June 2nd, 2011

Continental European Legislative and Judicial Trends: France: Arbitration Agreement or Expert Determination Clause?

Posted at 1:00 AM ET
David Lewin, Managing Director
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Differentiating between a proper arbitration agreement and an expert determination clause is often difficult. The difference is significant since the decision rendered as a result of arbitration proceedings is binding and subject to very limited review. However, the decision rendered as a result of expert determination proceedings leaves open the possibility of litigation before a court in case of disagreement on the expert’s findings.

The difference between arbitration clauses and other types of dispute resolution clauses (in particular expert determination clauses) has been subject to a number of disputes. Courts and scholars have identified criteria to differentiate between those two types of clauses (Ch. Jarrosson, “Les frontières de l’arbitrage”, Rev. arb. 2001.5; P. Duprey, “Arbitrage et expertise: où sont les frontières”, Gaz. Pal., 26 Apr. 2006, p. 967).

The very title of the clause, “clause d’arbitrage,” or “arbitration clause,” is not decisive. Courts are not bound by the wording used by the parties and must analyze the nature of the mission conferred on the third party to determine the qualification of the clause (French Supreme Ct, 31 March 1862; Paris Ct App., 12 Jan. 1979; French Supreme Court, 2nd civ. div., 7 Nov. 1974; 1st civ. div., 26 Oct. 1976, Bull. civ. I, No 305). The court may nevertheless take into account the wording to determine the intention of the parties (Lyon Ct App., 12 Oct. 1953; Paris Ct First Instance, 22 Apr. 1985). The Court may also have a tendency not to disqualify clauses entitled “arbitration,” but to qualify clauses entitled expert determination as arbitration agreements (J-Cl. Fasc., 1005 § 71, Rev. arb. 1990.717; Paris Ct App., 24 Oct. 1991, Joyaux v Gan).

The criteria that are usually relevant in differentiating the two types of agreements are:

  • First criterion: A dispute with diverging positions must exist. This criterion is not sufficient by itself. The existence of a legal dispute is a condition for the qualification of the clause as an arbitration clause because the referral to a third party in the absence of a dispute is not considered to be a reference to arbitration. However, a dispute can be submitted to an expert for decision.
  • Second criterion: A clause can only be qualified as an arbitration clause if the parties vest the third party with the power to render a decision that is binding upon them. If the parties ask for the intervention of the third party without conferring the power to render a binding decision, then the clause is not an arbitration clause.
  • Third criterion: The nature of the mission conferred on the third party must be ascertained. As a general rule, the arbitrator must give a decision on a legal dispute as opposed to a purely technical analysis. The arbitrator goes beyond a mere analysis of facts and provides the legal consequences of a given actual situation. On the contrary, expert determination proceedings generally comprise the acquisition of a factual and technical analysis from a third party and presentation of the result in a written report. Hence, whereas third parties empowered to assess the amount of damage suffered as a result of a loss are experts (French Supreme Court, 21 Feb. 1887, DP 1887.1.297) - those who have, in addition, received the mission to render a decision to which the parties must abide, are arbitrators (Paris Ct First Instance, 25 Jan. 1984, Rev. arb. 1984.376, cited in B. Moreau, Arbitrage en droit interne, Rép. civ. Dalloz, para. 10, Apr. 2008).
  • Fourth criterion: The decision of the third party must result from a procedure that meets specific demands, such as the observance of a due process. The fact that the clause refers to the appointment of a third “expert” in case of disagreement between the two party-appointed experts has been seen as indicating that the clause is an arbitration clause (Versailles Ct App., 17 Jan. 1979, RGAT 1980.361).

French courts are very careful to not hinder the parties’ intention to have recourse to arbitration and often favor the qualification as arbitration. Charles Jarrosson, a leading French Professor on arbitration, wrote: “Unless it appears from the interpretation of the parties’ intent that the parties wanted to have recourse to something other than arbitration, one should favor the qualification as arbitration as frequently as possible, not only because its regime is well defined and offers serious warranties to the parties, but also because arbitration often corresponds to what the parties intended.” According to this author, if there is any doubt, the qualification as arbitration clause should be preferable.

However, the fact that an insurance policy also contains a choice-of-forum clause could be used to interpret the intention of the parties and to conclude that the clause provided in another part of the contract is a mere expert determination clause since the parties have expressed their intention to submit their disputes to a national court. As a general matter, under French law, an arbitration agreement would prevail over a choice-of-forum clause (French Supreme Ct, 2nd civ. div., 18 Dec. 2003, No 02-13410, Gaz. Pal., 22 May 2004, No 143, p. 20).

The expert determination clause is binding in the sense that it precludes any legal action before a court as long as the party-appointed experts’ opinions are not delivered (French Supreme Court, 19 Jan. 1942; Paris Ct App., 4 March 1981). It has been held that the expert determination clause precludes the recourse to judicial appraisal as long as the party-appointed experts have not passed their opinions (French Supreme Court, 1st civ. div., 26 Apr. 1978; on the contrary: Paris Ct App. 13 March 1978, La Protectrice).

If the parties want to challenge the decision of the party-appointed experts, they have to demonstrate “manifest errors” in the finding of the experts (J. Kullmann [dir.], Lamy Assurances 2008, para. 4702). Courts and tribunals have been consistent in rejecting objections against party-appointed experts’ opinions, when the parties, seeking to obtain a new expertise, did not articulate precise arguments demonstrating severe mistakes of the party-appointed experts (French Supreme Ct, 1st civ. div., 10 March 1992, No 90-19.147; French Supreme Ct, 1st civ. div., 29 Apr. 1997, No 94-20.688, RGDA 1997.865). There is, therefore, a presumption that the expert opinion is authoritative.

Before deciding if the parties are bound by the opinion, the courts nevertheless verify whether the expert’s finding is a serious piece of work and whether the opinion is sufficiently detailed (S. Pinguet, J.-Cl. Resp. civ. Ass., 2007, Fasc. 520-20, para. 94). This is in line with the case law prevailing in cases of sales, when the determination of the price is left to a third party. In those cases, the price fixed by the third party is binding on the parties. They can only challenge the price fixed by the expert if they can demonstrate gross negligence or manifest errors by the expert (for example French Supreme Ct, com. div., 6 June 2001, JCP E, 2002, 1292).

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