The background of the case is necessary to understand this final decision of the French Supreme Court.

Background of the case

On 6 June 2023, an appeal was brought before the International Chamber of Commerce of the Paris Court of Appeal against an order granting exequatur to an award in which a Spanish arbitrator had declared himself competent to rule on claims for compensation made against the State of Malaysia by the Sultan of Sulu's Heirs, in accordance with an Agreement concluded in 1878 by the Sultan.

As a reminder, the Paris Court of Appeal ruled on the merits that the clause invoked by the Sultan of Sulu's Heirs to seek arbitration could be regarded as an arbitration clause, effectively affirming the parties' agreement to settle any potential dispute concerning the contractual provisions through an arbitration procedure, despite the uncertainty caused by its translation (written in Jawi and transcribed into Arabic characters). The procedure provided for in the Agreement enabled the parties to invoke a clause in the Agreement which provided for the intervention of the British Consul General in Borneo in the event of a dispute.

Given the circumstances in which the Agreement was concluded between the Sultan of Sulu and two European explorers, the Paris Court of Appeal determined that the choice to appoint the British Consul General in Borneo to handle any dispute had been a determining factor in the parties' agreement to agree to arbitration.

For context, in 1878, the Agreement was intended to govern the rights of each party to the territories on the north coast of the island of Borneo, before these territories became part of the State of Malaysia in 1963. This was before the office of British Consul General ceased to exist.

Decolonisation however, meant that the office of the British Consul General had ceased to exist and as a consequence the Paris Court of Appeal determined the arbitration clause was in fact inapplicable. The Paris Court of Appeal overturned the exequatur order, concluding that the Spanish arbitrator could not legitimately declare himself competent - the arbitration clause had become impossible to enforce.

The French Supreme Court ruling in favour of the State of Malaysia

A few weeks ago, the French Supreme Court fully dismissed the appeal brought by the Sultan's Heirs and upheld the decision of the Paris Court of Appeal ruling that the partial award could only be reversed because the arbitration clause had lapsed.

To dismiss the appeal, the French Supreme Court started by stating that only the common will of the contracting parties has the power to invest the arbitrator with jurisdictional authority.

It also recalled the main findings of the judgement under appeal according to which a decisive factor in the parties' intention to have recourse to arbitration was the appointment of the British Consul General in Borneo: in other words, the parties to the agreement had prioritised the selection of a particular type of arbitrator over the broader choice to employ arbitration.

• As the office of British Consul General had ceased to exist, the consent to arbitration was necessarily also no longer valid.

• In this regard, the French Supreme Court agreed that the Paris Court of Appeal was right to declare that the arbitration clause had lapsed.

The French Supreme Court's control of the appealed ruling is limited to verifying whether Paris Court of Appeal ruled in accordance with the law, on the issue of the parties' consent to arbitration and thus, the validity of such a clause.

Although the French Supreme Court's decision is logical, it is regrettable that the disappearance of the office of an arbitrator appointed in a clause, leads to the nullity of that clause, despite the fact that the consent to arbitration existed at the time the contract was concluded. Had the parties not specified the arbitrator in this way, the clause would not have been deprived of its scope.

As a result of this ruling, French jurisdictions definitively refused to enforce the partial award, which served as the original foundation for the final award of USD 14.92 billion to the Sultan's Heirs issued on February 28, 2022.

The final award which is, as a reminder, still the subject of a further action for annulment before the Paris Court of Appeal would, in the same line, result in the refusal to enforce in France too.