Paris Court of Appeal, 19 September 2023 – no. 21/16159
A recent ruling by the Paris Court of Appeal on the independence and impartiality of arbitrators highlights the strict and high standard applied by French courts to applications to set aside an arbitral award based on an arbitrator’s failure to disclose his relationship with a party.
In this case, in a dispute opposing the Greek steel company Halyvourgiki and the Greek Power Public Corporation (“PPC”), the Paris Court of Appeal dismissed an application by PPC to set aside an ICC award on the grounds that the tribunal had been irregularly constituted and that the award breached international public policy.
Halyvourgiki argued that the arbitrator appointed by PPC had failed to fulfil his obligation under Article 1456 of the French Code of Civil Procedure to disclose any circumstances likely to affect his independence or impartiality. Although the arbitrator made no disclosure in his declaration of independence or in his curriculum vitae, investigations that Halyvourgiki performed during the arbitration revealed professional and personal relations that the arbitrator had maintained with PPC over a period of 30 years and which, in Halyvourgiki’s view, amounted to a business relationship and a conflict of interest.
More specifically, the arbitrator failed to disclose:
– Eleven previous appointments as an arbitrator, between 1989 and 2019, in cases in the steel and/or energy industrial sector by PPC or by public companies linked to it through their main shareholder, the Greek State. These included two other appointments as arbitrator by PCC, most recently in 2015, and one appointment by PCC’s subsidiary in 2017.
– The preparation of ten legal opinions paid for by PCC in litigation or arbitration cases, between 1989 and 2016.
– The preparation of five legal opinions paid for by PPC’s subsidiary until 2009, in addition to eight other legal opinions paid for by companies associated with PPC, from 1989 to 2016.
– His position as a member of PPC’s legal council for 4 years, between 1989 and 1993; and
– His wife’s employment as in-house counsel within PPC for twenty years, from 1992 to 2012, of which she was now retired and, as such, benefited from discounts on power bills.
In response, PPC argued that these links did not have to be disclosed because, on the one hand, rules of the International Bar Association (“IBA”) limit to a period of three years the disclosure of circumstances predating the appointment of an arbitrator and, on the other hand, these circumstances were well known in the circle of arbitration relating to the energy sector in Greece. PPC also argued that, in any event, the alleged new circumstances were not likely to give rise to reasonable doubt as to the arbitrator’s independence.
The Court of Appeal dismissed the application for annulment. It began by pointing out that an arbitrator’s failure to disclose information is not in itself sufficient to characterise his lack of independence or impartiality, but that such failure must be linked to factors likely to give rise to reasonable doubt in the minds of the parties as to his impartiality and independence, which it defined as a doubt that might arise in the mind of a person placed in the same situation and having access to the same reasonably accessible items of information.
Referring to the IBA’s guidelines, the Court of Appeal considered that the arbitrator’s relations with PPC were too scattered and, dating back more than three years, too long-standing to be subject to an obligation of disclosure.
In addition, the Court of Appeal stated that the alleged circumstances, even taken together, were not sufficient to “establish the existence of a sufficiently significant business relationship […] capable of affecting [the arbitrator’s] independence of mind” on the grounds that eleven appointments over a period of thirty years, given the limited number of arbitrators in this professional circle, did not amount to a current of business; that the preparation of legal opinions had been occasional ; that PPC did not belong to the same group and exercised no control over the public companies linked to it by their shareholding; and finally that the arbitrator’s wife being retired and benefiting from a preferential rate governed by law, she did not have a substantial financial or personal interest with regard to the principles of the IBA. Thus, the Court found that none of the information withheld by the arbitrator created any doubt as to his independence and impartiality.
