Welcome to our latest update, focused on bringing you closer to the pulse of arbitration in Paris. In this edition we have curated key arbitration points that we believe are important for you, our clients:

• A deep dive into the latest decision of the French Court of Cassation on the implications of sanctions on arbitration,
• Insights into the EU Commission’s recent actions against the UK concerning its failure to terminate its intra-EU BITs,
• Practical tips for addressing the post-award phase, and the options available to review an award,
• An exploration of the impact of international sanctions on the FET standard in investment arbitrations, and
• A personal note on my participation to the upcoming Swedish Arbitration Days!

Enjoy the read! Please do get in touch if you have any feedback or questions.

Ioana

LATEST FRENCH ARBITRATION CASE LAW

ARBITRATION & EU SANCTIONS: On 27 November 2024, the French Court of Cassation addressed the interaction of EU sanctions with arbitration by referring three preliminary questions to the CJEU.

The case arose from an ICC arbitration involving the Yemen Ministry of Oil and Minerals, the Yemen Oil and Gas Corporation (YOGC), and several companies over oil and gas contracts, leading to an award for damages against the companies. The companies contended that enforcing the award would contravene EU sanctions, specifically by indirectly making funds available to sanctioned entities. Citing uncertainties in the political situation of Yemen and the application of sanctions, the Court sought the CJEU's guidance on whether indirect payments to public entities influenced by sanctioned individuals or entities fall under the scope of EU sanctions, among other questions.

Takeaway? This decision shows the complex relationship between international arbitration and EU sanctions, especially in cases involving state entities and geopolitical complexities. It also echoes another recent referral to the CJEU made by a Swedish court over Russian sanctions.

(Read my analysis of the French Court of Cassation’s decision here)

REGIONAL HIGHLIGHTS – EU Commission’s referral of the UK to the CJEU over intra-EU BITs

On 16 December 2024, in a decisive action that highlights the ongoing tension between EU law and BITs within the EU, the EU Commission has referred the United Kingdom to the CJEU. This action marks a notable escalation in the enforcement of EU law over-intra EU BITs, which are seen as conflicting with the principles of EU law, particularly following the landmark Achmea and Komstroy rulings.

• The referral concerns the UK’s failure to terminate its BITs with Bulgaria, Czechia, Croatia, Lithuania, Poland, and Slovenia;
• These BITs are viewed by the Commission as incompatible with EU law, as they provide for investor-to-State arbitration mechanisms that the CJEU has found to undermine the autonomy of EU law and the “mutual trust between Member States”;
• Despite efforts to resolve the issue through a plurilateral treaty signed by 23 EU states in May 2020, aimed at terminating such BITs in a coordinated manner, the UK has not signed this treaty nor proceeded with bilateral terminations. This has led the Commission to initiate infringement proceedings, culminating in the referral to the CJEU;
• This development is part of a broader scrutiny by the EU Commission of Member States’ adherence to EU law in the context of intra-EU BITs and investment arbitration, as the Commission has previously launched infringement proceedings against several other Member States, including Finland, Austria, Sweden, Belgium, Luxembourg, Portugal, Romania, Italy, and Hungary.

PRACTICAL TIPS – Review of the arbitral award

While the issuance of the arbitral award is the culmination of the arbitration process, it does not always constitute the final word on every detail of the dispute. In light of the potential for human error and the evolving nature of complex disputes, most arbitration rules provide the parties with the unique opportunity to seek modifications to the award (e.g., correction, interpretation, supplementation, revision, and remission) to ensure its finality and accuracy. Here is some practical guidance for effectively addressing this critical post-award phase:

• Understand the scope of review: Familiarize yourself with the specific grounds under which the arbitral tribunal may review its award. This typically includes correction of clerical or calculation errors, interpretation of ambiguous parts, supplementation for omitted claims, and revision in cases of fraud or similar circumstances;
• Make timely requests: Pay close attention to the deadlines for requesting a review of the award, as most arbitration rules and laws impose strict time limits within which parties must submit their requests for correction, interpretation, or supplementation;
• Be precise: When requesting a correction or interpretation, be precise and specific about the errors or ambiguities you want the tribunal to address. General or broad requests are less likely to be successful. Clearly identify the mistake, the proposed correction, or the specific ambiguous statement and the clarification sought;
• Substantiate your requests: Support your request with clear evidence or rationale. For corrections, provide calculations or demonstrable evidence of clerical errors. For interpretations, explain why the language is ambiguous and how it impacts the understanding of the award;
• Make separate requests for different types of review: If you are seeking, for example, both correction and interpretation, consider submitting separate requests. This can help ensure that each of your requests is clearly articulated and properly considered by the tribunal under the relevant rules;
• Engage with the tribunal’s corrections: If the tribunal initiates corrections on its own, review these changes carefully. Make sure they accurately address the errors without introducing new ones;
• Consider the implications of supplemental awards: If you are requesting a supplemental award for omitted claims, consider how this could affect the overall outcome of your case. Be prepared to present a concise argument explaining why the omission significantly impacts the award.

SECTORIAL NEWS – The impact of sanctions in FET arbitration

The interaction between international sanctions and international investment agreements in recent years has posed unique challenges for arbitral tribunals, especially concerning the application of the fair and equitable treatment (FET) standard. This issue has gained importance due to the increasing use of sanctions on the global stage (Afghanistan, Belarus, Burma, Central African Republic, Cuba, DRC, Ethiopia, Iran, Iraq, Lebanon, Libya, North Korea, Russia, Syria, Yemen, etc.) and their potential to impact the merits of arbitration cases significantly.

• Interference of sanctions with FET: Sanctions can deeply influence how tribunals interpret and apply the FET standard. As individuals and entities are often placed on sanctions lists without due process, this opens a pathway for affected investors to initiate arbitration based on due process violations under the FET standard owed by host states to foreign investors;
• Challenges posed by sanctions: The manner in which sanctions are imposed can be challenged under the FET standard, especially if the host state fails to protect foreign investors from the effects of primary and secondary sanctions imposed by a third state. This is particularly the case in jurisdictions like the EU, where measures such as the EU Blocking Statute aim to mitigate the impact of third-state sanctions;
• Violation of the investors’ legitimate expectations: In the context of Russian countersanctions, for example, foreign investors might argue that changes to the legal framework governing foreign investments breach the FET standard by violating their legitimate expectations at the time of investment. Issues such as discriminatory measures or restrictions on the transfer of investments could constitute breaches of the FET standard and specific provisions of Russia’s BITs;
• Relevant case law: Scenarios can be envisaged where specific case facts might lead to investment treaty claims based. Recent jurisprudence provides illustrative examples, such as (i) the Kadi and Al Barakaat International Foundation decision, where the CJEU emphasized the primacy of fundamental rights under EU law, including the right to property and judicial review, over UN sanctions, (ii) the four multibillion dollar investment arbitrations initiated by Qatar Airways in 2020 against the UAE, Bahrain, Saudi Arabia and Egypt, claiming that denial of access to these countries’ airspace as a result of their joint blockade against Qatar constituted expropriation and violated other investment protection standards, including FET, or (iii) the award in the Mohammad Reza Dayyani and others v Korea PCA case, which involved a claim that South Korea’s implementation of UN sanctions exceeded the mandated scope, justifying an FET claim that the tribunal granted.

BY THE WAY

2025 starts with exciting times ahead as I will be attending the Swedish Arbitration Days on 23-24 January at the beautiful Grand Hotel in Stockholm. This event will be a deep dive into the theme of ”Information in Arbitration” with leading minds in the field. The highlight ? A gala dinner in the iconic Stockholm City Hall, which is no less than the historical venue of the Nobel Prize ceremonies!

As a Board Member of the SCC Arbitration Institute I can only encourage you to join us and participate to these discussions on the future of arbitration so don’t miss out and register. I would love to see familiar faces there, so please drop me a note if you’re planning to attend!