In a recent decision, the Paris Court of Appeal refused to enforce an LMAA arbitral award on the basis that the underlying contract was affected by illegality on account of corruption.
Pursuant to article V of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, a national authority may refuse to enforce or recognise a foreign award on certain limited grounds, including where it would be contrary to the public policy of the country concerned.
On the question of public policy, the approach of the French civil courts is not to look to the domestic concept of public policy. Instead, the Paris Court of Appeal has developed the narrower concept of international public policy, enshrined in the French Code of Civil Procedure. This concept comprises a body of rules and values, the violation of which the French legal order will not accept, even where a matter is international in nature. For this reason, the French civil courts will refuse enforcement where there has been a failure to adhere to international public policy, although the courts usually place a high burden of proof on the contesting party, requiring it to demonstrate that any violation is flagrant, effective and concrete.
In the case in question, proof of the violation was straightforward. During the appeal proceedings, the competent French criminal court found that corrupt practices had occurred.
Read the full client alert on this case here.