The Chemouny Associés law firm was set up on 1 February 2016 by Philippe Chemouny, a lawyer who has been a member of the Paris Bar since March 1989 and who specialises in collective insolvency proceedings. He handles all types of company law litigation, defending the interests of businesses. Here he gives us his opinion on the use of arbitration to settle disputes.
“When a cross-border agreement is entered into by a French company with a company based in an English-speaking country, it is common that an arbitration clause is included”, says Maître (lawyer) Philippe Chemouny. This is no cause for alarm if no conflict arises from the contractual relationship and everything goes to plan. But if something does go awry, some big surprises may be in store. “Too often company heads are not aware of the full effects of the use of an arbitrator”.
Six days of arbitration can be expensive!
French business people are still not fully up to speed enough when it comes to arbitration. Arbitration is a form of private dispute resolution which can be fully binding. “Compared to justice administered in the courts, it can be costly, even excessively so. Six days of arbitration in New York can prove to be very expensive for a French company!” says Maître Chemouny. Although expense is not its only disadvantage – indeed this is far from the case. “Depending on the agreement which has been signed, parties can find themselves dealing with an arbitrator who will rule on a dispute in light of the law of a foreign country, which may be radically different from French law! Parties will no longer be governed by French law, which is sometimes more protective of their interests. For instance, French law does not recognise the right to compensation for lost profits nor the right to punitive damages in the event of a sudden breaking-off of negotiations pertaining to the transfer of ownership of a business. This is not the case as regards British- and US-type legal systems.
On many occasions, Philippe Chemouny has been faced with situations which were very tricky for French businesses. “Arbitrators jeopardised companies which employed hundreds of people, merely through their decisions. It is sometimes forgotten that they have exorbitant powers, that they take decisions based on the rules of fairness, or in accordance with the law of a foreign country which is both quite removed from the rules which govern the French legal system and quite removed from our legal culture”, he adds.
A right to information
To prevent unpleasant surprises, Philippe Chemouny sees a need for information for senior managers. “I am not against arbitration, quite the reverse in fact. Arbitration can often compensate for the slow progress of justice administered through the courts. But it is vital that company heads are informed of the effects of arbitration clauses.”
Philippe Chemouny calls for prudence, in order to avoid the pitfalls. He prefers to draw up clauses on jurisdiction personally. “I have drafted such clauses for an innovative French business which specialises in the design of software programs for export”. However, he remains very circumspect with regard to the use of arbitration in litigation where the stakes are high for French SMEs or which involves the public interest.
Interview by Jean-Christophe Collet
“I am not against arbitration, quite the reverse in fact. Arbitration can often compensate for the slow progress of justice administered through the courts. But it is vital that company heads are informed of the effects of arbitration clauses.”
Page 64 July 2017 C’est à vous ! 45 (“C’est à vous !” is the magazine of Medef, the French employers’ federation)