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Advocate General at the CJEU emphasizes the importance of competition law arguments in international arbitration (Opinion of AG Wathelet in Case C-567/14)

On 17 March 2016, Advocate General Wathelet at the Court of Justice of the European Union (CJEU)  delivered his Opinion in Case C-567/14 (Genentech) emphasizing the importance of competition law arguments in annulment proceedings of arbitral awards and calling the French standard of review of arbitral awards “contrary to the principle of effectiveness of EU law“.

France is known for its limited scope of review of arbitral awards by national courts. Although Paris is one of the hubs of international arbitration in Europe, this was the first referral for preliminary ruling of a French Court to the CJEU in annulment proceedings of arbitral awards. Should the CJEU follow the Advocate General’s opinion (which is regularly but not always the case), this is likely to entail considerable changes to the review of arbitral awards with regard to EU competition law, in particular but not exclusively in France. In the future, EU competition law arguments are likely to become significantly more important in international arbitration proceedings.

The referred question originated from annulment proceedings before the Paris Court of Appeal regarding arbitral awards granted in an ICC arbitration between Genentech Inc. (Genentech) and Hoechst GmbH/Sanofi-Aventis Germany GmbH (Sanofi). The arbitration dealt with payment of patent royalties under a license agreement in the pharmaceutical sector. In the annulment proceedings Genentech mainly relied on a public policy argument, claiming that the arbitral awards constitute a restriction of competition in the sense of Article 101 TFEU as they oblige the licensee to pay running patent royalties even though the licensee has never used the licensed technology. Before the CJEU, the French Government had argued that a request for preliminary ruling was inadmissible due to the standard of review applied by French courts towards arbitral awards.

In his Opinion, Advocate General Wathelet dismissed these arguments calling the French standard of review of arbitral awards “contrary to the principle of effectiveness of EU law” and a system that is “the opposite of the system of mutual trust” established by the (recast) Brussels I Regulation (EU) No 1215/2012 (paras. 58, 60).

According to the Advocate General’s assessment, EU competition law constitutes a provision of fundamental importance to the EU legal order and there is nothing that could support the conclusion that restrictions of competition falling under Article 101 TFEU could be permissible. Advocate General Wathelet added that according to the CJEU, private arbitral tribunals are not entitled to make referrals for preliminary ruling which is why a state court in subsequent annulment proceedings has to refer questions of compliance with EU law to the CJEU. The Advocate General concluded that no national legal system can accept such infringements of its fundamental public policy rules, irrespective of whether they are originally dealt with in arbitration proceedings and whether or not they are flagrant or obvious.

We will closely follow this case and its implications and will provide an update as soon as the CJEU will have issued its decision.