French Courts and Arbitration Validity: Simplicity or Legal Uncertainty?

This case note examines the French Court of Cassation’s decision of 6 November 2024. The case involved descendants of the Sultan of Sulu disputing Malaysia’s cessation of payments under an 1878 agreement granting territorial rights. The French Court rejected the enforcement of a Spanish arbitral award based on the alleged invalidity of the arbitration agreement. The Court assessed the validity of the arbitration agreement solely through the common intention of the parties, principles of good faith and the doctrine of ‘useful effect’, without analysing the problem under the lex contractus or the lex loci arbitri, which are applicable under Article V of the 1958 New York Convention. This pragmatic approach departs from established international frameworks, raising concerns about legal certainty and consistency. Ironically, however, the theoretical foundation of this approach – the French transnational or delocalized theory of arbitration – was originally developed to support enforceability, not restrict it. By allowing the recognition of awards annulled at the seat (as in Putrabali), French courts once led a movement toward arbitral autonomy. The Sulu decision, by contrast, illustrates how the same theoretical framework can now produce arbitration-hostile outcomes. This note will argue that the Sulu case exposes an internal contradiction in the transnational theory: its open-ended flexibility, once heralded as liberating, now risks being turned inward to justify the denial of enforcement. By prioritizing judicial interpretation of party intent, the Court disregarded the Convention’s mandate to assess validity under applicable national laws. The French approach (a simple analysis of validity under general principles such as the common intention of the parties, good faith, the doctrine of effet utile, without reference to the law of any particular country) is legally defensible only when it facilitates recognition or exequatur, as permitted under Article VII of the New York Convention. However, in this case, where exequatur was denied, the approach of the French Court of Cassation is a clear violation of the New York Convention.