Paris court clarifies arbitrators’ scope to determine governing law of agreements

Arbitration law expert William Brillat-Capello of Pinsent Masons said that while the judgment of the Paris Court of Appeal addresses a simple point, it serves as a reminder that the best way to avoid this is to draft simple and strict governing law clauses, and to ensure coherence among all the agreements of a same business operation.

The ruling by the Paris Court of Appeal – dated 10 March 2026, n°23/08160 – was issued in the context of a case involving Turkey and Iraq. Turkey and Iraq had an agreement providing for the construction and operation of oil infrastructure linking the countries. A dispute arose between them relating to use of the infrastructure and related payments.

The agreement between Turkey and Iraq contained an arbitration clause. An ICC arbitral tribunal was convened to resolve the dispute. It issued an award in favour of Iraq. Before the Paris Court of Appeal, Turkey sought the partial annulment of the award, while Iraq asked the court to dismiss Turkey’s application.

Turkey’s case was rooted in its argument that its agreement with Iraq was governed by French law, as specified in the arbitration agreement and confirmed by the parties afterwards. It argued that the arbitral tribunal had exceeded its mandate and breached the principle of due process by determining the applicable law itself, under the false pretext that no agreement would have existed between the parties on this point.

Iraq, on the contrary, argued that the parties disagreed as to the applicable law to the merits of the dispute and specifically asked the tribunal to issue a decision on this point.

The agreement referred to French law, but the tribunal considered that it was not clear from the wording that both countries intended for French law to govern their disputes under their agreement. It considered that the agreement constituted a treaty that was governed by public international law, not French law.

In its ruling, the Paris Court of Appeal clarified the circumstances in which arbitral tribunals can determine the applicable law of an arbitration agreement. It said tribunals can do this in cases where the parties have not made a clear and common choice, provided this accords with the so-called adversarial principle – a principle in French law that essentially provides that both parties can present their case to the tribunal and that no significant element of the decision be issued without the parties being consulted by the tribunal.

In other words, under French international arbitration law, the arbitral tribunal should first decide a dispute in accordance with the law chosen by the parties. In the absence of such a choice, only then can the tribunal decide the dispute in accordance with the rules of law it considers appropriate, it said.

In reaching its decision, the court reflected on the reference to French law in the arbitration clause in the countries’ agreement. It considered the wording to be ambiguous and accounted for the fact the two countries did not agree that they had chosen French law as the governing law. In those circumstances, it was legitimate, the court considered, for the arbitral tribunal to determine the applicable law.

The court found that the adversarial principle was respected since the issue of the applicable law had been the subject of extensive debate on which both countries had had the chance to present arguments.