Belgian Constitutional Court Rules Third Party Opposition Against Arbitral Awards Admissible
On 16 February 2017, the Belgian Constitutional Court (the Constitutional Court) held that third parties should be entitled to lodge third party opposition (tierce opposition) against arbitral awards.
This judgment arose following an arbitral award given in 2012. A company that was not a party to the arbitration proceedings but nevertheless felt aggrieved by the award initiated third party proceedings before the Brussels Court of First Instance seeking the annulment of the award. Uncertain as to whether the relevant provisions of the Belgian Judicial Code allowed a third party to stage such proceedings, the Brussels Court of First Instance stayed the proceedings and referred the matter to the Constitutional Court for a preliminary ruling.
In its first question to the Constitutional Court, the Brussels Court of First Instance asked whether Article 1122 of the Belgian Judicial Code violates Articles 10 and 11 of the Belgian Constitution (i.e. the provisions of the Belgian Constitution on equality and non-discrimination) as it allows third parties to challenge the validity of judgments given by a civil or a criminal court by means of third party opposition but does not offer the same possibility to third parties to arbitral proceedings.
In answering this question, the Constitutional Court relied on its long established case-law, according to which the principle of equality and non-discrimination does not preclude a difference in treatment, as long as this difference is based on objective criteria and is reasonably justified.
In applying this principle to the case at hand, the Constitutional Court found that the fact that Article 1122 of the Belgian Judicial Code allows third parties to challenge the validity of judgments given by civil or criminal courts by means of third party opposition but does not offer the same possibility to third parties to arbitral proceedings relies on an objective criterion (i.e. the nature of the body that gave the decision – either a judicial court or an arbitral tribunal). However, the Constitutional Court added that this distinction is inappropriate in the light of the purpose of the measure, because (i) court judgments and arbitral awards have identical effects vis-à-vis third parties; and (ii) the choice to refer a case to arbitration is made by the parties to a dispute while third parties have no influence on this choice.
On this basis, the Constitutional Court considered that the difference of treatment between third parties to arbitral proceedings and third parties to judicial proceedings is not justified and that Article 1122 of the Belgian Judicial Code violates the Belgian Constitution. According to the Constitutional Court, third party opposition against arbitral awards should therefore be admissible.
In its second question to the Constitutional Court, the Brussels Court of First Instance asked whether Article 1717 of the Belgian Judicial Code violates Articles 10 and 11 of the Belgian Constitution (and is therefore discriminatory) as it lists the requirements for challenging an arbitral award but does not offer this possibility to third parties.
In contrast with third party opposition (which allows a third party affected by a decision to make itself heard through a new hearing organised before the same judge who rendered the initial decision), a challenge brought against an arbitral award – under Article 1717 of the Belgian Judicial Code – seeks to have the award annulled on the basis of defects characterising the award and/or the arbitration proceedings. Those defects are listed in Article 1717 of the Belgian Judicial Code.
In answering this second question, the Constitutional Court relied on a judgment of the Belgian Supreme Court of 29 January 1993 which had found that third parties to arbitration proceedings were excluded from the scope of Article 1717 of the Belgian Judicial Code unless these third parties are able to demonstrate that the arbitration was simulated for the purpose of undermining their rights. Hence, third parties can only seek the annulment of an award in case of fraud.
In the light of this judgment, the Constitutional Court found that the fact that Article 1717 of the Belgian Judicial Code only allowed parties to arbitral proceedings to challenge an arbitral award was justified and was therefore not discriminatory. The Constitutional Court made clear that an action for annulment brought against an arbitral award cannot be likened to an appeal. The Constitutional Court also found that a challenge against an arbitral award is a procedure which is unique to arbitral proceedings and is first and foremost intended for the parties to the arbitral proceedings in order to contest an award because of specific irregularities affecting either the award itself or the arbitral proceedings. The Constitutional Court found that third parties, on the other hand, are only concerned with the enforceability of the award and cannot challenge arbitral awards directly as they are not concerned by the flaws of the award or the arbitral proceedings.
In the light of those developments, once the Belgian Judicial Code will have been changed, third parties will have the possibility to lodge third party proceedings against arbitral awards rather than having to wait for the enforceability procedure to address their claims. At the same time, third parties will not be in a position to challenge arbitral awards directly and will not be able to rely on the limited grounds of annulment against arbitral awards provided for in Article 1717 of the Belgian Judicial Code.
Interestingly, on 5 May 2015, the French Supreme Court also allowed joint guarantors to file third party opposition in French domestic arbitration case.
This post was originally drafted on 7 March 2017 and was slightly amended and updated on 21 March 2017.