In 1998, Overseas Mining Investments Ltd (OMI), a privately held company incorporated in the Channel Islands, entered into a joint venture agreement with Cuban state mining concern Commercial Caribbean Niquel SA (CCN) to exploit nickel deposits in Cuba. Following CCN's repudiation of the venture in 2004, OMI invoked the agreement's arbitration clause, seeking (among other claims) damages for lost profits.

The arbitral tribunal, in an UNCITRAL arbitration held in Paris, acknowledged OMI's right to lost profits in an award rendered in October 2008. However, when the tribunal granted OMI more than US$50 million in damages and costs, it based its award on the distinct legal principle of lost chance, a theory that the parties had not discussed before the tribunal.

CCN successfully petitioned the Paris Court of Appeal to set aside the award for violation of the adversarial principle (principe de la contradiction), a rule of due process in French civil procedure that guarantees one party's right to counter arguments of fact or law raised by the other. In the court's judgment of March 2010 (CA Paris, 1ère Ch., 25 mars 2010, n° 08-23901), the court accepted CCN's claim that the arbitrators had failed to respect due process. The arbitrators had rejected the lost profits theory that was actually debated by the parties and instead awarded damages to OMI on a legal basis (loss of chance) that OMI had neither raised nor been asked to discuss. The fact that CCN had invoked the loss of chance principle in its counterclaim was not enough, the court held, to satisfy due process requirements. The court held that arbitrators must give both parties the opportunity to present opposing arguments on the substantive law that forms the basis for their award.

The Cour de Cassation upheld the Court of Appeal's decision, agreeing that the arbitrators' failure "to invite the parties to express their views" on loss of chance violated the adversarial principle. The court emphasised the fact that the arbitrators had not used the theory of loss of chance simply as a rubric for estimating damages. The arbitral tribunal had instead acted sua sponte (of their own accord), by making loss of chance the legal foundation for the award of damages itself. The court held that such a ruling was in violation of the due process guarantees in Article 1502 of the French Code of Civil Procedure.

The Cour de Cassation decision confirms the French courts' longstanding insistence on scrutinising arbitral awards for strict compliance with fundamental principles of due process. The Cour de Cassation has long held that the adversarial principle in particular is "essential for the conduct of a fair trial" (C. cass., 1ère civ., 5 fév. 1991, n° 89-14382). This latest decision, therefore, fits squarely within the lines of previous French court decisions, confirming that the adversarial principle is binding on arbitrators (C. cass., 1ère civ., 14 mars 2006, n° 03-19764), and requiring arbitrators to base their reasoning on issues of fact and law that parties actually contest before the tribunal (CA Paris, 18 sept. 2003, Rev. arb. 2004, 311). The Commercial Caribbean case is by no means a harbinger of change in French law. It does, however, serve as a reminder that French courts expect arbitrators to apply all due process safeguards.

Overseas Mining Investments Ltd c/ Commercial Caribbean Niquel SA (C. cass., 1ère civ., 29 juin 2011, n° 10-23321).