cassation quashed the Paris Court of Appeal’s judgment and remitted the case to the Versailles Court of Appeal.
- It held that equality of the parties in the designation of arbitrators is a rule of public policy in French international arbitration and that parties may renounce it only after the dispute has arisen.
- It found that the Court of Appeal erred by treating the multiparty character of the contract and the reference to ICC arbitration as sufficient to justify an appointment method that placed Siemens and BKMI at a disadvantage in constituting the tribunal.
Legal Principles
- In France-seated international arbitration, the principle of equality of the parties in the designation of arbitrators is a matter of public policy (ordre public).
- A party’s renunciation of equality in the appointment of arbitrators is effective only after the dispute arises; advance consent in an arbitration clause or by reference to institutional rules is not enough.
- A tribunal’s constitution may be challenged, and an award (including a partial award on constitution/jurisdiction) may be exposed to annulment review, when the appointment process violates the equality principle.
- The fact that an agreement is multipartite, and that it provides for a three-member ICC tribunal, does not by itself justify a process where one side appoints an arbitrator alone while multiple parties on the other side must share a single appointment, even if those parties may have different interests.
- The Cour de cassation reviewed the issue by reference to the French procedural rules governing annulment in international arbitration (including NCPC Articles 1502(2) and 1504) and the Civil Code’s public policy limit (Article 6).
Conclusion
The Cour de cassation set aside the Paris Court of Appeal’s approval of an ICC multiparty appointment method that allowed Dutco to appoint an arbitrator alone while Siemens and BKMI were compelled to agree on a single arbitrator, holding that equal participation in arbitrator selection is French public policy and cannot be renounced before a dispute arises.