After the award: trends in arbitration challenges – France

Transcript:

Erwan: Hello and thank you for joining Arbitral Insight. I'm Erwan Robert, Senior Associate with Reed Smith in Paris. Today we are diving into a topic that anyone practicing or interested in international arbitration should have on their radar. The findings of the Reed Smith International Arbitration Report, which was released in December 2025. So what is this report? In a nutshell, it is a comprehensive empirical study that analyses court decisions on applications to set aside international arbitrary awards. It covers several jurisdictions England and Wales, France, Hong Kong, the Middle East, UAE onshore, DIFC and Bahrain, New York and Singapore. The report covered a minimum six year review period. Hundreds of cases were collected and analyzed. What makes this study particularly interesting is that there is no single publicly available source compiling all this data. The team gathered decisions from a variety of databases. There is no comparable publicly available data set. The report goes beyond anecdotes to give practitioners concrete empirical indicators of how courts actually treat setting aside applications. Which is essential for seat selection, post award strategy, and risk assessment. Now, why France? Well, as many of you will know, France is one of the most active and mature arbitral jurisdictions in the world. It is home to major arbitral institutions, most notably the ICC, and Paris is regularly ranked amongst the top five arbitral seats globally. France has been long known for combining a historically strong pro arbitration framework with competent courts that adopt a supportive stance towards arbitration. For the French section, we reviewed a total of two hundred and twenty two decisions rendered between the first of june twenty eleven and december thirty first of two thousand twenty four. The data collection concluded on the fifteenth of january two thousand twenty five. This podcast is the first of a series exploring its jurisdiction studied in the Reed Smith International Arbitration Report. With that as a context, I am delighted to welcome Clement Fouchard. Clement is a partner at Reed Smith in Paris and one of the co authors of this report. He is idly placed to walk us through the key findings in detail and share some practical takeaways for arbitration practitioners. Clément could you please give us an overview of what the data for France shows?

Clément: Thank you, Erwan. It's really a pleasure to be back on Arbitral Insight and in particular to speak about the French section or French chapter of the Reed Smith report. So Paris, and because we are talking about the Paris court and the French Supreme Court, the Court de cassation, so the France had the highest number of sitting aside cases of any seat reviewed. By quite some margin, despite being only the fifth most preferred seed globally in the 2025 International Arbitration Survey of Queen Mary. Yet only 17 % of those challenges succeeded. And the first lesson I will start with that sort of takeaway as a starter. The first lesson from the analysis of the data is that the most popular setting aside ground, which is international public policy, Article 1525 invoked 137 times, was the least successful at just 4 % of success rate. So that's quite interesting. And we'll come back to that, obviously. While the most successful ground, which is another one, the ground on jurisdiction, Article 1521, well, it succeeded 15 % of the time, but was only the third most frequently invoked. So the first question, guess, France is a jurisdiction where many parties try to challenge awards, but the courts overwhelmingly hold the line. And the question is, why do so many parties try and what does the data tell us about doing that better?

Erwan: Well, that's the question I will try to answer today. Turning to what the data says, could you please present the volume of data the team in Paris reviewed and what the global success rate of Annorman proceedings in France is?

Clément: Yes, of course. So the team reviewed 222 decisions and the focus has been on the setting aside proceedings only, excluding the appeal to enforcement orders and executure. And out of those 222 decisions, 143 were rendered by the Paris Court of Appeal and 79 by the Court of Cassation. The average success rate is 17 % of the challenges. And it's interesting to put that figure in comparison with other jurisdictions that has been covered in the report. In England and Wales, the success rate is 38%, but we must say that it's probably inflated by the Section 69 of the English Arbitration Act. Appeals on the point of law where we know that the success rate is higher. Singapore has a 23 % success rate, Hong Kong 22%, New York 8%, and UAE 11%. So France sits in the lower tier, confirming the strongly pro-arbitration judicial stance that we have. Although the data set that we have reviewed is not complete, and it's maybe interesting to recall that there is no one single database with all decisions rendered in the domain, the high number of cases that we have been able to retrieve and reviewed is significant. Why so? Well, the report posits two France-specific drivers, as I would mention. First, the availability of the broad and undefined notion of international public policy ground that tempts parties to actually take a chance to try to get the award annulled on that basis. And the second driver is the relatively low cost of setting aside proceedings in France. And we also come back to cost issues a bit later.

Erwan: Thank you, Clément. can you now tell us a bit more about the various grounds raised by parties in support of annulment proceedings in France and whether they all are successful?

Clément: Yes, and the short answer is that now the success rate varies quite significantly from one ground to another. So I will give you a snapshot quickly on the five grounds that a party can use to set aside an award in France, starting by the most invoked one to the least invoked one. So as I said, international public policy is the most invoked one very low success rate, 4% reason behind this paradox, the fact that it's very much invoked but with a low success rate is that parties tend to see it as a catchall sort of grounds. And in practice, this ground is often relied upon in response to almost any setback or frustration encountered in the arbitration. And such attempts, however generally dismissed outright, explain this paradox, this situation. If I move to the second most invoked ground, that's jurisdiction. So that's Article 1520, first paragraph, with the highest success rate, 15%. Article 1520 first paragraph ensures that the arbitral tribunal has jurisdiction to render the award. Because the tribunal's jurisdiction is the very foundation of the validity of the award, French courts perform a de novo review when examining this ground, which explains the high success rate of challenges. Moving to the third ground, which is the constitution of tribunal with a 12 % success rate and invoked 60 times in the cases we have reviewed. And we come back to one specific aspect on this one. Fourth, which is the breach of mandate, the mission of the arbitral tribunal invoked 92 times with a 6 % success rate. This ground has some overlap and is at times confused with the one of jurisdiction because a retreat tribunal that does not comply with the mandate given by the parties may also have breached this jurisdiction to decide issues in excess of their mandate. It's worth noting that this ground, the breach of mandate, has never been admitted as a single and sole ground during the review period. Last ground that I will mention, which is the principle of contradiction, invoked 96 times 5 % success rate. Well, because a violation of the principle of contradiction is inherently subjective, a losing party may understandably be under the impression that it has not been heard by the tribunal. This ground may serve as a fallback when the chances of success for the other pleaded grounds are quite weak. But as we see from the success rate, it does not necessarily shift the balance.

Erwan: I'm sure some of our listeners may think that invoking several grounds maximizes the chances of seeing the award being annulled, but is that actually true?

Clément: Well, it's not. One of the interesting takeaway we got from the analysis is that single ground applications have a 16 % success rate. When you have two combined grounds, you increase the success rates to 20%. But above that sort of threshold, when you have more than two grounds, the success rate decrease. So with three grounds is 15 % of success rate, four grounds it's a bit less as well. And when you have all five grounds, it's zero success. That means that none of the 10 applications we have reviewed raising all five, all five grounds succeeded. So the conclusion is that by doubling or quadrupling grounds, parties only modestly improves the prospect of success by a few percentage points. And by tripling the number of grounds, it actually, we can see a slight decline. So this is one of those counter-intuitive findings that challenges conventional wisdom. More is not more. Drivers for success is, on the contrary, to identify the most relevant ground which is susceptible to convince the court. As we know as lawyers, every case is different and a specific strategy must be put in place in order to find the best sort of combination. If a combination is seen as the best solution or sometimes there's just one single and sort of obvious ground that should be used by party.

Erwan: Thank you, Clément. one of the recent trends before French courts is for parties to raise corruption allegations in the hope that it will help them have the awards annulled. Do the findings of the report actually support this?

Clément: Well, we've seen an increasing number of challenges brought on corruption grounds. And in that case, corruption relates to international public policy. So this article 1525 paragraph, as many of our listeners know, French courts have shifted from a limited review, violation at the time must be flagrant, effective and concrete to nowadays maximalist approach. That means that the violation of the international public policy corruption being one of the element of that. Duration need only to be manifest, effective and concrete. So it's a lower threshold with a full examination of the facts and law not limited to the contents of the award. So the Paris Court of Appeal and the Court of Cassation have now embraced clearly a maximalist approach, which led to more challenges, but not necessarily to more setting aside of awards. As already mentioned, there is no correlation on that. Both courts have held evolving and at times opposing views on the intensity of the review, but we can say that now the positions of both courts seem aligned. But we can say that this is arguably the most dynamic and unpredictable area in French setting aside law right now. And it's clearly one to watch closely because from one case to another and the jurisprudence is clearly evolving.

Erwan: One of the grounds parties think will be most successful is the lack of independence and or impartiality of the arbitral tribunal. On paper, this appears as a peripheral ground for annulment, but what does the data say?

Clément: Well, first, when we talk about independence or impartiality of the arbitral tribunal, one has to look at the ground relating to the arbitral tribunal's mission, the mandate. When we look at the data, we see that over 70 % of those cases concerned allege lack of independence and or impartiality. Yet only seven challenges on this ground succeeded during the entire review period. And the report observes that these few decisions attracted disproportionate media attention relative to the issues actual significance, largely because Paris based arbitration practitioners form sort of closed knit community. So the answer is probably no here. And success rate shows that it's not necessarily the most powerful ground, but in general, we tend to have a very important media focus. French courts impose a duty of curiosity on parties, and they will assess whether circumstances were sufficiently notorious. Failure to investigate can then amount to a waiver by the parties to actually rely on those elements. So, in a nutshell, if you read the trade press, would think that arbitrator challenges are a major avenue, but the data says otherwise.

Erwan: Thank you, Clement. Now if a party wants to apply for the annulment of an arbitrary award, do you know how long and how much would it cost on average?

Clément: Yes, the data has been quite interesting on that. Average time from an award to a determination takes almost three years at the court of appeal level and almost five years when the court of cassation is involved. As to cost award at the court of appeal, well, we have a very wide range from 6,000 euros to 400,000 euros. The average relays around 80. This is deliberately and this is something I want to stress higher than in non-arbitration matters before French court. And that has been a policy choice to enhance Paris attractiveness as a seat and to adapt the cost award to the reality of arbitration matters. From specific nuance versus other jurisdiction, I would like to mention that France has a cost follow the event principle, but the quantum is discussionary and does not reflect actual cost in code, although it's it's higher than in other matters in France. And compare with Hong Kong, where we have a presumptive indemnity cost for unsuccessful challenges and New York, where each party bears its own costs.

Erwan: Now I'm sure our listeners would like to have your practical takeaways from all your work on the report. what would your recommendations be for arbitration practitioners and for in house counsel?

Clément: Yes, a few points from the review, at least from the French perspective. First for practitioners, the data proves that raising all five grounds result in 0 % success rate. So my advice is pick your strongest round and build your case around it. That's my first point. Second one, if you have a genuine, traditional argument, lead with it. The de novo review gives a real shot, 20 % success rate, as I said, which is better than any other grounds. My third point would be, well, watch out corruption. Corruption is a notion which is really evolving. And that's an area where courts are generally scrutinizing the facts, build robust evidence cases on corruption allegation. The court will now conduct a full review. So we just have to size the opportunity if the case presents such a risk. Then a challenge through the Court of Appeal takes many years. And if the Court of Casation is involved, even worse. So that's a factor that should be taken into account at the beginning of the post award strategy. Average cost awards of around 80,000 euros in average may not deter well-funded parties but can be relevant in settlement calculus and abuse of process applications, though quite rare, have succeeded and could serve as a deterrent. Now, for in-house council, my advice or recommendations from the analysis of the data, well, five main points. First, the drafting of the clause. Paris remains a strong seat. 83 % of challenges fail and the now specialized chamber of the Paris Court of Appeal provide a specialized English-friendly forum, but factor in that the volume of challenges is high and timelines are quite long. Seed selection considerations. If minimizing the risk of post-award challenging is a priority, compare France with Hong Kong. France has a high volume but low success. Hong Kong, for instance, has a low volume and similar success rate, likely due to indemnity cost deterrence I mentioned Don't be the kitchen sink client, as we discussed that. The data is clear. Insisting counsel raise every considerable grounds, waste costs and may actually reduce the odds. Find a focused challenge or accept the award would be my advice in that case. If you hold, and that would be my last point, if you hold a Paris City award, anticipate that the losing party may challenge it. The low financial barrier makes this common. Build the cost and delay of a potential three-year challenge into your commercial planning.

Erwan: Thank you very much for your insight, Clément. This certainly makes France stand out as one of the most interesting jurisdictions of the report. Thank you for listening to this podcast, the first of a series addressing the jurisdictions covered in the full report. Remember, you can download the full report from the Reed Smith website. Thank you for listening and see you soon on Arbitral Insights.

Outro: Arbitral Insights is a Reed Smith production. Our producers are Shannon Ryan, Amanda Saunders, and Mason Kautz. For more information about Reed Smith's global international arbitration practice, email [email protected]. You can find our podcast on all streaming platforms, reedsmith.com, and our social media accounts at Reed Smith LLP.

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