Case law Developments in PIL

When Do International Sanctions Define French Public Policy?

In a judgment of 3 June 2020, the Paris Court of Appeal ruled that sanctions issued by the Security Council of the United Nations (UN) or by the European Union (EU) are international mandatory rules which define French public policy. As a result, the court ruled that, in principle, an arbitral award violating such sanctions could be set aside by a French court.

In contrast, the court ruled that unilateral sanctions issued by the United States of America do not constitute French public policy. As French authorities have expressed their hostility against them, US sanctions obviously cannot be regarded as defining the most important values of the French state. An arbitral award failing to take them into consideration might not, therefore, be challenged before French courts.


The case was concerned with a gas storage contract to be performed in Yort-E-Shah, Iran. The initial contract was concluded in 2002 between an Iranian and a French company.  A number of letters of credit had been issued by various banks to guarantee the  performance of the contract. In 2008, a dispute arose between the parties. The Iranian party alleged various contractual breaches, terminated the contract and called the guarantees. The French party initiated proceedings before French courts to enjoin the banks from paying under the letters of credit, which were eventually dismissed (see the judgment of the French Supreme Court here).

The French party then initiated arbitration proceedings before an ICC tribunal in Paris arguing that the termination of the contract was illegal. The Iranian party made counterclaims. The tribunal allowed claims from both parties and, after setting them off, ultimately found in favour of the Iranian company.

The French company then initiated proceedings before French courts, arguing inter alia that the award was contrary to French public policy for failing to take into account applicable sanctions and should thus be set aside.

UN Sanctions

The first argument was that the arbitral tribunal had failed to apply UN Resolutions no 1737 of 23 December 2006, no 1747 of 24 March 2007 and no 1803 du 3 mars 2008. The Iranian party challenged the relevance of the UN resolutions for defining French public policy, arguing that UN resolutions are not directly applicable in France, were not implemented in the French legal order, and thus could not be considered as defining French public policy.

The court recognised that the UN resolutions were not directly applicable in France, and that they could not be characterised as French international mandatory rules. However, the court held that they were either foreign international mandatory rules, or  “genuinely international mandatory rules”. The court concluded by adding that, in any case, the objectives pursued by the UN, peace and international security, were essential values to the French state. In principle, therefore, arbitral awards violating UN sanctions would not comport with French public policy and could be set aside on this ground.

This wealth of reasons might reveal that none of them was particularly convincing.

The most unconvincing argument was certainly to distinguish between foreign international mandatory rules and mandatory rules of the forum. The purpose of the distinction is to grant discretion to courts to apply mandatory rules protecting the interests of foreign states. It seems hard, and pretty artifical, to establish a link between UN sanctions and certain states, but not others. A formalistic way of doing this would be to argue that UN sanctions would be foreign mandatory rules only in the states which have not implemented them. Is that what the court means? If so, it should tell which foreign implementing legislation it is actually considering. And what if UN sanctions are not directly applicable in the vast majority of states? Are they foreign to everybody?

The concept of “genuinely international” mandatory rules (lois de police réellement internationales) is a reference to the idea that while arbitrators have no forum, and cannot be considered as more specifically bound by the mandatory rules of any given state, they should consider that they are the guardians of a genuinely international public policy composed of norms recognised as being of the utmost importance at a global level. The doctrine of “genuinely international public policy” (ordre public réellement international), or “genuinely international mandatory rules”, is a correction of the consequences of the delocalisation of arbitration promoted by the French law of arbitration. The reference to this doctrine in the context of court proceedings, however, raises a number of issues. First, the court implies that arbitral tribunals should be compelled to apply a rule which is not a French international mandatory rule, and that French courts would thus have no obligation to apply if the case was litigated in France. Second, while one can conceive that arbitrators do not have a forum and are thus not bound by the international mandatory rules of the seat of the arbitration, a French court does have a forum, and should thus care about French public policy (indeed, see below the reasons for not taking into account US sanctions).

Finally, the court explained that UN resolutions should be considered as defining French public policy because of the importance of the purpose that they served. The court ruled:

the aforementioned resolutions, in so far as they are intended to contribute to the maintenance or restoration of international peace and security, embody rules and values whose disregard must be considered to be incompatible with the French legal system and which therefore fall within the French concept of international public policy

International mandatory rules are defined by the importance of the purpose that they serve, so establishing the purpose of UN Resolutions in this context was no doubt important. Yet, one wonders whether the sole purpose of norms could make them international mandatory provisions irrespective of their enforceability in the relevant legal order.

EU Sanctions

The characterisation of EU sanctions contained in Regulations (EC) no 423/2007, (EU) no 961/2010 (EU) no 267/2012 was much simpler. EU regulations are directly applicable in all Member states. The court thus found that these regulations are French international mandatory rules and, because they contribute to the maintenance or restoration of international peace and security, also define French international public policy. In this context, the reference to the purpose of EU Regulations was aimed at distinguishing those EU regulations which would qualify as international mandatory provisions and those which would not.

US Sanctions

Finally, the court turned to US sanctions and ruled that they did not define French public policy. The court insisted that its role was to assess French public policy. For this purpose, it was highly relevant that the French state had repeatedly expressed through members of its government its opposition to the policy of the US to use unilateral sanctions, calling them unjustifiable and violations of international law. French authorities were working with other Member States to reinforce the economic sovereignty of the EU, in particular by reflecting on extending the scope of the EU blocking regulation (and possibly the French blocking statute). Thus, US sanctions clearly did not define French public policy


After elaborating quite extensively on the characterization of international sanctions as international mandatory rules, the court found that neither the UN Resolutions, nor the EU Regulations applied in the particular case, and that there had not been any actual violation of French public policy. It seems clear, therefore, that the court wanted to signal its doctrine and clarify that, while it would expect arbitrators to take into account UN and EU sanctions, it would participate in the effort of the French state to resist US unilateralism in this respect.

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