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Muitipartism: The Dutco Decision of the

French Cour de cassation
Jean-Louis Delvolve Author

Jean - Louis Delvolve

The Supreme Court of France, the Cour de cessation, rendered on 7 Jurisdiction

January 1992 its decision on multiparty arbitration; Siemens v. BKMI
and Dutco. This decision has rapidly become a matter of concern France
among those dealing with multipartism in the field of international
Source
commercial arbitration.
Jean-Louis Delvolve,
In brief, the case was as follows: three companies entered into a Multipartism: The
consortium agreement for the construction of a factory on behalf of
Dutco Decision of the
their common employer in the Middle East. The consortium
French Cour de
agreement contained an ICC arbitration clause expressly providing
cessation, Arbitration
for the settlement of disputes by an arbitral tribunal composed of
International, (Kluwer
three arbitrators. Law International 1993
The Dutco company as claimant filed a request for arbitration in Volume 9 Issue 2) pp.
197 - 202
which in reality it had one particular claim against BKMI and a
second (quite dissimilar) claim against Siemens, although both
claims were based on alleged breaches of the consortium
agreement. The time came for the designation of the arbitrators.
Whilst the claimant freely nominated its arbitrator for the approval of
the ICC International Court of Arbitration, each of the defendants
contended for the right to nominate an arbitrator. The ICC Court
refused those contentions, considering that the defendants'
disagreement over the nomination of one arbitrator in their common
interest amounted to a failure to make any appointment; and the ICC
Court warned the defendants of its intention to apply Article 2.4 of
the ICC Rules ('If a party fails to nominate an arbitrator, the
appointment shall be made by the Court'). Eventually Siemens
accepted the same arbitrator as BKMI, but it expressed its strong
reservation as to the validity of the constitution of the arbitral tribunal
in those circumstances.

Siemens duly challenged the jurisdiction of the arbitration tribunal.

The tribunal rejected the challenge by its award of 19 May 1988.
Siemens then filed a recourse for annulment in the Cour d'appel of
Paris. The recourse was rejected by the Cour d'appel on 5 May
1989.'`' Hence the appeal in the Cour de cessation and the decision
of the Cour de cessation, reversing the decision of the Cour d'appel
and remitting the case to the Cour d'appel of Versailles. (In the
meantime, it is said that the parties settled their case amicably).

The Dutco decision might well be a corner stone in the process of

establishing rules for multiparty arbitration. It seems in effect to have

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fixed a limit for those contending for a systematization of multiparty

arbitration: such as page "1.97': parties to any bilateral arbitration
agreement must expect consolidation with parties to another
arbitration in whatever circumstances if only either there exists a
minimum convergence between those agreements or there is a
mandatory rule imposing consolidation, under the applicable law, by
courts or arbitral institutions. What kind of limit was drawn by the
Dutco decision? It seems to lie in the principle, strongly affirmed by
the Cour de cessation as a rule of international public policy ('ordre
public internationale'), that any and all parties to an arbitral
agreement should be kept on the same footing in their right to
contribute to the constitution of their arbitral tribunal. Hence a party
who, in contrast to other parties, has been deprived of such a right
as an effect of either the arbitration agreement or the circumstances
of the case, could claim annulment of an award rendered in that
arbitration.

It its Dutco decision, the Cour de cessation added that the principle
was such that none of the parties could waive its right in advance;
such renunciation could be valid only if expressed after a dispute
had arisen. It may be a matter of concern that multiparty arbitration
agreements, as they exist in many commercial contracts actually in
force or to be agreed in the future, are subject to challenge insofar
as these agreements are intended, precisely, to establish specific
rules for the formation of arbitration tribunals whereby parties accept
in advance a certain limitation on their right to participate in the
nomination of the arbitrators. A number of examples could be cited
in this respect, the simplest of them being the case of co-
contractors, jointly and severally responsible in a construction
contract towards their employer, agreeing with the employer that, in
the case of a dispute, they should agree among themselves for the
joint nomination of an arbitrator on their behalf, whilst the employer
is free to appoint his own without limitation. Are those parties (the
contractors vis-à-vis the employer) on the same footing in the sense
of the Dutco decision? Is the arbitration clause valid or void?

Certainly the arbitration agreement would be validated if the parties

agreed after the dispute had arisen to designate a joint arbitrator,
either spontaneously or after submission to the relevant arbitral
institution without protest by any one of them against an
appointment made by the latter. In this way, and supposing the
clause being otherwise a nullity, the parties would have ratified and
confirmed it in full knowledge of their rights. But what about in the
contrary situation? It seems that the only possible answer is that one
should have regard to the circumstances of the particular case in
order to detect in true fact whether a discrepancy has been created
between the parties; or whether their disequilibrium is apparent only
and either does not affect their rights or is not detrimental to the
interests of the party claiming nullity.

In the Dutco case, the Cour de cessation certainly did pay close
attention to two features of some importance. First it transpired that
the defendants, two of the three members of a joint venture which
provided for ICC arbitration in case of dispute, had not the same
interests vis-à-vis the claimant, for a very simple reason. Although
based on the same agreement, the claimant page "198" claimed
one thing against the first defendant and claimed another thing
(substantially different) against the second defendant. Thus there

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was nothing rendering absolutely necessary the settlement by the

same arbitration tribunal of that dispute; Le, in reality, they were two
disputes.

Second, the arbitration clause differed from the ICC model clause in
one respect. Instead of providing for settlement of their future
disputes 'by one or more arbitrators appointed in accordance with
the said [ICC] Rules', the arbitration clause provided for: 'settlement
by three arbitrators' appointed in accordance with the ICC Rules. 0
Therefore, the ICC Court was deprived of any possibility to decide,
in accordance with Article 2.5 of the ICC Rules, that due to the
nature and circumstances of the dispute, a sole arbitrator should be
appointed by the ICC Court. That being so, one can understand the
protests of the second defendant claiming that the ICC Court had
forced on him, without justification and in a manner detrimental to
his interests, the renunciation of the arbitrator which he had himself
nominated for approval of the ICC Court; and that the ICC Court had
required him to have his defence examined by an arbitral tribunal in
which the arbitrator nominated on that second defendant's side was
the arbitrator nominated by the other defendant—whose
appointment he was forced to agree, of course, under due
reservations.

The Cour d'appel of Paris, nevertheless, tried to save the situation.

In its decision which later the Cour de cessation reversed, it paid in
effect, in words of elegance and comprehension, some tribute to
what seemed to have been the common intention of the parties,
leading it to a liberal interpretation of their arbitration clause. For the
Cour dapper there was no obstacle in three parties, in the
framework of an agreement which was multipartite in nature, in
providing for an arbitral tribunal composed of three arbitrators with
the unavoidable consequence that the first two arbitrators should
have to be appointed, respectively, by the one or two claimants and
by the one or two defendants. Such a practice, under the ICC rules,
should not infringe the principle of equality of parties towards the
constitution of an arbitral tribunal, account being taken of two factors
which the Cour d'appel emphasised in the following words:

Considerant qu'ainsi le choix d'un seul arbitre par les societes

defenderesses resultait de leur situation de consorite obligee reflet
de leur partenariat contractuel —et n'etait pas de nature a apporter
une quelconque restriction a lour autonomie dans l'organisation de
lour defense, I'arbitre choisi etant, des sa designation pleinement
investi du pouvoir de juger, echappant ainsi au domaine contractuel
pour acceder au statut de juge, exclusif par nature de toute
dependance a regard des parties, et don't l'independance constitue
la garantie de la stricte egalite des parties dans le deroulement du
proces, page "199" It may be a matter for regret that the Cour
de cessation did not share similar views. Once the Cour de
cessation referred to the principle of public policy, it became clear
that no liberal interpretation could prevail: 'Attendu que le principe
de l'egalite des parties dans la designation des arbitres est d'ordre
public; qu'on ne pout y renoncer qu'apres la naissance du
litige;' (Whereas the principle of equality of the parties in the
designation of the arbitrators is a matter of `ordre public', no
derogation therefrom is permissible until after the dispute has
arisen). `4)

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But it makes sense that the Cour de cessation was impressed by the
peculiarities of the case, as evidenced above; and it could finally be
that the Dutco decision should not be given (except for the general
principle) the status of a true precedent. In other words it should not
be deduced from the decision that multiparty arbitration clauses are
condemned, in that these clauses necessarily entail inequality of
treatment of parties as to the constitution of an arbitral tribunal; and,
more generally, it should not be inferred that multiparty arbitration is
no longer capable of being legally valid and binding. On the other
hand, the Dutco decision gives a strong incentive to the imagination
of practitioners and in particular to those wishing to make
multipartism available — at least at a minimum level. The challenge
is how to deal with the matter in such a way as to eliminate the
reasons which, in almost all types of multipartism, could give rise to
inequality amongst the parties. There are several lines of thinking in
this respect.

One feels committed, first of all, to explore who should be regarded

as a party to a multiparty arbitration; and second, to determine
whether and how such party is having his rights jeopardised in a
multiparty dispute resulting from the arbitration agreement in issue
(whether multiparty or not). To start with the first point, who is or
should be deemed to be a party to multiparty arbitration? This is
undoubtedly a crucial question and perhaps one could decide that a
person whom one believed was a party to multiparty arbitration in
reality is not and even that a situation which one believed was
multipartite finally proves to be classically bipartite. Identification of
parties is worth immediate attention since the fact that a person
enjoys some rights deriving from a contractual relationship does not
necessarily result, if one seriously thinks about the matter, in the
same person enjoying personally and exclusively a right to
participate in arbitral proceedings arising out of that relationship.

Examples abound. Suffice, to make it short, to point out that two co-
contractors jointly and severally responsible for works towards an
employer on a construction contract, should be regarded as forming
(jointly and page '200" severally) only one party when they have
to defend an action in contract brought against them by the
employer for defective works. Similarly, are the vendors of the
shares of a company to a purchaser a plurality of parties when they
claim payment of the price against the latter or do they form one
claimant, having their interests in common, versus one defendant?
And what about a party to a contract transferring some part of his
rights to a third party, who thus acquires some title to the benefit of
such contract as well as to its arbitration clause: do they form two
parties, or only one, when under the contract they bring a claim in
arbitration against their creditor or vice-versa, their creditor sues
them both in arbitration? Under continental procedural laws, there
exists a word designating those persons having their interests in
common in a legal suit: they are 'consorts'. Consorts, to some
extent, are regarded as members of one procedural camp. To what
extent should such a camp be deemed to constitute one party? The
question deserves deeper study, but enunciating it in this term could
pave the way to eliminating one of the difficulties of multipartism.
Reducing a number of litigants to the unity of one camp would be
capable of transforming multipartism into bipartism, so that nobody
in the same camp should contend that he is personally entitled to

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contribute to the constitution of the arbitral tribunal. Hence, no

objection could be taken against the appointment of one arbitrator
for their side under an appropriate arbitration clause intended to
provide in advance for a method for the appointment of one
arbitrator for all of them or referring to an arbitration institution
enjoying appropriate rules.

The second point is how to avoid a party, in a real multiparty

situation, having his right to participate in the constitution of the
arbitral tribunal upset. This issue addresses principally the
promoters of institutional arbitration rules and the draftsmen of
arbitration agreements. The challenge, more precisely, is as follows:
since multipartism, according to the Dutco decision, can only work if
one party is not placed in a less favourable position than the other(s)
as to his right to participate in the constitution of the arbitral tribunal,
everything must be done to re-equilibrate the positions of the
parties. The implication of the Dutca decision is that a sacrifice
imposed on one party must have its counterpart in an equal sacrifice
imposed on the other(s); it is not that since there is a sacrifice on
any side, the clause is null and void: and the arbitration agreement
and/or arbitration rules should exhaust the matter by putting in
motion appropriate rules of equilibrium. Such would be the case, it is
suggested, where Article 2.5 of the ICC Rules permits the ICC Court
to decide at its entire discretion that, due to the nature and
complexity of the dispute, it should be settled by a sole arbitrator.
The ICC Court Secretariat could let the parties understand, after a
fi rst approach to the problem, that such would be the decision of the
ICC Court failing the amicable agreement of the parties on the
designation of their arbitrator. So too would be an arbitration
agreement providing that the three members of the arbitral tribunal
should be appointed by an arbitration institution. page 201"

Finally, it seems clear, in the Dutco case, that the arbitration clause
was impracticable, even if not null ab initlo, since it provided for a
three arbitrator tribunal, each of the first two being appointed by the
parties and the third one by the ICC Court of arbitration. Such being
the arbitration clause, the ICC Court was prevented from applying its
discretion under Article 2.5 above. If the parties had subscribed to
the ICC model clause without any amendment, probably the ICC
Court would have played its part and the Dutco decision would have
never existed because the two co-defendants, placed in the
alternative of the ICC Court designating a sole arbitrator or
themselves falling into agreement without reservation by any of
them as to their common arbitrator, would certainly have preferred
the second solution. On the other hand, if these parties had let the
ICC Court make the appointment, none of them, it is submitted,
could have had any ground for challenge since they were duly given
by the ICC Court the opportunity of making an appointment of their
choice. page "202"

See Bellet, Rev Arb 1992, 470: l'arret qui precede ne manquera
pas de causer un peu d'emoi. Sa brievete ne dolt pas faire croire
son peu d'importance, bien au contraire: it se veut un arret de

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principe...'; and Bond, [1992] World Arbitration and Mediation Report

70.
2See Rev. Arb. 1989, 723, note Ballet; and Seppala, International
Financial Law Review, November 1989.
In French: tous differends decoulant de cat accord qui ne
pourront etre *les a ('amiable entre les membres, seront trenches
definitivement conformement au reglement de conciliation at
&arbitrage de la Chambre de commerce internationale par trois
arbltres nommes conformement a ce reglemenf. Article 2.4 of the
ICC Rules provides that where the dispute is to be referred to three
arbitrators, 'each party shall nominate...'(emphasis supplied).
4 Its Dutco decision begins: 'Vu les articles 1502, 2e, 1504 du
nouveau code de procedure civile et l'article 6 du code
Article 6 of the Civil Code prescribes an important rule of public
policy in French law: 'On ne peut deroger, par des conventions
particulieres, aux lois qui interessent l'ordre public et les bonnes
moeur'. (Articles 1502(2) and 1504 of the New Code of Civil
Procedure allow recourse against an award made in France in an
international arbitration 'si le tribunal arbitral a ate irregullerement
compose...').

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