Paris Court of Appeal, 30 September 2025 (No. 23/11499)

Background

The dispute arose from six contracts entered into between three Italian companies and a Venezuelan public entity (IFE) for the construction of sections of the railway network in Venezuela.

These contracts were concluded within the framework of an intergovernmental agreement signed in 2001 between Italy and Venezuela (the Agreement), which provided for the possibility of recourse to arbitration under the rules of the International Chamber of Commerce (ICC) for disputes relating to its performance.

Believing that IFE and Venezuela had hindered the proper performance of the contracts, the Italian companies initiated arbitration in 2019 based on Article XV of the Agreement, which provides that:

“1. All differences and disputes arising between Italian and Venezuelan companies as a result of the implementation of this Agreement shall be settled amicably.

2. In the event that the differences or disputes referred to in the preceding paragraph are not resolved amicably within six (6) months from the date of the written request for consultations, recourse may be had to the dispute settlement mechanisms provided for in the Conciliation and Arbitration Rules of the International Chamber of Commerce in Paris, and in accordance with the rules established in the aforementioned Rules. The procedures shall be defined by the International Chamber of Commerce in Paris”. (Free Translation)

The Issue

In an award rendered in Paris on 20 March 2023, the arbitral tribunal declared that it lacked jurisdiction over:

• Venezuela: The arbitral tribunal concluded that the term "enterprises" in Article XV does not encompass States, and therefore the provision only covers disputes between Italian and Venezuelan companies, not disputes between a contracting State and companies of the other State.

• IFE: Although both the Claimants and IFE were aware of the Agreement and Article XV, the parties expressly chose the exclusive jurisdiction of the Caracas Metropolitan Area courts in all six contracts, thereby excluding ICC arbitration.

The Italian companies subsequently filed an application to set aside the award before the Paris Court of Appeal on the ground that the arbitral tribunal had wrongly declined jurisdiction.

Parties’ Positions

The Italian Companies

The Italian companies argued that Article XV established an obligation to arbitrate between the contractual parties to the railway projects –the Italian companies and IFE – and that this obligation should extend to Venezuela due to its direct involvement in the negotiation and performance of the contracts. They alleged that this argument raised before the court did not contradict their position before the arbitral tribunal, i.e., that Article XV contains a unilateral offer to arbitrate made by Venezuela for the benefit of the Italian companies. The Italian companies relied on a previous decision of the French Court of Cassation, which allowed a party to raise new arguments before the annulment judge even if they were not presented to the arbitral tribunal, provided that jurisdiction had already been argued during the arbitration proceedings.

Venezuela and IFE

Venezuela and IFE disputed this approach, arguing that the Italian companies had fundamentally changed their position by shifting from an idea of an investment-treaty arbitration to an idea of commercial arbitration based on the contracts. Such a change, raised for the first time before the annulment judge, violated Article 1466 of the French Code of Civil Procedure, which prohibits a party from invoking grounds that could have been raised before the arbitral tribunal. They further contended that this reversal of positions constituted procedural bad faith, contrary to the principle of estoppel, as it surprised the respondents and undermined their right to a fair defence.

Paris Court of Appeal’s Decision

The Court of Appeal began by recalling the principle set out in Article 1466 of the Code of Civil Procedure: a party that knowingly and without legitimate reason fails to raise an objection before the arbitral tribunal is deemed to have waived its right to do so. This principle, based on procedural coherence and fairness, applies fully to international arbitration. The Court found that the Italian companies had indeed advanced two successive and incompatible arguments. This “radical change in argumentation” thus constituted a new ground raised for the first time before the annulment judge and was therefore inadmissible under Article 1466.

The Court nonetheless rejected the application of the estoppel doctrine, holding that the contradiction had caused no concrete prejudice to Venezuela. However, it found that the change in position breached the duty of procedural consistency imposed by French arbitration law. Consequently, the plea of lack of jurisdiction was declared inadmissible, leading to the dismissal of the annulment application.