On 9 November 2016, following the challenge of an arbitration award before the French Conseil d’Etat, France’s highest administrative court, the administrative court rendered an interesting new decision on the issue of its power to review an international arbitration award in the context of a public contract.
This decision arises out of an ICC award with respect to a contract in 2004 by Fosmax for the construction of an LNG terminal on the Cavaou peninsula in Fos-sur-Mer, on the Mediterranean coast. Under the contract, “Fosmax brought an ICC claim seeking compensation for alleged delays and defects in the delivery of the terminal”, and STS (France’s Sofregaz and Italy’s Tecnimont and Saipem) claimed excessive costs in a counterclaim. In 2015, the Arbitral Tribunal ruled that private law was applicable and awarded each party for their respective claims (Eur 128 million for STS and Eur 69 million for Fosmax).
Following this award, Fosmax applied to the French Conseil d’Etat to challenge the award on the ground that the Tribunal should not have applied private law, but administrative law instead, as provided for in the contract.
Under French law, issues before the Conseil d’Etat are first referred to the Tribunal des Conflits to determine jurisdiction between French civil and administrative courts. This tribunal ruled that the contract was in nature a public law contract, relying on the case Inserm, and thus the Conseil d’Etat was competent to hear the petition.
The Conseil d’Etat, for the first time, examined the scope of its powers over international arbitration awards being challenged under its jurisdiction. While French civil courts are usually competent to review international arbitration award challenges, the Conseil d’Etat ruled that it had jurisdiction over awards in violation of a mandatory rule of French administrative law, as it did in the case at hand, thus partially setting aside the ICC award. In its paragraph 11, the Conseil d’Etat explained that:
“Considérant, en premier lieu, qu’il résulte de ce qui a été dit au point 5 que le contrôle du juge administratif sur une sentence arbitrale doit porter non sur la qualification que les arbitres ont donnée de la convention liant les parties, mais sur la solution donnée au litige, l’annulation n’étant encourue que dans la mesure où cette solution méconnaît une règle d’ordre public ; que s’il résulte de la décision rendue par le Tribunal des conflits le 11 avril 2016 que le contrat en cause était un contrat administratif et si, par suite, c’est à tort que les arbitres, chargés de déterminer le droit applicable au contrat, ont estimé que le litige était régi par le droit privé, la censure de la sentence par le Conseil d’Etat ne saurait être encourue que dans la mesure où cette erreur de qualification aurait conduit les arbitres à écarter ou à méconnaître une règle d’ordre public applicable aux contrats administratifs. »
Of course, a challenge of an arbitration award before the Conseil d’Etat will only succeed if it falls within the Conseil d’Etat’s scope of competence, for instance involving a public contract as in this case.