In November 2001, Claimant, a US company, initiated arbitration against Respondent, a French company. In July 2002, Respondent became subject to bankruptcy proceedings in France. The arbitral tribunal issued a partial award in which it addressed the Claimant's claim for unpaid sums with interest. Respondent subsequently claimed that this award violated French insolvency law as it was made prior to the declaration of a debt and that the debt was declared after the allotted time limit, with the result that the arbitration had become void. The arbitral tribunal addressed this renewed challenge to its jurisdiction in its final award.

Partial Award

'4. The claim for unpaid invoices

4.1 The claim

Claimant claims . . . in respect of unpaid sums due under 12 invoices. . . .

4.4 Tribunal's decision

In these circumstances, we are in no doubt that the invoiced sum of . . . is due and owing from Respondent to Claimant.

4.5 Effect of French bankruptcy proceedings

Since Respondent is subject to a "redressement judiciaire" procedure under French commercial law (Articles 620-1 et seq. Code de Commerce), according to Article 621-41 of the Code de Commerce, court proceedings are suspended until after the creditor has filed a declaration on his claim. Thereafter the proceedings are resumed but with the only aim to determine the claims and their amount. Accordingly, the judge may not condemn a party under bankruptcy proceedings to pay any amount. Only after the declaration as to the existence of such claim is made the judges may decide on the claim in dispute. French courts have acknowledged the applicability of this principle in international arbitration proceedings referring to the former law no. 85-98 dated 25th January 1985, now incorporated in the above Article 621-41 of the Code de Commerce (Cass. Civ. 1, 8 March 1988, Société Thinet vs Labrely ès-qualites, in Revue de l'arbitrage, 1989, p. 473). We therefore declare that Respondent is liable for the amount of . . ., as set out above.

5. Interest on the invoiced sums

Claimant claims interest on the invoiced sums referred to in section 4 above. The claim for interest is divided into two parts.

5.1 Pre-award interest

. . . . . . . . .

5.2 Post-award interest

. . . . . . . . .

5.3 Effect of French bankruptcy proceedings

Since Respondent is subject to a "redressement judiciaire" procedure under French commercial law (Articles 620-1 et seq. Code de Commerce) as set out in section 4.5, according to Article 621-41 of the Code de Commerce court proceedings are suspended until after the creditor has filed a declaration on his claim. Thereafter the proceedings are resumed but with the only aim to determine the claims and their amount. We therefore decide that Respondent is also liable for the amount of . . . as set out in section 5.1 above and for post-award interest, as set out in section 5.2 above.'

Final Award

'Having considered [Respondent]'s arguments . . ., we . . . rejected the challenge to our jurisdiction based on arguments of French law relating to the French bankruptcy or liquidation proceedings to which the Respondent is subject. We were appointed to act as arbitrators in the disputes between Claimant and Respondent before Respondent was made the subject of any such bankruptcy proceedings, and we consider it as our mandate, and indeed duty, to resolve such disputes.

We know of no principle in either English or French law which has the automatic effect of nullifying an ongoing arbitration when a party to the arbitration is placed in administration or liquidation. It may or may not be the case that the matters referred to by [Respondent] will constitute obstacles to the enforcement of the partial award or this award in France. We do not consider it appropriate that we should adjudicate over the issue of enforcement and, moreover, even if there were valid reasons why the award would not be enforced in France, that would not deprive us of jurisdiction to make an award.

No argument was presented to us based on English law, perhaps for the good reason that Respondent is not subject to any administration or liquidation proceedings in the English courts so as to bring into play any provisions of English legislation.

As to the position under French law it has been affirmed by the French judiciary that the jurisdiction of the courts in French insolvency proceedings does not affect the competence of State courts before which proceedings are already pending pursuant to Article L 621.41 of French Code of Commerce (see as well the decision of Paris Court of Appeal of May 2, 2000, in Recueil Dalloz, 1990, summary 219, note Honnorat). Accordingly, it has been held in French case law and doctrine that arbitration agreements are enforceable in the context of French insolvency proceedings if they have not arisen (or were not originating) in the particular procedure or if not forming part of "core" insolvency proceedings. Although the relevant provisions of the French law do not refer particularly to arbitration proceedings, it is considered that the same principles apply to pending arbitrations (see Pascal Ancel, "Arbitrage et procedures collectives après la loi du 25 janvier 1985", in Revue de l'arbitrage, 1987, pp. 127-132, sp. p. 131).

Furthermore, the French judiciary has ruled that it will accord jurisdiction to an arbitral tribunal to rule upon a dispute involving a party against which insolvency proceedings are brought. In the first place, the Cour de Cassation held that the principal criterion to be applied in determining whether an arbitral tribunal has jurisdiction over a dispute in the context of insolvency proceedings is whether there is a linkage between the dispute submitted to the arbitrators and the insolvency proceedings; if there is such linkage, the arbitral tribunal should decline jurisdiction in favour of the competent court (see decision of the Cour de Cassation dated July 19, 1982, Société d'exploitation de materiel industriel et de travaux publics (S.E.M.I.P) c. Société Ducar et autre, in Revue de l'arbitrage, 1983, pp. 321-322, note Ancel).

Subsequently, the Cour de Cassation confirmed this position, albeit for different reasons. The Court held that arbitrators do not lack jurisdiction faced with a dispute in the context of insolvency proceedings since resolution of the dispute does not jeopardise the insolvency proceedings (decision of the Cour de Cassation, held on January 10, 1984, Société Fleurot Charvel et fils c. Société Courrèges Homme, in Revue de l'arbitrage, 1984, pp. 492-497, note Ancel confirming the decision of the Cour d'appel of Grenoble, dated October 19, 1982, in Revue de l'arbitrage, 1983, pp. 323-325, note Ancel).

Accordingly, the Cour de Cassation reversed a decision of the Cour d'appel of Paris, which had been to the effect that national courts had jurisdiction to adjudicate upon a dispute in the context of insolvency proceedings despite the existence of an arbitration clause entered into before the commencement of the insolvency proceedings (Société Technique d'avant-garde (T.A.G.) c. Société Entertainment Media France corp. (B.M.P.C.) et autres, decision of the Cour de Cassation's Commercial Chamber dated February 12, 1[9]85, in Revue de l'arbitrage, 1985, pp. 275-277, note Ancel). Similarly, the Cour de Cassation, upholding a decision of Cour d'appel of Paris, affirmed that the arbitral tribunal had jurisdiction over a dispute regarding an action for delivery of goods that had been sold subject to a reservation of title clause, despite insolvency proceedings brought against the buyer. The Court held that the dispute emanated from the contract entered into by the parties and not from the insolvency proceedings (Caille et Jobart ès qual. c. société Peter Cremer France, decision of Cour de Cassation held on May 19, 1987, in Revue de l'arbitrage, 1988, p. 142-148, note Ancel).

Following the same point of view, Professor Philippe Fouchard (in his Article "Arbitrage et faillite", in Revue de l'arbitrage, 1998, pp. 471-494, sp. pp. 484-486) refers to more recent relevant case law granting jurisdiction to an arbitral tribunal to rule on a dispute involving insolvency proceedings against a party to an arbitration agreement. He refers to the decision of the Cour d'appel of Paris of September 20, 1995 (Société Matra Hachette c. société Reteitalia) upholding the power of the arbitral tribunal to determine its own jurisdiction even if it is confronted with a matter involving bankruptcy proceedings and in which mandatory rules are applicable. Furthermore, this decision highlights that the arbitrability of an issue is not to be determined by the fact that mandatory rules apply on the merits (decision published in Revue de l'arbitrage, 1996, p. 87-99, note Cohen). In more general terms, the Cour de Cassation has held that a dispute is arbitrable notwithstanding that it involves application of mandatory rules on the merits (see decision of Cour de Cassation, 1st Chamber, November 28, 1950, in S., 1951, p. 120 seq., not[e] J. Robert reported by Professor Cohen in Revue de l'arbitrage, 1996, p. 96).

In light of the above mentioned French doctrine and case law, we consider that the commencement of liquidation proceedings in relation to Respondent cannot deprive us, the Arbitral Tribunal, of jurisdiction over the disputes submitted to us since such disputes concern the performance and interpretation of the Distributorship Agreement between Claimant and Respondent and do not impact on the insolvency proceedings as such.

Accordingly, we consider that we do have jurisdiction to determine the matters set out in this award.'