Note on the judgment of the Court of Appeal of Paris retracting the award in the Bernard Tapie v. Crédit Lyonnais arbitration

Daniel Arthur Laprès[1]

1. - Introduction

On February 17, 2015, the Court of Appeal of Paris rendered the latest in a long series of judgments involving a dispute between the flamboyant businessman Bernard Tapie and his corporate group’s former banker, the Crédit Lyonnais, over events that occurred in the early 1990s.[2]

The Court retracted an ad hoc arbitral award holding that the Resolution Consortium of the Crédit Lyonnais[3] (CDR) was liable to pay some € 403 million to Mr. Tapie and his corporate entities because of the Bank’s wrongful conduct in connection with the sale of the Tapie interests in the German sporting goods company Adidas (the Award).

The dispute has drawn widespread interest over the years in part because of the high profile of Mr. Tapie, a self-made business mogul whose notoriety soared when his French sports teams achieved international triumphs in cycling[4] and football,[5] which popularity earned him the role of host of a television show dedicated to the identification of promising entrepreneurs,[6] and in 1992 an invitation to join the Socialist Government as Minister of Urban Affairs,[7] and who at the apex of his glory plunged into a sea of criminal pursuits that landed him in jail for six months in 1993,[8] who then exploded into corporate and personal bankruptcy, and who after his release from jail published a book about that experience,[9] while launching a career as a pop singer,[10] and then as an acclaimed actor on television, in movies and in the theater,[11] and who has most recently bought two regional newspapers.[12]

On February 17, 2015, the Court of Appeal of Paris retracted the Award because it found that it was vitiated by fraud committed by Mr. Tapie and one of his lawyers, who colluded with one of the arbitrators to obtain the rendering by the Arbitration Tribunal of an award in Mr. Tapie’s favor.

On December 3, 2015, the Court of Apeeal of Paris then judged that the claims of the Tapie interests were largely inadmissible, and wholly ungrounded, and dismissed them all but for the Tapie spouses claim for moral damages, granting them 1 Euro, while that the Tapie return the amounts paid to his side pursuant to the Award, that is some € 403 million.

In the meantime, the conditions in which the arbitration was organized have ensnared a bevy of high-ranking French government officials in criminal investigations, of whom the most renowned on the international level is the current head of the International Monetary Fund, Ms. Christine Lagarde, who was Minister of Finance when her department approved the arbitration agreement and who has been indicted for criminal negligence for her role in the matter.

Because of the amounts of money at stake, and because of the light it sheds on dysfunctions in the arbitral process, the case will likely impact the image of France, and more particularly that of Paris, as a center for international arbitration.

After a summary of the facts and procedures of the case (2), we will highlight those points that most merit attention in the context of a comparative approach to arbitration law, namely the distinction between domestic and international arbitral proceedings and how that distinction can affect the availability of recourses (3) and the meaning of the requirement of impartiality of arbitrators and the limits on their relations with parties and with the latter’s lawyers (4). Then a hypothesis is developed as to how an analogous case on the facts would be treated in the law of the People’s Republic of China (PRC) and from the comparison questions are raised about reforms to optimize the arbitration process (5). Thus, the focal point of this analysis is the February 17, 2015 judgment of the Court of Appeal of Paris and that rendered on December 3, 2015, dealing with the merits of the Tapie interest claims in French law, is not commented.

2. - The facts and procedures

As of the early 1990s, Mr. Tapie and his wife had gathered their holdings under the umbrellas of two companies: Financière et Immobilière Bernard Tapie (FIBT) and Groupe Bernard Tapie (GBT).[13] While the former held a diversity of the couple’s interests, the latter owned the majority of shares in Bernard Tapie Finance (BTF), which itself controlled, via a wholly owned German subsidiary (BTF GmbH), the group’s shares in the German sporting goods company Adidas AG, which had been acquired in July 1990.

The acquisition of Adidas for 1.6 billion French Francs[14] was financed by a consortium of banks led by Société de Banque Occidentale (SDBO), a subsidiary of the Crédit Lyonnais (referred to below collectively as the Bank), that had traditionally acted as lead banker for Mr. Tapie’s operations.

When Mr. Tapie entered the French Government in 1992, he chose to cease his economic activities and to that end, FIBT, GBT and BTF concluded an agreement with SDBO whereby the Tapie group’s debts to the Crédit Lyonnais group would be paid back, in particular from the proceeds from the sale Adidas and from the transfer of GBT’s industrial assets to a company to be constituted, Newco, the capital of which would be shared between the Bank and the Tapie group.

At that juncture, the Tapie group was in dire financial straights and the agreement with Crédit Lyonnais was thus intended to give the group time to sell enough assets to repay its creditors while hopefully leaving a surplus with which to provide for Mr. Tapie’s re-orientation from business owner/manager to rentier/politician.

On December 10, and December 16, 1992, FIBT, GBT and BTF concluded agreements with SDBO by which (i) BTF undertook irrevocably to sell upon first demand upon until February 15, 1993 the entirety of its 78% stake in BTF GmbH for 2.085 billion French Francs to any acquirers designated by SDBO, thus valuing Adidas at a total of 2.673 billion French Francs, (ii) BTF appointed irrevocably for the same period SDBO as “agent” (in French, “mandataire”) for the sale of the shares in BTF GmbH, (iii) all the proceeds from the sale would be imputed to the settlement of their debts to SDBO, and (iv) the three companies would merge into a single entity.

On February 12, 1993, the shares were transferred at the agreed price to eight buyers introduced by SDBO, including Clinvest, a subsidiary of the Crédit Lyonnais, a Luxemburg company called Rice owned by Mr. Robert Louis Dreyfus, and six offshore companies.[15] To finance their acquisitions, some of the buyers obtained “limited recourse loans” from Crédit Lyonnais at an annual rate of interest of 0,5%, under agreements stipulating that, in the event of resale of their shares, any gain would be split on the basis of one third for the acquirer and two thirds for the Bank, and in the event that the option to buy the shares were not to be exercised, they could keep the shares and would bear no obligation to repay the principal of the loans. Consequently, the second scenario was extremely unlikely to arise since even if the Adidas shares became almost worthless the Bank would exercise the option to buy them, i.e. to preserve its right to be repaid the principal of the loans.[16]

On that same date, all the acquirers granted an option to buy their shares to a Belgian company owned by Mr. Louis Dreyfus for a price of 3.498 billion French Francs.

Mr. Dreyfus’ company exercised the option on December 22, 1994.

The financing of the acquisition of Adidas was 100% provided by a consortium of banks led by SDBO and including two other subsidiaries of the Crédit Lyonnais, Omega and Coatbridge.

Thus for the duration of the portage, from February 12, 1993, to December 22, 1994, the Crédit Lyonnais actually controlled BTF GmbH (54.8% of its shares), and therefore Adidas.

EVOLUTION OF SHAREHOLDERS OF BTF GmbH

	SHARE-	AGREEMENT	SHARE-
	HOLDINGS	DISTRIBUTING	HOLDINGS
	BEFORE	BTF'S	AFTER
		78%
BTF	78.0
CLINVEST	10.0	9.9	19.9
OMEGA		19.9	19.9
COATBRIDGE		15.0	15.0
PHENIX (AGF)		3.2	3.2
UAP (WORMS)	2.0		2.0
EFC Mrs. Beaux	5.0		5.0
RICE		15.0	15.0
METROPOLE (AGF)	5.0	9.0	14.0
EFC		3.0	3.0
MATINVEST		3.0	3.0
TOTAL	100.0	78.0	100.0

On November 17, 1995, Adidas carried out an initial public offering (IPO) of its shares and had them quoted on the Frankfurt Stock Exchange. The IPO raised 3.28 billion Deutschmarks, that is some 11 billion French Francs at the exchange rate then applicable.

In the meantime, a dispute had arisen between Mr. Tapie and the Crédit Lyonnais. The former claimed to have been outraged upon discovering how the latter had organized the sale of Adidas to its own benefit.[17]

On March 13, 1994, Crédit Lyonnais, SDBO and Mr. Tapie signed a Protocol to terminate their banking relationship.

Within a few days of the conclusion of that agreement, the Bank took advantage of a technical failure by Mr. Tapie in the performance of his personal guarantee of the debt owed by his group to the Bank, to call the loans. More particularly, Mr. Tapie was obligated to provide by March 24, 1994 an expert’s evaluation of his personal property. When the report was not communicated to the Bank on March 24, a sheriff served notice on Mr. Tapie on March 25 of rescission of the memorandum. Mr. Tapie submitted the expert’s evaluation within 48 hours, but it was too late, the Bank would not relent.

Instead, the Bank took the position that the original repayment schedule on the loans had been reinstated, and of course Mr. Tapie and his group were unable to make the overdue payments.

This disproportionate and drastic move by the Bank was atypical of the manner in which banks in France treat a major customer, especially when it employs several thousand people.

One explanation for the aggressiveness of the Bank was that it was having difficulty buying up the GBT shares circulating among a large number of small shareholders, and the plan to immunize the Bank against any actions by GBT/BTF over the conditions of sale of the stake in Adidas was not working to its satisfaction.

As Mr. Tapie and his companies were unable to repay the loans, the Bank then brought suit before the Commercial Court of Paris.

On November 23, 1994, the Superior Court of Paris declared that the Protocol of March 13, 1994 had been terminated and that the 303 million French Francs owed to the SDBO were immediately due.

On November 30, 1994, by judgments rendered by the Commercial Court of Paris, BTF, GBT, FIBT, Mrs. Tapie, Mr. Tapie and two of Mr. Tapie’s other companies (Bernard Tapie Gestion – BTG – and Alain Colas Tahiti - ACT - through which he owned one of the world’s largest private yachts, The Phocaea), were all put into receivership.

On December 14, 1994, the Commercial Court of Paris put BT and FIBT into liquidation.

On January 11, 1995, ACT was put into liquidation.

On January 23, 1995, Mr. and Mrs. Tapie were put into liquidation.

On March 31, 1995, GBT was put into liquidation.

On May 31, 1995, the Commercial Court of Paris ordered that the liquidation procedures be joined, with respect to all the Tapie companies, except BTF that was transferred to SDBO for a price of 500 million French Francs pursuant to a pledge of shares in its favor.[18]

On February 21, 1996, the Tapie group’s liquidators initiated an action before the Commercial Court of Paris against SDBO and the Crédit Lyonnais for violations of their duties in connection with the sale of the Tapie’s group’s interests in Adidas.

On November 7, 1996, that Court found SDBO liable to pay a provision of 600 million French Francs and ordered an expert’s report.

The Bank appealed that judgment to the Paris Court of Appeal, which in the meantime had also been seized of the appeal of the Tapie spouses against the judgment declaring the Protocol of March 13, 1994 to have been rescinded and declaring immediately payable the amount of their debts at that time, as well as of an appeal by a group of small shareholders in GBT seeking reparation for the harm they suffered in connection with the sale of Adidas.

The Court of Appeal joined the procedures and on September 30, 2005, it handed down a judgment finding jointly liable SDBO (under its new name CDR Créances) and Crédit Lyonnais toward the Tapie group liquidators, reserving its judgment on the questions of liability for the wrongful liquidation and of the tax consequences of its orders, and dismissing all the other claims of the Parties.

The Court concluded that the agreement signed by BTF on December 16, 1992 with SDBO “corresponded perfectly” to an “agency” agreement (“mandat”) under the applicable legal régime defined in articles 1984 and following of the Civil Code.[19]

The Court recalled that agents owe to their principals duties of “loyalty, transparency, disclosure, and rendering of accounts”[20] and that article 1596 of the Civil Code prohibits agents from buying the property which they are charged by their principals to sell and that any such sales are void.

On the facts as it found them, the Court of Appeal concluded that all of SDBO, Crédit Lyonnais and Clinvest, though separate legal entities, were obligated as agents in the sale of Adidas. All the relevant operations were approved at the highest executive levels of Crédit Lyonnais. The various aspects of the operation were distributed between SDBO and Clinvest according to the nature of their general activities: SDBO as lender, Clinvest as investor. The Protocol of March 13, 1994 terminating their banking relationship between the Parties was signed by the Managing Director of the Crédit Lyonnais acting for both Crédit Lyonnais and SDBO. Crédit Lyonnais paid to Clinvest amounts that it used to purchase BTF shares. In representations before the public and French Parliamentarians about the sale of Adidas, it was the Chairman of the Crédit Lyonnais who intervened.

The Court of Appeal judged that Clinvest’s acquisition of shares on February 12, 1993 had not been disclosed to Mr. Tapie (Clinvest had acquired shares when the Tapie group originally took over Adidas in 1990 and 1991, and Mr. Tapie was presumably aware of that initial acquisition).

It was upon the specific instruction of the Chairman of Crédit Lyonnais that Clinvest had made the additional acquisition, and it intervened instead of Crédit Lyonnais to avoid that the latter’s role be disclosed.

The Court characterized the operation as an illegal portage in the sense that (i) the intermediate purchasers of the BTF shares were obligated to sell them upon first demand, (ii) there was virtually no possibility that they would not in the end sell the shares since even if the value of Adidas had gone almost to zero the Bank would have exercised its option to buy them (lest, according to the terms of the agreements, the loans granted to the acquirers be abandoned while they could keep the shares), (iii) the entire operation was financed by the Bank, and (iv) the Bank would capture two thirds of the gain from the sale of the BTF shares by the portage acquirers to the ultimate buyer, a company owned by Mr. Louis Dreyfus.

The Court of Appeal even chastised the executives of the CDR for their insistence that had been no portage even though it had not occurred under their watch and that they had thus “tarnished the image, the reputation and the credibility of a financial institution of which it has been said that it has difficulty in recognizing its errors and in assuming their consequences.”

According to the Court of Appeal, Crédit Lyonnais had breached its duty as agent in failing to inform Mr. Tapie or any of his companies in the fall of 1992, that is to say approximately the same time frame when the Adidas operation was put in place, that it was in contact with a potential acquirer of the Tapie group’s interests in Adidas, and for a price of 4.85 billion French Francs compared with the price of 2.085 billion French Francs at which Mr. Tapie would sell them in the operation as mounted by the Bank.

In order to evaluate the prejudice suffered by the Tapie group because of the Bank’s violations of its duties as agent, the Court of Appeal reasoned that the Bank had a “duty as banker agent to propose to the Tapie Group the same terms of financing as it afforded to the acquirers of the Adidas shares”. Therefore, the reference by which the Group’s damages would be measured was the difference between the price actually paid by the acquirers, that is 2.085 billion French Francs and the price at which they sold the shares to the Dreyfus companies, that is 3.498 billion French Francs. That difference, had the Bank lent its financial support to the Tapie Group instead of the acquirers in the portage operation, namely 1.313 billion French Francs,[21] would then, according to the portage operation agreements, have been divided two thirds for the Bank and one third for the Tapie Group, such that the Tapie Group would have received 438 million French Francs.

To that amount was added the accumulated interest and the total was expressed in Euros, namely 135 million Euros.

CDR Créances and Crédit Lyonnais filed a recourse before the Cour de Cassation, France’s highest court in civil and commercial matters.[22] That Court on October 9, 2006, vacated the judgment of the Court of Appeal as regards the findings of liability of CDR Créances and Crédit Lyonnais.

The Cour de Cassation ruled that the agency agreement had been concluded exclusively with CDR Créances (i.e. SDBO), not with Crédit Lyonnais, so the Court of Appeal had erred in holding the latter liable to BTF as a party to the agency agreement. Also, the Cour de Cassation ruled that, since the Court of Appeal had not found SDBO to be a “fictitious” entity, nor that its assets had been co-mingled with those of Crédit Lyonnais, nor that the latter had intervened in the performance of the agency agreement, then it could not be held de facto liable on the agency agreement with its subsidiary.

Finally, the Cour de Cassation ruled that neither CDR Créances nor Crédit Lyonnais bore any obligation as agents to finance the Adidas share sale that the Bank had put together.

The case was thus sent back to the Court of Appeal of Paris for a new decision based on the principles set down by the Cour de Cassation.

The result satisfied none of the Parties. For the CDR, there was now a risk of an even greater liability, whereas the Tapie interests might lose everything.

So, on November 16, 2007, the liquidators of the Tapie group companies, and the Tapie spouses for their own account on the one hand and CDR Créances and CDR-Consortium de Réalisation on the other hand (referred to below as the CDR Companies), concluded an agreement whereby the court actions opposing them would be abandoned and their disputes would be submitted to arbitration before a panel of three arbitrators.[23] It was agreed that the arbitrators were to consider themselves bound by the already rendered judgments, and that they would render an award governed on the substance by French law with application of the procedural rules set down in articles 1460 and following the French Code of Civil Procedure (CCP).

The three arbitrators were designated in the arbitration agreement: Mr. Pierre Mazeaud, former President of France’s Constitutional Court, Mr. Jean-Louis Bredin, founding partner of one of France’s most prestigious law firms, and Mr. Pierre Estoup, former First President of the Court of Appeal of Versailles.

The arbitration agreement was submitted to the approval of France’s Ministry of Finance as the CDR, though a commercial company, was owned by a public enterprise, the Établissement Public de Financement et de Restructuration (EPFR). The Minister of Finance then in office, Ms. Christine Lagarde, personally approved the agreement, but a dispute would later arise about the contents of the agreement as approved.

The Arbitral Tribunal rendered a first award on July 7, 2008, ruling that the Bank had committed two wrongs consisting in the violation of the agent’s duty of good faith and in the violation of the prohibition against agents acting as counterparties vis-à-vis their principals.

The Tribunal found the CDR companies liable to pay the Tapie group liquidators 240 million Euros, plus interest, to pay the Tapie spouses 45 million Euros to compensate the moral harm they had suffered, and to pay another 8.448 million Euros for the expenses of the liquidation.

On November 27, 2008, the Arbitral Tribunal rendered three more awards, one concerning the liquidation expenses and two by way of interpretation of the award of July 7, 2008.

All the awards, on which orders of exequatur had been obtained, were served on the defendants on March 3, 2009.

The payments ordered by the Arbitral Tribunal were made and the Tapie group liquidators were thus able to pay off creditors of the group, with result that GBT and FIBT regained solvency. By a judgment of May 6, 2009, the Commercial Court of Paris ordered the revision of the bankruptcy judgments against Mrs. And Mr. Tapie and his companies on the basis that they would never have been put into liquidation had they received from the Crédit Lyonnais their rightful due for the sale of Adidas.

From the moment of the disclosure of the awards rendered in favor of the Tapie interests, a public clamor broke out. Numerous political figures expressed suspicions that the arbitration had been organized with the deliberate intention of favoring Mr. Tapie.[24]

Several French Parliamentarians filed actions before the Administrative Tribunal of Paris contesting the legality of the award of moral damages, the decision of the Ministry of Finance to approve the arbitration agreement, and its decision not to have the CDR exercise any of the legal recourses that might have been implemented in the months following the award’s issue. But these actions were dismissed because the quantification of the moral damages award was within the mission of the Arbitral Tribunal and there was not, at least at that time, any proof of error in the Ministry of Finance’s exercise of its discretion to approve the arbitration agreement, or that not to have the CDR file recourses against the award.[25] The judgment of the Administrative Court[26] was confirmed on appeal[27] and upon final recourse by the Conseil d’Etat (France's highest court in administrative law matters) on July 26, 2011.[28]

In the meantime, on October 27, 2010, the Court of Public Audits rendered a highly critical report of the CDR’s management of the Tapie arbitration and forwarded the file to the competent Prosecutor General.[29] This would eventually trigger the inquiry into Ms. Lagarde’s management of the matter, including her indictment by the Cour de Justice de la République (the court in France that hears cases brought against political officials on allegations of criminal conduct violative of State interests). Ms. Lagarde is charged with having negligently allowed the embezzlement of public funds by her approval of the provision of the arbitration agreement authorizing the Tribunal to award moral damages up to 50 million Euros and for not having caused the CDR to exercise its recourses immediately after the award was rendered.[30]

After the election of a Socialist Government in June 2012, a fresh wave of indignation against the Award swept the country.

In September 2012, the Public Prosecutor of Paris opened an inquiry into the arbitration based on suspicions of abuse of social powers and receipt of the fruits of that infraction.

This inquiry culminated in the indictment in May and June of 2013 of Mr. Tapie,[31] his principal lawyer before the Arbitration Tribunal, Mr. Lantourne, the arbitrator Mr. Estoup, and the former director of Ms. Lagarde’s office, Mr. Stéphane Richard, at that time Chief Executive Officer of one of France’s major telecommunications companies, Orange. Mr. Jean-François Rocchi, former Chairman of the CDR, was indicted for abuse of social powers.

The judges charged with investigating the criminal case ordered the provisional seizure of at least some of Mr. Tapie’s assets as security in the event of an ultimate conviction and consequent obligation to repay any ill-begotten gains of the arbitration, including life insurance policies worth 20.7 million Euros, shares worth 69.3 million Euros in a Paris mansion and a villa in Saint Tropez worth 48 million Euros,[32] and a bank account in Hong Kong containing 17 million Euros.[33]

At that point, the CDR Companies decided to launch an all-out attack to challenge the awards.

On June 28, 2013, the CDR Companies sued the liquidators of the Tapie spouses and of the companies in the Tapie group before the Court of Appeal of Paris seeking a revision entailing retraction of the arbitral awards of July 7, 2008, and November 27, 2008, a reopening of the debates, restitution of 404,623,082 Euros plus the costs of the arbitration as well costs for the legal action of one million Euros.

On July 26, 2013, the CDR seized the Arbitral Tribunal itself, despite its presumptive dissolution after the termination of its mission, of an application for retraction of its awards.[34]

On July 1 and July 28, 2013, the CDR Companies filed applications before the Court of Appeal of Paris to have the awards vacated, and on July 25, 2013 they filed appeals to contest the Awards, but these applications were all declared inadmissible on April 10, 2014, because entered after the legal deadline. As no recourses were directed against the dismissals of these recourses, they became final.[35]

On October 1, 2013, the CDR and its parent the EPFR filed before the Superior Court of Paris an action in tort against Mr. Tapie, his lawyer, Mr. Lantourne, and the arbitrator Mr. Estoup, while specifying in accordance with French law, that this civil action could not be heard until the criminal case on the same facts would have been closed.

For his part, Mr. Tapie, in an apparent attempt to pre-empt the Court of Appeal’s decision on the CDR’s application for revision of the awards, filed an application with the Commercial Court of Paris to have new arbitrators appointed, who could then hear any application of the CDR for revision of the Awards. But the Court ordered the suspension of its instruction of the case pending the outcome of the criminal investigation.[36]

On February 17, 2015, the Court of Appeal rendered its judgment declaring that Mr. Tapie, his lawyer, Mr. Lantourne, and the arbitrator, Mr. Estoup, had fraudulently colluded to rig the arbitration in favor of the Tapie interests, it retracted the awards and set a date in September, 2015 to hear the Parties’ arguments on the substance of the case, that is whether the CDR was liable to the Tapie interests for the conditions in which the sale of Adidas was carried out by the Bank.

Two days later, the CDR summoned Mr. Tapie and his companies to repay the amount of the vacated award.[37]

Mr. Tapie et al. have filed a recourse before the Cour de Cassation to contest the judgment of the Court of Appeal.[38]

On December 3, 2015, the Court of Appeal of Paris judged the merits of the Tapie side. Considering that the Court had already retracted the Award for reasons of fraud imputed to the Tapie side, it can hardly be surprising that the Court then dismissed the claims against the Bank. The intricacy of the Court’s reasoning is no doubt intended to preclude the success of the already announced recourse by the Tapie side to the Cour de Cassation on this second judgment.

3. - On the Court of Appeal’s jurisdiction - the distinction between domestic and international arbitration

This distinction played a crucial role in the outcome of the CDR Companies’ action to have the awards revised.

For their recourse to be admissible, the CDR Companies had to convince the French courts that the arbitration was internal.

3.1. - The legal framework in French law with respect to recourses against awards in internal arbitrations

While France adopted a reform of its régime governing arbitration in 2011,[39] the case at hand was subject to the rules in effect before the reform.

Under the new régime, the recourse exercised by the CDR Companies would be available regardless of whether the arbitration were deemed to be internal or international.

But, under the régime applicable in the case at hand, where an award is deemed to be internal, then the parties may exercise any of three recourses.

First, under article 1482 of the former CCP, the dissatisfied party may appeal before the courts unless the parties have expressly excluded that possibility. In the case at hand, the Parties had excluded such appeals in article 8 of the Arbitration Agreement.[40]

Secondly, where no appeal is possible under article 1482 of the former CCP, then under its article 1484, the parties may apply to have the award voided, even if such latter recourse were to have been excluded by the parties.[41] But this recourse is only available on limited grounds.[42] The application is brought before the Court of Appeal seating in the jurisdiction where the award was rendered. When an award is voided, unless the parties have agreed otherwise, the Court of Appeal renders a judgment within the terms of reference subscribed by the parties in the arbitration agreement.

Article 1486 of the former CCP provides that the recourses under the above articles 1482 and 1484 must be exercised within one month from the service of the award bearing mention of the grant of exequatur on the party that exercises them.

Thirdly, under article 1491 of the former CCP, a dissatisfied party may apply for revision of the award in the same conditions as applicable with respect to judgments, namely, as provided in article 595 of the CCP:

· if, after the rendering of the award, it is revealed that it was obtained by fraud committed by the party in whose favor it was rendered,

· if, after the award, decisive elements of proof retained by one of the parties are uncovered,

· if the award was rendered on the basis of elements of proof admitted to be or characterized by a judgment as false since the judgment (or award) was rendered,

· if the judgment (or award) was rendered on the basis of attestations, testimony or sworn statements declared by a judgment to have been false by a judgment rendered after the award was rendered.

In any case, revision is admissible only if the applicant can demonstrate that it was unable, without any fault on its part, to have raised its complaint before the award became res judicata.[43]

The recourse is only available to the parties to the judgment or award.[44]

Article 596 of the CCP provides that applications for revision must be filed within two months from the date on which the applicant became aware of the justification for revision that it invokes before the court.

According to article 1491 of the pre-reform CCP, applications for revision are filed before the Court of Appeal with jurisdiction over the other recourses.

3.2. - The legal framework in French law with respect to recourses against awards in international arbitrations

Article 1492 of the former CCP defines an arbitration as international when “it involves interests of international commerce”. The definition of international arbitration is unchanged in article 1504 of the revised CCP.

According to article 1504 of the former CCP, an award rendered in France with the context of an international arbitration may give rise to applications for voiding in the following cases:

· the arbitral tribunal rendered an award in the absence of an arbitration agreement or if such agreement is void or expired,

· the tribunal was improperly constituted or the single arbitrator was improperly appointed,

· the tribunal rendered an award in disregard of the mission conferred upon it,

· the rights of the parties to defend themselves were not respected,

· the recognition or the enforcement of the award is contrary to international public order.

Article 1505 of the former CCP requires that the application for voiding of the award must be exercised within one month from the service of the award declared to be executory on the applicant party. The application is filed before the Court of Appeal in the jurisdiction where the award was rendered.

There is no right provided in the former CCP to bring an appeal against an award rendered in France in an international arbitration.

Nor is there any right specified in the former CCP to bring an application before a court to obtain revision of an award rendered in an international arbitration.[45]

3.3. - The judgment

In response to the challenge to its jurisdiction,[46] the Court of Appeal applied article 1492 of the former CCP régime according to which an arbitration is international “if it involves international commercial interests”.

The Court ruled that the capacity and nationalities of the Parties are not decisive as to the qualification of an arbitral proceeding as internal or international. Nor is the Parties’ qualification of their proceeding binding upon it. Nor are the law applicable as to the substance of the dispute or the law governing the arbitration procedure decisive as to the qualification of the arbitration as international or domestic.

Instead, the Court found that the key criterion is whether the operation unfolds in economic terms in more than one country, meaning that there occurs a transfer across borders of goods, services, capital, technology or personnel.

The Court noted that the arbitrators were seized not with respect to a dispute about an appointment to sell shares in the German subsidiary of BTF, which was not a party to the arbitration, as was not BTF itself (since its liquidators had taken over its management and were acting in its interests), nor with respect to the promise of purchase or the promise to sell the said shares, but instead pursuant to an arbitration agreement concluded on November 16, 2007, between the CDR Companies on the one hand, and the liquidators of the Tapie group and of the Tapie spouses on the other hand, in order to resolve in a “global and definitive manner” the disputes opposing the parties actions before various State tribunals, namely:

· the action alleging liability of Crédit Lyonnais and SDBO in the Adidas affair for violation of the duty of good faith and for violation of the prohibition against an agent intervening as a counterparty to the promoted transaction,

· the action alleging liability of the CDR Companies for abusive support and abusive rupture of the grant of credit,

· the rejection of the claim of SDBO for the balance of loans granted to Alain Colas Tahiti based on the illegality of the cause of the loan.

The Court considered that these disputes related to the resolution of numerous financial links established in France between a French bank and its French clients and with respect to the alleged violations by the former of its duties to the latter and the resolution thereof, whatever it might be, would not involve cross-border financial flows or transfers of securities.

On that basis, the Court concluded that the arbitration “does not involve international commercial interests”.

The Court added that it was a matter of indifference that the violations imputed to the Bank concerned its role in the transfer of shares held in the capital of a foreign company by a company in the Tapie group, which in any case was not party to the arbitration.

The Court also declared that it was irrelevant that the notice of the award referred to the provisions applicable in international arbitrations, since the qualification of the arbitration does not depend on the intention of the parties.

The Court therefore ruled that it had jurisdiction to entertain the application for revision based on article 1491 of the CCP as it was written as of the date of the rendering of the award.

Under article 595 of the CCP, an application for revision is admissible only if the applicant was unable, without any fault on its part, to avail itself of the cause it invokes before the criticized decision became res judicata and the application must be filed within two months from the date on which the applicant became aware of the cause of revision it invokes.

Thus the CDR Companies were obliged to prove that the fraud they were invoking as the justification for their application for revision become known to them less than two months prior to their service of the summons to appear on the Tapie interests, that is, as of June 28, 2013.

The CDR Companies argued that they first learned of the fraud that they would invoke to justify the revision of the arbitration as of June 7, 2013, when they gained access to the file compiled in the criminal case under investigation by an “instructing judge” involving suspicions of, inter alia, fraudulent collusion between one of the arbitrators and one of Mr. Tapie’s lawyers. The CDR Companies could not have obtained access to that file unless they filed a complaint against the Tapie interests. Such a complaint could not been filed prior to the disclosure of sufficiently solid grounds for the charges, lest the complainant be subsequently exposed to counter-charges of false denunciation to a judicial authority, which is a criminal offence under French law and entails civil liability to repair harm caused to the person improperly accused.

The Tapie interests agued that the CDR Companies had received notice of the possibility that fraud had occurred as early as 2008. Thus, in October of that year, the CDR Companies sought clarification from the Tapie side with respect to a meeting and correspondence that had apparently occurred in 1999 between one of Mr. Tapie’s lawyers and one of the arbitrators, which meeting concerned the dispute over the sale of Adidas. But that lawyer then denied that the said meeting and correspondence had related to the disputed conditions of the sale of Adidas.

The arbitrator subject to suspicion had declared prior to the arbitration that he had never issued opinions or advice nor participated in any arbitration at the request of the liquidators of the Tapie Companies or the Tapie spouses, other than that he had acted as arbitrator in three matters in which Mr. Tapie’s lawyer had represented one of the Parties.

Upon learning of these situations, the CDR Companies had considered demanding the withdrawal of the arbitrator in question at least seriously enough to have consulted two law professors for their opinions. But both replied that there was not sufficient evidence to contradict Mr. Tapie’s lawyer’s denials of prior contacts with the arbitrator and the suspicions of compromise of the impartiality of the arbitrator were not convincing.

The Tapie interests also referred to an incident in November 2007 when a lawyer for the CDR Companies protested to the Arbitral Tribunal that a summary prepared by the Tapie side had been sent to all the arbitrators even before the arbitration agreement had been signed. But the Court of Appeal concluded that this information alone would not have sufficed to justify suspicion of fraudulent collusion between the Tapie side and the indelicate arbitrator. Furthermore, as the President of the Arbitral Tribunal had specifically declared that no memorials could be filed with the Arbitral Tribunal before the approval of the arbitration agreement by the Commercial Court of Paris, it was reasonable to assume that the arbitrators had not taken account of the disputed summary.

In short, whatever information was known to the CDR Companies prior to their gaining access to the criminal investigation file on June 7, 2013, could not be considered as requiring them to act thereon by applying for revision of the award.

4. - The proof of fraud

In evaluating whether fraud had occurred, the Court of Appeal made the following findings of fact, based largely on the revelations in the criminal investigation.

Mr. Tapie, and one of his lawyers, Mr. Lantourne, on the one hand, and the arbitrator Mr. Estoup, on the other, had deceived the CDR Companies with respect to their previous relations in connection with the dispute between Mr. Tapie and the CDR Companies, and those prior contacts impugned the impartiality of Mr. Estoup.

First, Mr. Estoup and Mr. Lantourne lied to the CDR Companies in 2008 about their meeting on June 30, 1999, and the fee note of July 6, 1999, drawn by Mr. Lantourne on the Tapie side for his services consisting in a meeting with Mr. Estoup and a memorandum to his attention. It came to light in the criminal investigation that they had falsely claimed that the fee note had arisen from an accounting error and the events involved did not relate to the CDR-Tapie dispute, but rather to another arbitration, when in fact they did concern that Tapie-CDR matter.

Secondly, none of Mr. Tapie, his lawyer, Mr. Lantourne, or the arbitrator, Mr. Estoup, revealed prior to the arbitration that, as early as September 2006, that is more than a year before the arbitration agreement was signed, the law firm for which Mr. Lantourne was working at the time had sent two communications to Mr. Estoup, including numerous documents, relating to the dispute over the sale of Adidas.

Thirdly, neither Mr. Lantourne nor Mr. Estoup revealed prior to the arbitration that, as early as 2000 and for several years thereafter, they had communicated and coordinated efforts to favour the Tapie interests by convincing associations of small shareholders to join Mr. Tapie in claiming against the Crédit Lyonnais because of the conditions in which the sale of Adidas had been carried out.

Fourthly, the Court of Appeal found there to be a personal relationship between Mr. Estoup and Mr. Tapie, that they did not admit prior to the arbitration, evidenced in particular by a legend that the latter had in 1998 written on the copy of his book that he offered to the former expressing his “infinite gratitude” for the former’s “support which had changed the course of (my) destiny” and “thanking (him) for having had the intelligence and the heart to seek the truth behind the clichés and the appearances” while manifesting his “affection”. Also, in 2000, Mr. Tapie had asked Mr. Estoup’s opinion on a certain person with whom Mr. Tapie was considering doing business.

In addition, the conduct of Mr. Estoup during the arbitration betrayed his partiality in favor of the Tapie side. Thus, the Court of Appeal found, based on revelations in the criminal investigation about the internal functioning of the Arbitration Tribunal, that he had systematically taken the side of the Tapie interests and that he sought to and did exercise a preponderant role among the three arbitrators.

More particularly, Mr. Estoup had in November 2007 drafted an arbitration agreement, which in the end the Parties did not sign, but which included a provision that the Tribunal should disregard the judgment of the Court of Appeal of September 30, 2005. That provision would have been favorable to the Tapie side, and in the final arbitration agreement, the Parties instead agreed that the said judgment of the Court of Appeal should be binding upon the Arbitration Tribunal.

That draft arbitration agreement prepared by Mr. Estoup was strikingly similar to the memorandum that Mr. Lantourne had written and sent to Mr. Estoup even before the Parties had met with the Arbitration Tribunal to identify the questions of law to be decided.

After the arbitration agreement was concluded and the Tribunal constituted, Mr. Estoup submitted in May 2008 to his co-arbitrators a list of legal questions to be decided that was a faithful replica of his draft arbitration agreement in November 2007, all of which oriented the debate in favor of the Tapie interests.

In addition, the Court of Appeal found that Mr. Estoup, during the arbitration proceeding, had contacted an association of small holders of Tapie company shares that had concluded a settlement agreement with the CDR with respect to the disputed sale of Adidas, in order to obtain disclosure of the financial terms of that confidential agreement. In that same regard, Mr. Estoup had written to his co-arbitrators in April 2008 to obtain that the Parties be questioned about any settlements that might have been concluded over the previous two years, even though not only had none of the Parties raised that question in any of the pleadings but furthermore the Parties had expressly agreed that information about any such settlement was not necessary for resolving the questions before the Arbitration Tribunal.

Mr. Estoup had dominated his co-arbitrators in that, for instance, he drafted for the President’s signature all the procedural orders and all the correspondence with the Parties, he decided the Tribunal’s schedule and even wrote directly to the Parties.

In the opinions about the case that he expressed to his co-arbitrators, he was uniformly negative regarding the CDR’s case, considering that its faults were “obvious” and that its arguments were devoid of “credibility”.

The Court of Appeal concluded that Mr. Estoup’s pre-disposition in favor of the Tapie side was apparent from his communication to his co-arbitrators, even before final oral pleadings, that he would be ready to draft the first part of the award and the legal argumentation.

The Court of Appeal also retained that Mr. Estoup sent to his co-arbitrators a draft of the final award including, which according to the Tribunal’s internal arrangements was not supposed to be his responsibility, the Tribunal’s allocation of moral damages, and the final award reproduced Mr. Estoup’s text on that subject after the latter had made clear to his co-arbitrators that he was “absolutely determined to have his opinion prevail”. According to one of Mr. Estoup’s co-arbitrators, the Tribunal was led by Mr. Estoup to increase the amount awarded as moral damages in order to offset what the Tapie spouses had argued before the Tribunal to be the under-assessment by the liquidators of the Tapie companies of their actual damages.

In summary, the Court of Appeal concluded that:

Considering that it has thus been demonstrated that Mr. Estoup, in violation of the requirement of impartiality which is the very essence of the arbitration function, had, by imposing his dominance of the arbitration procedure, by presenting the dispute in a univocal manner and then deliberately and systematically orienting the Tribunal’s reflections for the benefit of the party which he intended to favor in collusion with that party and its lawyer, exercised a determining influence and had by his fraudulent conduct vitiated the arbitral award.

Thereupon, the Court of Appeal approved the application for revision, retracted the Awards and set a date for submitting initial arguments on the substance of the case on September 2, 2015.

5. - A comparison with the law of the People’s Republic of China (PRC)

Below, we undertake a hypothetical analysis of how the facts of the Tapie-CDR case would have been handled under PRC law and draw conclusions about how arbitration law might evolve to manage optimally the problems that the case has highlighted.

5.1. - Under PRC law, would relationships comparable to those involving Mr. Tapie, his lawyer and the arbitrator be illegal?

Article 34 of the PRC Arbitration Law provides that an arbitrator must withdraw from the tribunal if he/she:

1.is a party or a close relative of a party or of a party's representative;

2.is related to the case;

3.has some other relationship with a party to the case or with a party's agent which could possibly affect the impartiality of the arbitration;

4.meets a party or his agent in private, accepts an invitation for dinner by a party or his representative or accepts gifts presented by any of them.

In the Tapie-CDR case, both Mr. Tapie and his lawyer, Mr. Lantourne, had pre-existing relationships with the arbitrator, Mr. Estoup.

While it might be argued that those relationships did not necessarily compromise the arbitrator’s impartiality, it would be especially hard to deny that they « could possibly » do so, a fortiori in that the Court of Appeal of Paris found actual bias of the award in favor of the Tapie-side.

Furthermore, according to article 31 of the CIETAC Rules of Arbitration,[47] arbitrators must sign a declaration and disclose in writing any facts or circumstances likely to give rise to justifiable doubts as to his/her impartiality or independence.

In the Tapie-CDR case, an element of the fraud of which Mr. Tapie, his lawyer, Mr. Lantourne, and the arbitrator, Mr. Estoup, have been indicted, is that they did not spontaneously disclose their pre-existing ties.

The Court of Appeal of Paris found that Mr. Estoup had earned substantial fees in past years from services rendered to one of Mr. Tapie’s lawyers, Mr. Francis Chouraqui.

Also, Mr. Estoup had had exchanges with Mr. Lantourne about the Tapie-CDR case before his appointment as arbitrator.

Furthermore, when confronted by the police and investigating judge conducting the criminal inquiry into the case with this evidence of “facts or circumstances likely to give rise to justifiable doubts as to his/her impartiality or independence », each of Mr. Lantourne and Mr. Estoup offered explanations that were found by the Court of Appeal of Paris to be false.

As for Mr. Tapie, he had a pre-existing personal relationship with Mr. Estoup that neither denied, though Mr. Tapie debunked its significance in so far as the evidence thereof consisted of an annotation he had written on the inside cover page of a copy of his book that he offered to Mr. Estoup. Considering however that Mr. Tapie expressed his “infinite gratitude” for Mr. Estoup’s “support which had changed the course of (my) destiny” and “thanking (him) for having had the intelligence and the heart to seek the truth behind the clichés and the appearances” while manifesting his “affection” toward Mr. Estoup, it seems hard to deny that there existed between the two men a relationship which “could possibly affect the impartiality of the arbitration”. In addition, there had been professional contact between the two since, in 2000, Mr. Tapie had asked Mr. Estoup’s opinion on a certain person with whom Mr. Tapie was considering doing business.

So, under PRC Law as well as under French law, it would appear that Mr. Tapie, his lawyer, Mr. Lantourne, and the arbitrator, Mr. Estoup, had relationships that they should have disclosed to the opposing parties and to the Arbitral Tribunal and failure to do would be illegal in PRC law.

5.2. - Would there have been a recourse available in China in circumstances analogous to those in the Tapie-CDR case

As regards non-foreign-related, i.e. domestic, arbitrations, article 58 of the Arbitration Law[48] provides that parties to an arbitration may apply to the Intermediate People’s Court to have an award cancelled in any if the following circumstances:

1.there is no arbitration agreement between the parties,

2.the matters of the award are beyond the scope of the arbitration agreement or not within the jurisdiction of the arbitration commission,

3.the composition of the arbitration tribunal or the arbitration procedure is contrary to legal procedure,

4.the evidence on which the award is based is falsified,

5.the other party has concealed evidence which is sufficient to affect the impartiality of the award,

6.the arbitrator(s) has (have) demanded or accepted bribes, committed graft or perverted the law in making the arbitral award,

7.the award is contrary to social and public interests.

Facts of collusion between a party or its lawyer and an arbitrator to determine the award in that party’s favor would arguably fall within (6) and (7).

Concealment of a pre-existing interested relationship between an arbitrator and a party or its lawyer might be considered as covered by (3), (5) and (7).

In short, there would be no lack of legal provisions on which to mount an attack against an award rendered in the circumstances found to exist by the Court of Appeal of Paris if a similar situation arose in China.

On the other hand, since, according to article 59 of the Arbitration Law, such an application must be filed within six months after receipt of the award, an application to vacate the award under article 58 of the Arbitration Law several years after its rendering would be untimely under PRC Law.

As regards awards rendered in the PRC in arbitrations with respect to disputes arising from foreign economic, trade, transportation or maritime matters, article 71 of the Arbitration Law provides that they may be set aside (撤销) under any of the circumstances stipulated in article 260 of the Civil Procedure Law (CPL), become number 274 since the reform of the CPL in 2012,[49] namely:

1.the parties have not stipulated clauses on arbitration in the contract or have not subsequently reached a written agreement on arbitration;

2.the person against whom the application is made is not duly notified to appoint the arbitrator or to proceed with the arbitration, or the said person fails to state its opinions due to reasons for which he is not held responsible;

3.the composition of the arbitration tribunal or the procedure for arbitration is not in conformity with the rules of arbitration;

4.matters decided exceed the scope of the arbitration agreement or the limits of authority of the arbitration organ; or

5.the award at issue is against social and public interests.

Facts of collusion between a party or its lawyer and an arbitrator to determine the award in that party’s favor would arguably fall within (5).

Concealment of a pre-existing interested relationship between an arbitrator and a party or its lawyer might be considered as covered by (3) and (5).

The scope for voiding an award rendered in a foreign-related arbitration is narrower than that applicable in domestic arbitrations, but the facts as determined in the Tapie-CDR case could probably be sanctioned under the applicable provisions in the PRC.

Still, in the circumstances of the Tapie-CDR case, such applications would be untimely.

Thus, Chapter VII of the Arbitration Law setting down special provisions on foreign-related arbitration does not stipulate a time limit for filing such recourses, but provides, in article 65, that in the absence of a relevant provision in Chapter VII, the void is filled by reference to the comparable provision that is applicable to domestic arbitrations.

Accordingly, the limit for filing applications to have voided awards rendered in the PRC in foreign-related matters would be six months as per article 59 referred to above.

Yet another recourse, similar to that exercised in French law by the CDR side, namely revision of the award entailing its retraction, is also available in PRC law.

The Interpretation of the SPC concerning Several Matters on Application of the Arbitration Law[50] provides in its article 21 that

Where a party applies to have a domestic arbitral award (国内仲裁裁决) revoked (revoked, rescinded, 撤销) under any of the following circumstances, the people's court may inform the arbitral tribunal to re-arbitrate the case within a certain term in accordance with Article 61 of the Arbitration Law:

(1) the evidence on which the arbitral award is based is fake; or

(2) the other party concealed any evidence that is sufficient to impact the impartiality of the proceedings. (accentuation added)

On several occasions, the SPC has confirmed the existence of such a recourse, while excluding its availability in the particular situations presented to it.[51]

The concealment from the arbitration tribunal and the opposing party of a pre-existing professional relationship between an arbitrator and a party or its lawyer, such as was found to have occurred in the Tapie-CDR case, would seem to fall within (2) of article 21 of the Interpretation.

The Interpretation does not specify a time limit for filing such applications for revoking arbitral awards. As the remedy is not even mentioned in the Arbitration Law, that Law of course stipulates no time limit for its exercise. On the other hand, 　　according to article 74 of the Arbitration Law, in the absence of any stipulation therein as to “time limitations of arbitration, the provisions on the limitation of actions shall apply”. Also, given that the CPL makes extensive provisions for the revocation of judgments and rulings of courts, one might infer that the time limitations for applications to revoke arbitral awards would be the same as that for similar applications regarding arbitration awards.

Article 205 of the CPR sets down a general limitation period of six months, but in the following cases, the period begins to run only from the moment the applicant “knows or should have known the fact“:

1.there is new evidence that is conclusive enough to overrule the original judgment or ruling;

2.the main evidence used in the original judgment or ruling to find the facts was forged;

3.the legal document on which the original judgment or ruling was made is cancelled or revised,

4.the judicial officers have committed embezzlement, accepted bribes, engaged in malpractices for personal benefits or perverted the course of law when trying the case.

The concealment from the arbitration tribunal and the opposing party of a pre-existing professional relationship between an arbitrator and a party or its lawyer might arguably fall within (1) and (4), and collusion between an arbitrator and a party or its lawyer would clearly be covered by (4).

On these principles, a remedy of revocation of the award might well be available in PRC law based on facts analogous to those in the Tapie-CDR case.

Support for this thesis may be gleaned from one of the SPC’s Guiding Cases, namely Shanghai Jewell Machinery Co., Ltd. and Retech Aktiengesellschaft, Switzerland.[52] In that case, a party applied to a PRC court to seize the award debtor’s property on the territory of the PRC in enforcement of a foreign-related arbitral award that had come into legal effect. But the limitation period for the application as calculated in accordance with article 239 of the 2012 CPL from the last day of the performance period specified in the legal document had expired. But, the SPC found that:

[in this case] there was no issue of [the enforcement applicant being] idle in exercising [its] right to apply for enforcement. The party subject to enforcement continuously refused to perform [its] legal obligations as confirmed by the award. (As soon as) the enforcement applicant discovered that the party subject to enforcement had property [located] within the territory of China, [it] immediately applied to a people’s court for enforcement. Considering that under this type of circumstance there is a relatively large [degree] of uncertainty as to when a foreign party subject to enforcement or his property will again fall within the territory of China, [the court] should, therefore, reasonably determine the point from which the application enforcement period [should be] calculated to fairly protect the legal rights and interests of the enforcement applicant.

And the SPC concluded that:

an enforcement applicant’s time limit [within which he must] apply for enforcement should be calculated from the date on which [such] enforcement jurisdiction is confirmed, that is, the date on which the property available for enforcement [belonging to] the party subject to enforcement is discovered.

Therefore, in a case involving the discovery of facts justifying revocation of an arbitration award but only after the expiry of the limitation period for the ordinary recourses, the applicant would probably succeed in having its application for the extraordinary remedy of revision heard, provided that its failure to learn of the relevant facts were not attributable to its own fault.

In conclusion then, before a PRC court, an application on grounds analogous to those in the Tapie-CDR case and brought under similar circumstances in terms of its timing and its grounds, would probably be ruled admissible provided that it were qualified as domestic.

But, as will be demonstrated below, if the arbitration were qualified as foreign-related, the recourse in revision would not be explicitly available under PRC law. Of course “domestic arbitral award” (国内仲裁裁决) could be interpreted to include all awards rendered on the territory of the PRC whether they did or did not involve foreign elements. But, article 21 of the Interpretation provides for re-arbitration in accordance to article 61 of the Arbitration Law, which article concerns arbitrations not involving foreign elements, whereas enforcement of arbitrations with foreign elements is covered specifically in Part V, by articles 70-72.

5.3. - Distinction between international and domestic arbitrations

Would the arbitration of the complex dispute described below be considered foreign-related or domestic under PRC law:

· a dispute over an agreement whereby one Chinese company mandated a second Chinese company to organize the sale of the former’s shares in a foreign company the only asset of which is its own stake in another foreign company with world-wide distribution and a world renowned brand,

· a dispute over an agreement whereby one Chinese company issues a call option to another Chinese company entitling the second to buy the first company’s shares, or designate the buyers thereof, in a foreign subsidiary the only asset of which is its stake in another foreign company with world-wide distribution and a world renowned brand,

· a dispute over an agreement whereby a Chinese company’s shares in a foreign company the only asset of which is its stake in another foreign company are sold to several companies, some of which are Chinese and some foreign.

Though the Arbitration Law’s Chapter VII sets down special provisions on foreign-related arbitration, that Law does not contain a definition of “foreign-related”.

　　But, according to Article 304 of the SPC’s Opinion on Certain Questions Concerning the Application of the Civil Procedure Law issued on 14 July 1992, foreign-related disputes are those in which:

1.at least one of the parties is a foreign or stateless individual or a foreign legal person;

2.a civil relationship is created, modified, or terminated outside China; or

3.the subject matter of the dispute is outside China.

The SPC’s Judicial Interpretation of the Civil Procedure Law of January 30, 2015, which replaced the 1992 Opinion[53] adds in its article 522 two situations to the list in the Opinion that characterize a foreign-related dispute:

4.the habitual residence of any or all contracting parties is located outside the PRC, and

5.there exist other circumstances that may be characterized as a foreign element.

As to (1) and (4) above, all the parties to the hypothetical arbitration would be Chinese and their domiciles would be in the PRC. So on these grounds, the arbitration would be qualified as non-foreign-related, or domestic.

As regards (2) above, the contractual relations in the Tapie-CDR case were created on local territory between domestic companies. On the other hand, among the companies that acquired the shares in BTF’s German subsidiary there were several offshore companies. Also, they paid for the shares by transferring funds from abroad. Whereas the Court of Appeal of Paris did not consider these facts sufficient to characterize the Tapie-CDR arbitration as international, a PRC court facing analogous facts might well qualify the arbitration as foreign-related.

Also pursuant to (3) above, one might reasonably argue that the interest, or cause, of the contracts between the Parties being the sale of shares in a foreign company, Adidas, the arbitration of a dispute in connection with the performance thereof involved a “subject matter outside China”, such as to qualify the arbitration as foreign-related.

Finally (5) above provides a wide scope for qualifying arbitrations as foreign-related under PRC arbitration law. On facts analogous to those in the Tapie-CDR case, there are many “circumstances that may be characterized as a foreign element”: several of the buyers of the BTF shares were offshore companies, they paid for their shares by transfers of funds from outside the country, the economic interest of the operation depended on the value of a foreign company, Adidas.

Whereas the Court of Appeal of Paris did not, under the former French arbitration régime, consider the Tapie-CDR arbitration as international, a PRC court facing analogous facts would probably qualify the arbitration as foreign-related.

But, if the arbitration were so qualified under PRC law, then there would probably not be a recourse to challenge the fraudulent proceedings because in PRC law, as in French law, all recourses would be untimely.

5.4. - Is the dichotomy between domestic and international arbitration régimes optimal

The observation that according to the Court of Appeal of Paris, and according to our conclusions about PRC law, the ill begotten award on the facts of the Tapie-CDR case could only be revoked if the arbitration were qualified as domestic begs two questions:

1.does the optimal arbitration régime include such a dichotomy,

2.and, in the affirmative, how should the opposing compartments be defined and by what source?

The answer to (1) is somewhat of an outgrowth of the evolution of arbitration and of international trade. The process of arbitration is of course age-old; it has “existed for as long as the common law “.[54] But it was not until the late 19th century that the international implications of arbitration started to attract attention, for instance in the context of problems of enforcement of foreign awards arising because of the variety of national régimes. The need to address these problems was one of the motives for the establishment of the International Chamber of Commerce in 1919 and the Court of Arbitration in 1923, and these organizations contributed to the adoption of the Geneva Conventions on Arbitration in 1923 and on the Execution of Foreign Awards in 1927 respectively, which have since been superseded by the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958.[55]

Thus, the regulation of international commercial arbitration arose after the implementation of local régimes governing arbitration.

In 1985, the United Nations Commission on International Trade Law (UNCITRAL) adopted a Model Law intended to cover specifically international commercial arbitration.[56] So, countries that adopt the Model Law may be led to incorporate into the national arbitration laws a distinct régime for international commercial arbitration to complement their already existing régime that is then limited to domestic arbitrations. The Model Law has been adopted by at least 68 countries, including Australia, Canada, Germany and Norway as well as by several States within the United States of America (California, Connecticut, Illinois, Louisiana, Oregon and Texas).

For example, in Singapore, the International Arbitration Act enacted in 1994 as amended in 2001 incorporates most of the rules of the Model Law, but the already existing régime, though amended to achieve a large degree of uniformity with the international régime remains the subject of separate legislation, the Arbitration Act.[57]

On the other hand, the United Kingdom, in reforming the Arbitration Act in 1996, chose not to adopt the UNCITRAL Model because, among other reasons, it was considered desirable that the arbitration régime should in general apply to domestic and international arbitrations alike, although there may have to be exceptions to take account of treaty obligations.[58]

Hong Kong implemented yet another solution, consisting in adopting a uniform régime with respect to commercial arbitration incorporating the principles of the Model Law.[59]

In short, whether it is advantageous to adopt separate régimes for international commercial arbitration and domestic commercial arbitration matters is debatable.

The Tapie-CDR case highlights serious disadvantages of instituting a dichotomy, including the intellectual difficulty of allocating individual cases among the categories, which problem may give rise to “régime-shopping” by parties and teleological reasoning by arbitrators and judges concentrating more on the result to be achieved by the qualification adopted than by the merits of the qualification itself.

On the other hand, an advantage of the dichotomy is that a country can subject international arbitrations to different constraints than domestic arbitrations in order to maximize the attractiveness of its major cities as seats for arbitrations. For instance, whereas domestic arbitrations awards may be voided in cases of violations of local public policy, foreign-related or international arbitrations would be subject instead to international public policy.

Assuming that a country does decide to adopt the dichotomy, the next questions are who decides the qualification and according to what criteria.

In its article 1(3), the UNCITRAL Model Law defines an arbitration as international if:

a.the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in different States;

b.one of the following places is situated outside the State in which the parties have their places of business: (i) the place of arbitration if determined in, or pursuant to, the arbitration agreement; (ii) any place where a substantial part of the obligations of the commercial relationship is to be performed or the place with which the subject-matter of the dispute is most closely connected; or

c.the parties have expressly agreed that the subject matter of the arbitration agreement relates to more than one country.

French law would appear to adopt an open-ended approach in so far as international arbitrations are defined as those that “involve international commercial interests”. This leaves a wide discretion for arbitrators and judges to select and weigh different criteria depending n the case at hand. But in the Tapie-CDR case before the Court of Appeal of Paris, while the CDR side invoked the Parties’ agreement that their arbitration was domestic, the judges specifically denied that they were bound by the Parties’ determination. Furthermore, the judges denied any influence on their appreciation to the elements of extraneity in the present case, such as the foreign incorporation of the company sold, the involvement of foreign buyers of the Tapie interests, and the cross-border dimension of their payments of the price.

As noted above, in PRC law, the original list of three criteria was apparently felt to be too narrow since the recent reform has added an open-ended criterion, namely any “circumstance that may be characterized as a foreign element”.

But the qualification of an arbitration in PRC law as foreign-related on facts analogous to those in the Tapie-CDR case would likely exclude that it be revoked, no matter how tainted the award might be because of the illegal relations between the parties and the arbitrators, if their misdeeds could only be discovered after the limitation periods governing the remedies available in international arbitrations.

Accordingly, just as a doubt arises whether the Court of Appeal of Paris, in order to prevent the perpetrators of fraud from profiting from their conduct, might have stretched the boundaries of domestic arbitrations to open an access to revocation of the award when that result was not achievable with respect to international arbitrations, the same question might one day challenge a PRC court seized of comparable facts.

6. - Conclusion

The single proposition that carries a high degree of certainty is that the Tapie-CDR case

is not over and many outcomes are possible.[60]

Already the case has given cause to reflect

upon the limits on relations between arbitrators and parties and their lawyers and what are their obligations of disclosure, as well as whether it is useful to distinguish the remedies available to challenge awards depending on the qualification of the arbitration as domestic or international.

While the maintenance in PRC law of the foreign-related/non-foreign related dichotomy has not yet developed into a subject of widespread discussion, it merits the attention of experts and legislators because the existence of two categories of arbitration is an invitation for the parties, their counsel, arbitrators and judges to “conduct disputation by making their appeal to the written word and arguing to the last over the tip of an awl or knife”.[61]

[12] The newspapers are La Provence and Nice-Matin, Les douze vies de Bernard Tapie, L’Express, December 20, 2012, http://www.lexpress.fr/diaporama/diapo-photo/actualite/societe/les-douze-vies-de-bernard-tapie_1201587.html.

[32] Assets of French Tycoon Bernard Tapie to be seized in fraud probe, South China Morning Post, July 13, 2013, http://www.scmp.com/news/world/article/1279938/french-judges-order-bernard-tapies-assets-be-seized-fraud-probe.

[33] Tapie : 17 millions d’euros placés sous séquestre à Hong Kong, Mediapart, December 4, 2014, http://www.mediapart.fr/journal/france/041214/tapie-17-millions-d-euros-places-sous-sequestre-hong-kong.

[37] Tapie sommé de restituer 392 millions d'euros, Mediapart, February 25, 2015, http://www.mediapart.fr/journal/france/250215/tapie-somme-de-restituer-392-millions-deuros.

[38] Affaire Tapie-Adidas: décryptage d'un naufrage, Economie Matin, March 9, 2015, http://www.economiematin.fr/news-bernard-tapie-remboursement-millions-euros.