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.