Restrictive competition practices and international public policy

Does the law of restrictive practices belong to international public policy or not? 

This last question was answered by the Paris Court of Appeal in its decision of 29 October 2024.  

The case in question was between a franchisor under Danish law, and a group of French companies to which it had entrusted the distribution of its products. The Parties were bound by a framework agreement and by franchise agreements finally terminated by the franchisor.  Arbitration

proceedings have been initiated, and the Franchisees have challenged these terminations.  

The award rendered by the arbitrator granted the franchisor.  

The appeal brought before the Court of Appeal was for the partial exequatur of which the award was the subject.  

To challenge the exequatur order, the franchisees invoked a violation of international public policy due to:
  

• violation of the adversarial principle; 

• failure to comply with the principle of the “Pacta sunt servanda” rule; 

• non-compliance with the provisions of Articles L.622-21 and L.622-28 of the Commercial Code; and finally,  

• non-compliance with Articles 101 TFEU, and L.420-1 and L.442-1, I, 2° of the Commercial Code. 

On the violation of the principle of contradiction, the appellants argued that they had been the victims of several refusals by the sole arbitrator to develop defences. Consequently, that the parties had not been treated equally and that the franchisees had not been able to present their arguments. According to the appellants, a violation of the principle of contradiction and the right to a fair trial was characterized. 

The Paris Court of Appeal recalls that under the terms of Article 1520 of the Code of Civil Procedure, the annulment of the award may be continued when its recognition or enforcement is contrary to international public policy.  

The Court considers that the reasoned refusal of the arbitrator to receive additional requests or his refusal to hear a witness or to order the production of documents or case law falls within his sovereign discretion and therefore does not in itself constitute a violation of the principle of contradiction or a breach of equality of arms. In the present case, it considers that the arbitrator only used his sovereign power to assess the admissibility of the evidence and the merits of the pleas submitted to him. It therefore dismisses the plea based on the principle of contradiction and the right to a fair trial.  

On the non-compliance with the principle of contractual freedom, the appellants argue that by refusing to apply the clause providing for the renewal of the Contract, and by admitting the merits of their termination, the arbitrator distorted the contract and the will of the parties.  

The Court recalls that the exequatur judge is not vested with the power to review the reasoning adopted by the arbitrators, moreover, assuming established the manifest error of assessment invoked by the appellants, it relates only to the legal consequences to be conferred on the disputed clause and not to the freedom to contract in itself. The appellants’ plea is therefore dismissed.  

On the non-compliance with Articles L.622-21 and L.622-28 of the Commercial Code, the appellants submit that the principles of the cessation of individual proceedings and the course of interest provided for by these articles have been violated.  

The Court held that the enforcement order did not give enforceable force to the decisive heads pronouncing convictions and fixing of claims, as well as convictions on interest, and conferred only recognition to the said heads. The Court thus held that the violation of international public policy had not been established.  

On the non-compliance with Articles 101 of the TFEU, and L.420-1 and L.442-1, I, 2° of the Commercial Code, the franchisees consider that the enforcement of the arbitration award would contravene not only the law of restrictive practices, but also the law of anti-competitive practices.  In particular,

they argue that certain contractual clauses conflict with provisions relating to significant imbalance, as well as antitrust law and the abuse of economic dependence.  

The Court recalls that the review of the violation of international public policy relates only to examining whether the execution of the provisions adopted by the arbitral tribunal violate in a marked manner the principles and values included in the said international public policy.  

It recalls that although Article L.442-6 I 2° of the Commercial Code constitutes an internal police law, its violation does not constitute a violation of international public policy. In addition, in the present case, these provisions were invoked in a logic of protection of private interests.  

On the other hand, the Court accepts that the alleged violation of the law of anti-competitive practices falls within the scope of international public policy. However, in this case, the franchisees will fail to demonstrate the existence of this breach.   Paris  Court of Appeal, October 29, 2024, No.23/02368