A Tale of Two Arbitration Cities No. 1 - Paris

Paris Court of Appeal, 23 January 2024 (RG No.23/01526)‍

Context

China Communications Construction Company Ltd (“CCCC Ltd.”), a Chinese company, and several Algerian shareholders (the “Algerian Shareholders”) entered into a shareholders’ agreement in respect of a construction company called CCCC Algérie (respectively, the “Shareholders’ Agreement”, and “CCCC Algérie”). The creation of this company aimed at complying with Algerian law requiring foreign companies in the construction sector to partner-up with Algerian nationals.

In 2017-2018, the Algerian Shareholders accused CCCC Ltd of using CCCC Algérie to secure public contracts directly for itself.

In December 2018, the Algerian Shareholders initiated legal proceedings before the Algerian first instance court of Bir Mourad Raïd (the “Algerian first instance court”) to halt CCCCLtd.’s actions and seek damages. CCCC Ltd relied on the arbitration agreement contained in the Shareholders’ Agreement providing for ICC arbitration seated in Paris to challenge the jurisdiction of the Algerian first instance tribunal.

In July 2019, the Algerian first instance court ruled that it had jurisdiction over the Algerian Shareholders’ claim. As aresult, in November 2019, CCCC Ltd. initiated arbitral proceedings in Paris. It requested the arbitral tribunal to declare that the Algerian Shareholders had breached their obligations under the Shareholders' Agreement and sought damages and the termination of the Shareholders’ Agreement.

On 16 September 2021, the arbitral tribunal found that it had jurisdiction over the dispute and ordered the Algerian Shareholdersto withdraw their claims pending before the Algerian courts.

Following the arbitral tribunal’s award on jurisdiction, on 22 October 2021, the Algerian Shareholders filed a request for annulment of the arbitral award before the Paris Court of Appeal (the “French setting-aside proceedings”).

Following that, proceedings continued before Algerian civil and criminal courts.

First, on 30 January 2023, the Algerian Shareholders filed criminal complaints before the Algerian criminal courts, challenging the authenticity of documents, in particular allegedly forged minutes of board meetings (the “Algerian criminal proceedings”).

Two days later, the Algiers Court of Appeal overturned the ruling of the Algerian first instance court and ruled that theAlgerian proceedings had been introduced in violation of the arbitration clause contained in the Shareholders’ Agreement.

Then, on 18 June 2023, some of the Algerian Shareholders filed a request for cancellation of the Algiers Court of Appeal’s ruling before that same Court based on the existence of the Algerian criminal proceedings.

Shortly afterwards, on 26 June 2023, in respect of the French setting-aside proceedings, the Algerian Shareholders seized the pre-trial judge of the Paris Court of Appeals with a request to stay the proceedings pending before the Paris Court of Appeal until the end of the Algerian criminal proceedings.

On 28 September 2023, the pre-trial judge ofthe Paris Court of Appeal denied the request for a stay of the French setting-aside proceedings.

On 12 October 2023, the Algerian Shareholders asked the Paris Court of Appeal to overturn the pre-trial judge’s decision.

Parties' Submissions

The Algerian Shareholders sought a stay of the French setting-aside proceedings pending the outcome of the ongoing criminal and civil proceedings in Algeria. They argued that the arbitral tribunal had upheld its jurisdiction by relying on fraudulent documents, in particular allegedly forged minutes of board meetings.

They argued that the Algerian criminal court proceedings would show that the arbitral tribunal had upheld its jurisdiction as a result of CCCC Ltd.’s fraudulent manoeuvres. Consequently, for the Algerian Shareholders,the outcome of the Algerian criminal investigations could lead the Algiers Court of Appeal to hold that the arbitration agreement is manifestly void or inapplicable, which, pursuant to Article 1448(1) of the French Code of Civil Procedure, would vest the Algerian courts with the power to determine the arbitral tribunal’s jurisdiction.

CCCC Ltd. objected to the stay, arguing that the Algerian criminal proceedings were irrelevant to the arbitration or the ongoing French setting-aside proceedings.

It also pointed out that, contrary to the Algerian Shareholders’ allegation, the arbitral tribunal had not relied on the allegedly forged documents to render its award on jurisdiction, given that it had excluded these documents from the proceedings. Accordingly, the Algerian criminal proceedings were irrelevant to the determination of the arbitral tribunal’s jurisdiction.

CCCC Ltd stressed that the ongoing civil proceedingsin Algeria would not affect the enforceability of the arbitral tribunal's decision or the French setting-aside proceedings.

Court's Decision and Reasoning

The Paris Court of Appeal examined (i) the Algerian Shareholders’ request to overturn the pre-trial judge’s decision rejecting the application for a stay of proceedings and (ii) the impact of the ongoing legal proceedings in Algeria on the arbitration and on the French setting-aside proceedings.

The Paris Court of Appeal recalled that, pursuant to Articles 377 et seq. of the French Code of Civil Procedure, unless the stay of the proceedings is required by law, a judge or court has the discretion to grant or reject a stay of the setting-aside proceedings, depending on whether it would serve a sound administration of justice (¶31).

In respect of the Algerian criminal proceedings, the Paris Court of Appeal noted that, pursuant to Article 4 of the French Code of Criminal Procedure, the commencement of criminal proceedings does not automatically require that related civil proceedings be suspended, even if the criminal proceedings might influence the outcome of the civil proceedings (¶32).

The Paris Court of Appeal further noted that the Algerian criminal proceedings were based on the alleged forgery of board meeting minutes. Given that it was clear from the arbitral tribunal’s decision on jurisdiction that it had excluded these documents from the arbitration proceedings, the Algerian criminal proceedings could not have directly affected the validity of its decision. Indeed, the arbitral tribunal had upheld its jurisdictionbased on other evidence than the allegedly forged documents (¶35).

Thus, the Paris Court of Appeal found that a sound administration of justice did not justify a stay of the French setting-aside proceedings on the basis of the Algerian criminal proceedings.

With respect to the Algerian civil proceedings,the Paris Court of Appeal found that the Algerian Shareholders had failed to show that a decision of the Algerian courts might affect the French setting-aside proceedingsand the arbitration as a whole and deprive the Paris Court of Appeal of its power to review the award on jurisdiction (¶¶37-38).

Therefore, the Paris Court of Appeal upheld the pre-trial judge’s decision and rejected the request to stay the French setting-aside proceedings.

The Court of Appeal’s decision on that aspect is unsurprising in view of the French law approach concerning parallel proceedings in the presence of forgery allegations. When criminal proceedings have been introduced by a party alleging that certain contracts or documents drafted or validated by public officers (“acte authentique”) have been forged, civil courts are not obliged to stay the proceedings if it considers that the case can be heard without taking into account the allegedly forged document (Articles 312 and 313(1) of the French Code of Civil Procedure).  This is a long-standing and consistent solution that reflects the general rule that the main proceedings should not be delayed when the allegedly forged document has no impact on the outcome of the case (Cassation Req. of 11 June 1845, DP 1845, 1, p. 368).  The Paris Court of Appeal was most likely inspired by this rule, even though it does not expressly refer to it, given that it did not need to wait for the outcome of the criminal proceedings relating to the Algerian parties’ forgery allegations to determine whether the arbitraltribunal had rightly upheld its jurisdiction.

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