The Arbitration Minute - November 2017

Can you obtain reimbursement of legal costs incurred in annulment proceedings?

Yes. Pursuant to Article 700 of the French Code on Civil Procedure, a judge may order the losing party to pay to the other party an amount which the judge will fix on the basis of the expenses incurred in the proceedings. However, in practice, the sum awarded by the judge only covers a small part of the actual lawyers’ fees and expenses. It is to be noted that often no reasons are provided regarding the amounts granted (even though the requesting party is not exempt from justifying the expenses incurred).

An international arbitral award issued in France cannot be appealed, it can only be set aside (annulled) by the competent state court. Requests for annulment must be filed with the Court of Appeal within whose jurisdiction the award was rendered. Our statistics show that out of 57 requests for annulment decided by the Paris Court of Appeal over the last three years (from November 2014 to October 2017), only 6 gave rise to annulment. In proceedings in which annulment requests were rejected, defendants were in average granted 58% of the requested amount of legal costs. In that period, the average amount being awarded was approximately 63,000 euros.

Recently, in annulment proceedings challenging the validity of three arbitral awards, the Paris Court of Appeal awarded the amount of 600,000 euros to defendants for legal costs. In that case in which a preliminary ruling was referred to the European Court of Justice, the defendants had provided documentary evidence of the legal costs incurred since the beginning of the annulment proceedings.

Thus, although French courts filing fees are low compared to certain other jurisdictions, a party filing a request for annulment should not only take into account the limited chances of success of such an action but also the risk that it will be ordered to pay substantial legal costs.

Paris Court of Appeal, Pole 1, Chamber 1, Judgment of 26 September 2017, Reference n° 16/15338