On 6^th June, the Paris Court of Appeal provided its landmark decision (in French: “arret”) in the Sulu arbitration. In Malaysia, arguably, no decision of any court of appeal outside of Malaysia has ever been as hotly anticipated as this one. The result of the arbitration between eight individuals (who describe themselves as descendants of the Sultan of Sulu; the “Heirs”) and the Government of Malaysia was a decisive victory for the Heir, with the sole arbitrator awarding them the amount of approximately USD 15 billion.
 
There has never been as much money at stake before for Malaysia; considering that the budget of the Malaysian government for 2023 amounts to less than USD 100 billion,¹ the sum awarded was enormous.
 
Aside from the importance for Malaysia, the Sulu Arbitration has also drawn general global interest. It is therefore unsurprising that media powerhouses such as Reuters,² Bloomberg³ and The Washington Post⁴ – in addition to many others⁵ – all reported on the recent decision by the Paris Court of Appeal. These reports were mainly on the outcome of the decision, however without going into the details of the decision itself.
 
In Malaysia, a translation of the decision into English was being circulated among those in the arbitration circle only a few hours from its publication (the “Translation”).⁶ However, the translation was made using software rather than professional translation services.
 
The newspaper reports as well as the Translation thus leave open a few questions, which the author, who is admitted as a Foreign Lawyer to the Malaysian Bar and as an attorney-at-law in Austria, EU,⁷ will clarify herein. This short write-up therefore aims to explain the Paris Court of Appeal’s decision and to provide essential background information and context to it:
 
Why is there a Paris Court of Appeal when there should only be one court of appeal in a country?
In commonwealth countries which base their legal systems on the English common law system, there is often only a single court of appeal. For instance, this is the case for Malaysia, the UK and Singapore. However, this is not necessarily always the case. Indeed, several courts with the name “Court of Appeal” exist in Australia.⁸
 
France does not follow the one court of appeal only approach: the French Ministry of Justice lists 35 courts of appeal on its website, including the Paris Court of Appeal (Cour d’Appel de Paris) and the Court of Appeal of Papeete (Cour d’Appel de Papeete), which as the name indicates is located in Papeete, the capital city of French Polynesia, in the Pacific Ocean – at a distance of over 15,000 kilometres from the French capital Paris.⁹
 
The reason the Paris Court of Appeal was the appellate court in this matter is that Malaysia’s appeal was made against a decision by the Tribunal de Justice de Paris.¹⁰ This gave the Paris Court of Appeal territorial jurisdiction.
 
What type of decision was the Paris Court of Appeal’s decision procedurally?
In civil matters before French courts, the term “arrêt” designates a decision rendered by the higher civil courts (Court of Appeal and Court of Cassation). The term “jugement” (judgement) refers to decisions rendered by courts of first instance (High Court, District Court, Commercial Court, etc.).
 
Although the Translation reads “judgement” at the top of its first page – a translation from the term “arrêt” – it incorrectly translates the same “arrêt” as “STOP” on page 3 of the Translation. This could easily have led to confusion among the reader. For the purpose of this explanatory note, except as stated here, it is not necessary to draw a further distinction between the terms “arrêt” and “jugement.”
 
Why where there two “Chamber Presidents” involved and what was the role of the “Advisor”
Judges of the French courts of appeal are generally called advisers (Conseilleur/Conseillère).¹¹ Each court of appeal is headed by a first president (premier president) and an attorney general (procureur general). French courts of appeal are divided into different sections (chambre). Sections also have presidents, called “Section President” (Président/Présidente de chambre).¹²
 
As can be seen from the decision by the Paris Court of Appeal, in the decision at hand, there were two section presidents and one advisor involved.
 
Why does the decision say that it is “contradictory”?
The attentive reader of the Translation will have noticed that the decision was supposedly “contradictory” (contradictoire). This is a prime example of translation software not (yet) being ready for professional use:
Traditionally, “contradictory” decisions refer to situations where two or more decisions are given in a case and these decisions contradict each other. This is not the case here as this was the only decision given by a court of this level.
 
However, “contradictory” (contradictoire) as employed in the Paris Court of Appeal’s decision here refers to the fact that during the process before the court, the parties were in a position to debate contradictorily and fairly.
 
What was the subject matter of appeal?
To those unfamiliar with French civil procedure and basing their knowledge entirely on newspaper reports, it might be understood that the decision by the Paris Court of Appeal was in respect of the final award rendered in the Sulu Arbitration. Such understanding would be incorrect:
 

To someone not familiar with enforcement / setting-aside proceedings in France, this requires additional explanations:
 
The sole arbitrator in the Sulu Abitration had rendered this partial award at Madrid on 25 May 2020 (the “Partial Award”).¹⁵ The President of the Paris Court of First Instance (Tribunal Judiciaire) declared the Partial Award enforceable (exécutoire) in France on 29 September 2021.¹⁶ Other decisions on procedure followed, which are not relevant for the purposes of this short write-up.
 
It is important to note, however, that the declaration of enforceability, also referred to as exequatur in France, was the subject matter of the proceedings before the Court of Appeal. This can be clearly seen from the fact that the Government of Malaysia applied to the Court of Appeal to:¹⁷

The Government of Malaysia’s application was premised on the following grounds:¹⁸

The Paris Court of Appel noted that as the arbitrator’s jurisdiction to decide was at the core of this issue, it had to first ascertain whether the parties’ will under the agreement at hand was to resort to arbitration and, if so, under what conditions.^₁₉
 
What were the findings/reasons by the Paris Court of Appeal?
The Paris Court of Appeal first dealt with various procedural matters. For various reasons, the Eight Heirs took the position that the requests by the Government of Malaysia were inadmissible (irrecevable).²⁰ These procedural matters may be of general interest for anyone dealing with French procedural law and the Paris Court of Appeal indeed discussed these procedural matters on several pages.²¹ However, for the purpose of this explanatory note, these procedural matters are irrelevant and will not be addressed here.
 
With respect to the question of jurisdiction, the Paris Court of Appeal took note that the Government of Malaysia had contested the Sole Arbitrator’s jurisdiction twice, once in a letter by the Attorney General and once through a letter from a law firm. Accordingly, the Paris Court of Appeal found that the Government of Malaysia had the right to rely on the lack of jurisdiction in the proceedings before the Paris Court of Appeal.²²
 
The Paris Court of Appeal then first examined the language of the underlying dispute resolution clause in the agreement of 22 January 1878 between the Sultan of Sulu and Alfred Dent et le Baron Gustavus Von Overbeck, the original Parties, (the “Agreement”). It examined the meaning of various different versions, including the French, English and Spanish versions.²³ Based on the various different dispute resolution clauses before the Paris Court of Appeal, in summary, it came to the conclusion that:

The Paris Court of Appeal further noted that the majority of the available translations of the Agreement spoke of “decision” (décision) and judgement (jugement). This was also supported by a dispatch sent by a person who witnessed the discussions and execution of the Agreement at the time. The Paris Court of Appeal thus found that the dispute resolution clause in the Agreement revealed the will of the parties to task the Consul General with the resolution of disputes between them or their successors, thereby excluding recourse to national courts, which are different from the function the Consul General was to exercise. It concluded that the dispute resolution clause in the Agreement could therefore be regarded as an arbitration clause (clause compromissoire).
 
This appeared to be bad news for the Government of Malaysia in principle, which disputed the existence of an arbitration agreement. However, the Paris Court of Appeal’s analysis of the arbitration clause did not stop there:
 
It also came to the conclusion that the choice of the Consul General constituted a decisive element of the willingness of the parties to have recourse to arbitration.²⁷ This is because the holder of that office maintained a relationship of trust with the parties, as was among others evidenced by the fact that he even took an active part in the negotiations between the parties and signed the Agreement himself.
 
More than just being a decisive element, the Paris Court of Appeal was even of the view that the Consul General’s designation as the person deciding any differences between the parties to the Agreement as an arbitrator appeared, in view of the circumstances, to be inseparable from their intention to refer disputes to arbitration. The designation was to be regarded as a whole with the dispute resolution clause as such.²⁸
 
The tides had thus turned for the Government of Malaysia. Given its interpretation of the dispute resolution clause, the Paris Court of Appeal unsurprisingly found that the disappearance of the function of Consul General had rendered the arbitration clause inapplicable, having become moot. According to the Paris Court of Appeal, this was supported by the fact that the British government had acceded to the rights of one party in 1946. This fact would have rendered the British Consul General unfit to sit as an arbitrator as he/she could no longer have been independent.²⁹
 
Under these circumstances, a new agreement on the resolution of disputes would have been necessary. However, despite renegotiations, no such agreement was concluded. Therefore, the arbitrator had no jurisdiction. The Paris Court of Appeal thus came to the conclusion that there was sufficient reason to annul the exequatur – of the partial award (only) – without it being necessary to rule on the other grounds raised by the parties.³⁰
 
What’s next?
According to the French Civil Procedure Code, the decision of a court of appeal dismissing an appeal lodged against an exequatur order has the effect of automatically enforcing the award.³¹ This shows how much there was at stake for the Government of Malaysia – had this matter been lost, the partial award on jurisdiction would have been automatically enforced.
 
According to reports from the media, the Heirs take the view that the court chose not to follow the guidance it had requested from its own attorney general which “made clear that Malaysia’s appeal against the exequatur order of the preliminary award should be rejected” and that they are “considering their options before the French Supreme Court.”³²
 
So, while this explanatory note has come to an end, it appears that the end of the saga is yet to come.

Article by  Dr. Harald Sippel, Head of Skrine’s European & North Asian Desk, Foreign Lawyer (Malaysia), Attorney-at-law (Austria).

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