The French Court of Appeal has recently outlined the scope of parties’ waiver in arbitration. In Antrix Corp Ltd v. Devas Multimedia P. Ltd, the International Commercial Chamber of the Paris Court of Appeal held that Antrix did not waive its right to rely on a procedural irregularity, raised before the ICC International Court of Arbitration (the “ICC Court”), and prior to the constitution of the arbitral tribunal.
In its decision, the Paris Court of Appeal shed light on the scope of Article 1466 of the French Code of Civil Procedure (the “French CCP”), pursuant to which “a party which, knowingly and without a legitimate reason, fails to object to an irregularity before the arbitral tribunal in a timely manner shall be deemed to have waived its right to avail itself of such irregularity”, and confirmed its stance that the parties’ waiver regarding procedural irregularities must be unequivocal.
On the merits, the Paris Court of Appeal rejected Antrix’s objection that the arbitral tribunal was invalidly constituted and lacked jurisdiction.
Background
The dispute between Antrix Corp Ltd (“Antrix”) and Devas Multimedia P. Ltd (“Devas”) arose out of a commercial agreement for the launch of two satellites and the lease of 70 megahertz of S-band spectrum signed on 28 January 2015 (the “Agreement”). The Agreement contained an arbitration clause providing for an arbitration in New Delhi, India, pursuant to either the Rules of Arbitration of the International Chamber of Commerce (the “ICC Rules”) or the Rules of Arbitration of the United Nations Commission on International Trade Law (the “UNCITRAL Rules”).
The arbitration clause in question may be summarized as follows:
In the event of there being any dispute or difference between the Parties hereto as to any clause or provision of this Agreement or as to the interpretation thereof or as to any account or valuation or as to the rights, liabilities, acts, omissions of any Party hereto arising under or by virtue of these presents or otherwise in any way relating to this Agreement such dispute or difference shall be referred to the senior management of both Parties to resolve within three (3) weeks failing which it will be referred to an Arbital [sic] Tribunal comprising of three arbitrators, one to be appointed by each party (i.e. DEVAS and ANTRIX) and the arbitrators so appointed will appoint the third arbitrator.
The seat of Arbitration shall be at NEW DELHI in India.
The Arbitration proceedings shall be held in accordance with the rules and procedures of the ICC (International Chamber of Commerce) or UNCITRAL.
In 2011, a dispute arose in the context of the termination of the Agreement by Antrix. Devas initiated an ICC arbitration pursuant to Article 4 of the then applicable ICC Rules, without seeking Antrix’s specific consent to ICC arbitration.
The ICC Court invited Antrix to nominate its arbitrator within the time limit provided by the ICC Rules, failing which the ICC Court would appoint the arbitrator on Antrix’s behalf.
Before the ICC Court, Antrix argued that Devas had no right to unilaterally choose the ICC and, in the meantime, requested the Indian Supreme Court to nominate an arbitrator on behalf of Devas in an attempt to initiate an ad hoc arbitration under the UNCITRAL Rules. While the ICC Court was informed about the pending judgement in India, it decided that the arbitration should continue despite Antrix’s objections.
The ICC Court then nominated an arbitrator on behalf of Antrix and confirmed the arbitrator nominated by Devas. Eventually, the Indian Supreme Court rejected Antrix’s application.
In the course of the arbitral proceedings, Antrix raised the argument that the arbitration clause was pathological because it referred to two sets of arbitration rules without providing a mechanism of selection between the ICC Rules and UNCITRAL Rules.
On 14 September 2015, the three-member arbitral tribunal dismissed Antrix’s jurisdictional objection based on the pathological nature of the arbitration clause and ordered Antrix to pay Devas USD 562.5 million, with interest, as damages for wrongful termination.
Devas sought to enforce the arbitral award in France pursuant to Article 1516 of the French CCP which provides that an arbitral award rendered abroad may be enforced by virtue of an enforcement order (exequatur) issued by the Tribunal de grande instance of Paris.
Antrix appealed the exequatur order, arguing, among other grounds, that the ICC arbitral tribunal lacked jurisdiction (Article 1520(1) of the French CCP) and had been improperly constituted (Article 1520(2) of the French CCP). Devas, in turn, argued that Antrix’s arguments were inadmissible pursuant to Article 1466 of the French CCP, which refers to a waiver arising from the parties’ failure to raise a procedural objection in a timely manner before the arbitral tribunal.
The First Decision of the Court of Appeal on the Challenge to the Exequatur Order of the Arbitration Award
In its first decision, the Paris Court of Appeal dismissed all of Antrix’s arguments and confirmed the decision of the Tribunal de grande instance that had granted the exequatur.
The Court of Appeal held that Antrix’s arguments regarding the procedural irregularities in the constitution of the arbitral tribunal were inadmissible pursuant to Article 1466 of the French CCP. [1]
More specifically, the Court of Appeal noted that the party’s waiver must be analysed by reference to the arguments raised before the arbitral tribunal and not by reference to discussions held prior to its constitution.[2]
The Decision of the Court of Cassation Quashing the Court of Appeal’s Decision
Antrix then filed an application before the French Court of Cassation arguing, amongst other grounds, that the argument concerning the irregularity in the constitution of the arbitral tribunal, which was dismissed by the ICC Court, and the argument regarding the pathological nature of the arbitration clause, were not a contradiction amounting to a waiver.[3]
Further, Antrix argued that the Court of Appeal violated Article 1466 of the French CCP by ruling that Antrix had waived its right to raise a procedural objection.[4]
In its decision, the Court of Cassation found that the pathological clause argument and the ad hoc arbitration argument were not incompatible, but rather were complementary.
In this respect, the Court of Cassation reasoned that:[5]
- the arbitration clause provided for an option between the ICC Rules and the UNCITRAL Rules;
- the option of the UNCITRAL Rules would imply that the arbitration would be ad hoc, excluding the intervention of an arbitral institution;
- notwithstanding the above, the arbitration initiated by Devas was institutional, despite Antrix’s objections.
Particularly, the Court of Cassation ruled that Antrix’s pathological arbitration clause argument necessarily entailed an objection relating to the improper constitution of the ICC tribunal.[6]
As a result, the Court of Cassation quashed the Court of Appeal’s decision and referred the case back to the Court of Appeal with a different formation.
The Court of Appeal’s Decision on Waiver
The International Commercial Chamber of the Paris Court of Appeal then issued a decision on 28 June 2022, ruling on (1) whether Antrix had waived its right to rely on the argument regarding the constitution of the arbitral tribunal to resist enforcement and (2) on the merits, on whether the arbitral tribunal was validly constituted.
Whether Antrix Waived Its Right to Raise a Procedural Irregularity Under Article 1466 of the French CCP
The first issue considered by the Court of Appeal was whether Antrix was precluded by Article 1466 of the French CCP to rely on its argument concerning the improper constitution of the arbitral tribunal raised before the ICC Court:[7]
The Court of Appeal first observed that, as far as Article 1466 is concerned, the parties’ waiver must be unequivocal.[8]
In this respect, it agreed with the Court of Cassation, noting that the ad hoc arbitration argument and the pathological clause argument did not conflict.[9] The Court of Appeal accepted that Antrix had construed the arbitration clause as being an ad hoc arbitration, as opposed to an institutional arbitration. Thereby, Antrix had raised the issue concerning the constitution of the arbitral tribunal and the inapplicability of the arbitration clause in a successive and complementary manner.[10]
The Court of Appeal further confirmed that Antrix’s argument regarding the pathological aspect of the arbitration clause necessarily entailed an objection regarding the constitution of the ICC tribunal, given that the arbitration agreement supposedly provided for an ad hoc arbitration which would require the arbitral tribunal to be constituted without the intervention of the ICC Court.[11]
Whether the Arbitral Tribunal Was Validly Constituted
Having found that Antrix’s argument had not been waived, the second contentious issue was whether the ICC arbitral tribunal was properly constituted.[12]
In this respect, the Court of Appeal recalled that arbitration clauses must be interpreted by the principle of coherence and usefulness, favouring an interpretation that gives full effect to the arbitration clause in order to prevent the possibility for a party to question its consent to arbitration.[13]
The Court of Appeal noted that whereas it was not disputed that the parties decided to resort to arbitration (whether ad hoc or institutional), the arbitration clause gave the parties the option of choosing an ad hoc arbitration, under the UNCITRAL Rules, or an ICC arbitration.[14] In this case, Devas exercised its right to file an ICC arbitration.
With respect to Antrix’s argument that the parties should have agreed on the type of arbitration prior to initiating the proceeding, the Court of Appeal noted that such a premise would add a precondition that had not been contemplated by the parties when drafting the arbitration clause.[15]
Consequently, the option of resorting to an institutional arbitration, as opposed to an ad hoc arbitration, would lie with the party initiating the proceeding (in the present case, Devas).[16]
By choosing to initiate an ICC proceeding, Devas gave the ICC Court the powers to administer the case and constitute the arbitral tribunal on the parties’ behalf pursuant to the ICC Rules.
In light of the foregoing, the Court of Appeal dismissed Antrix’s argument regarding the irregularity of the composition of the ICC tribunal and awarded Devas EUR 200,000 in costs.[17]
[1] Paris Court of Appeal, 27 March 2018, No. 16/03596, p. 5.
[2] Ibid.
[3] Court of Cassation, 4 March 2020, No. F 18-22.019; p. 2.
[4] Ibid.
[5] Court of Cassation, 4 March 2020, No. F 18-22.019; pp. 8-9.
[6] Ibid.
[7] Paris Court of Appeal, 28 June 2022, No. 20/05699, pp. 5-10.
[8] Id., p. 7.
[9] Id., pp. 7-8.
[10] Id., pp. 8-9.
[11] Id., p. 10.
[12] Ibid.
[13] Id., p. 14
[14] Ibid.
[15] Id., p. 15.
[16] Ibid.
[17] Id., p. 16.
