Earlier this year, the French Cour de Cassation brought the long-running “Tapie-saga” to an end. Mr Tapie and his former bank were in dispute over a 2008 arbitral award ordering the bank to pay Mr Tapie over €400 million in damages. This award was successfully challenged by the bank before the Paris Court of Appeal in 2015 which annulled the decision on the basis of fraud. The Cour de Cassation confirmed the decision of the Paris Court of Appeal.
At the centre of the “Tapie-saga” is Mr Bernard Tapie: businessman turned politician then actor and singer; a personality who has long been in the public eye in France.
In 1990, Mr Tapie acquired 95% of the shares of Adidas, largely financed by a loan granted by the Société de Banque Occidentale (“SDBO”), a subsidiary of Crédit Lyonnais, a State-owned French bank at the time. At the end of 1992 the Tapie Group was in financial turmoil and Mr Tapie mandated SDBO to sell Bernard Tapie GmbH, the German company holding the shares of Adidas. Pursuant to the mandate, SDBO was required to sell the shares at a minimum price. SDBO executed the mandate and sold the shares at this price to several companies, some of which related to Crédit Lyonnais. Shortly thereafter, the purchasers sold their shares at a much higher price. After the bankruptcy of the Tapie group, Mr Tapie and the liquidators of the group (hereinafter “Tapie”) took legal action against SDBO and Crédit Lyonnais, that had meanwhile become CDR and CDR Créances (together the “CDR Companies”) following the bailout of Crédit Lyonnais by the French State for, amongst other things, failure to fulfil their duty of loyalty.
The parties eventually agreed to submit the entirety of their dispute to arbitration (through a submission agreement “compromis d’arbitrage”). On 7 July 2008, an arbitral tribunal rendered an award finding a breach of the CDR Companies’ duty of loyalty and ordering them to pay Tapie the sum of €285 million (including €45 million for moral damages) and interest – which took the total over €400 million, a historically high sum.
The award was challenged when suspicions of bias were raised against the arbitral tribunal, in particular the failure of one arbitrator to disclose his ties with Tapie’s lawyer. In this regard, in September 2012, the Paris public prosecutor’s office also opened an official criminal investigation for “abuse of social powers and concealment, forgery, embezzlement of public funds, complicity and concealment of these offenses, and fraud committed in a gang”.
These investigations revealed new evidence of bias, which led to the CDR Companies bringing an action for judicial review of the 2008 arbitral award before the Paris Court of Appeal (the “Court”). That Court ruled in their favour and annulled the award in 2015. The Court’s reasons for its decision are discussed further below. It was this decision that the Cour de Cassation, on 18 May 2017, confirmed.
The choice of judicial review
Under French law, the ordinary recourse against a French arbitral award is a request to set it aside (Art. 1502 and 1520 Code of Civil Procedure). However, a set aside request is time barred within one month after the award is rendered. At the time the CDR Companies sought to annul the award this time limit was exceeded. This meant that their only possible recourse was a request for judicial review (“recours en révision”) admissible on the ground of fraud.
International or domestic arbitration?
However, one obstacle they faced was that prior to the reform of French arbitration law in 2011, a request for judicial review of an arbitration award was only available for domestic, not international, awards. Accordingly, one question before the Court was which category the award fell into. Pursuant to article 1504 of the French Code of Civil Procedure, an “arbitration is international when international trade interests are at stake”. In short, the internationality of arbitration depends on economic rather than legal criteria.
Before the Court, the parties’ views differed as to the internationality of the arbitration. While Tapie argued it was international (as Bernard Tapie GmbH’s incorporation was in Germany), the CDR Companies argued the contrary (as the case involved a dispute between French parties to a sale mandate in France). The Court agreed with this latter interpretation thereby granting itself jurisdiction (although in adopting a strict interpretation of the submission agreement, the Court distanced itself from the liberal approach of the pre-existing case law).
A clearly fraudulent arbitrator
The Court then had to assess whether the Tapie awards were “issued by fraud”. In the present case, due to discoveries made in the ongoing criminal investigation, the evidence of fraud was overwhelming. In particular, there was evidence of inappropriate contacts between the implicated arbitrator and the Tapie side (as an example, a book written by Bernard Tapie was found at the residence of the arbitrator’s daughter and contained a dedication to the arbitrator, in which Bernard Tapie expressed his “endless gratitude […]”, and highlighted that the arbitrator’s “support has changed [his] destiny”). Also the general behaviour of the arbitrator in the proceedings was found to have been biased and inappropriate.
Thus, having also recognised its jurisdiction over the case, the Court had proceeded to annul the arbitration award.
The aftermath of the saga
The Cour de Cassation’s confirmation of the Court’s decision now marks the end of the arbitration proceedings. It is fair to say that, in France, this case attracted a lot of attention and, even though the conduct of the implicated arbitrator was highly exceptional, it has, at times, not helped to promote a positive understanding of arbitration amongst the general public. Hopefully, however, this eventual denouement should now send a positive signal that, even in such exceptional circumstances, the arbitral system provides a means to effectively remedy fraud and an arbitrator’s failure to perform his or her functions/duties. The criminal proceedings remain ongoing.