This case offers a striking illustration of the limits imposed on annulment judges reviewing international arbitral awards seated in France. After an UNCITRAL tribunal dismissed the claims for lack of jurisdiction, the Paris Court of Appeal set the award aside – only to be overruled by the French Court of Cassation. At the heart of the dispute: whether the appellate court impermissibly reviewed the merits of the case, and whether procedural conditions like prior recourse to local courts affect jurisdiction or admissibility.
The case reaffirms France’s arbitration-friendly jurisprudence and the strict boundaries of judicial review of international arbitral awards.
Factual Background
The underlying dispute involved three British nationals – Rikita Mehta, Prenay Agarwal and Vinita Agarwal (the Claimants) – who claimed to be the beneficiaries of a trust located in the Cayman Islands established by their father in 2008. This trust was designed to hold assets of an iron ore mining project in Uruguay (the Valentines Project).
The Valentines Project was envisioned as a large-scale mining operation with an estimated investment of USD 3 billion. However, the project encountered significant challenges, including environmental concerns and regulatory changes. In 2013, Uruguay enacted legislation imposing stricter requirements on large-scale mining projects, which the Claimants argue adversely affected the project’s viability.
Alleging that Uruguay’s actions amounted to an unlawful expropriation, the Claimants initiated, in 2017, arbitration proceedings under the Agreement between the United Kingdom of Great Britain and Norther Ireland and the Oriental Republic of Uruguay for the Promotion and Protection of Investments, which entered into force on 1 August 1997 (the Treaty or the BIT). They contended that Uruguay’s measures violated its obligations under the Treaty, thereby engaging its international liability. They sought damages of approximately USD 4 billion.
The central issue before the arbitral tribunal, constituted under the UNCITRAL rules and administered by the PCA, was whether the Claimants qualified as investors under the Treaty and whether they had made a protected investment under Article 1 of the Treaty.
The arbitral tribunal issued its award on 6 August 2020 declining jurisdiction to hear the case focusing on the Claimants’ status as discretionary beneficiaries of the trust at the time the alleged breaches by Uruguay occurred.[1] Under Cayman Islands law, discretionary beneficiaries do not possess enforceable rights to the trust assets. The tribunal noted that the Claimants only acquired fixed beneficial interests in the trust on 1st August 2016. By that time, the alleged breaches by Uruguay had already occurred.
As a result, the tribunal concluded that it lacked jurisdiction ratione temporis, as the Claimants did not hold a protected investment at the time the dispute arose.
Dissatisfied with the tribunal’s dismissal of their claims, the Claimants initiated annulment proceedings before the Paris Court of appeal, the competent court at the seat of arbitration.
Annulment of the Award by the Paris Court of Appeal
Before the court, the Claimants argued that the arbitral tribunal wrongfully declined jurisdiction, asserting that the dispute meets all the jurisdictional requirements under the Treaty.
They maintained that Uruguay had encouraged their family’s investment, and that measures taken from 2012 onward – culminating in the designation of the project area as a protected reserve in 2017 – amounted to a continuing wrongful act under international law perpetrated by Uruguay. They claimed their interests in a Cayman Islands trust qualified as an indirect investment, even before it was converted into a fixed trust on 1 August 2016. They further argued that the BIT does not require direct ownership, personal contribution to the investment, or nationality at the time of the investment was made. Lastly, they claimed that the requirement of prior recourse to local courts was a matter of admissibility, not jurisdiction.
Uruguay responded that the tribunal correctly declined jurisdiction, as the Claimants were not investors when the alleged wrongful acts began, and the principle of non-retroactivity in international law precluded applying the BIT to earlier acts. It argued that prior to August 2016, the Claimants only held discretionary interests with no property rights over the assets of the Valentines Project. Even after they became fixed beneficiaries, the dispute had already arisen, and thus the arbitral tribunal did not have jurisdiction ratione temporis. Uruguay also maintained that its consent to arbitration was conditional on prior recourse to domestic courts, which the Claimants had not pursued.
In its decision dated 21 February 2023,[2] the Paris Court of appeal sided with the Claimants and annulled the award concluding that the arbitral tribunal had overstepped its authority by refusing jurisdiction on grounds not supported by the BIT. The Court held that the tribunal misinterpreted the treaty by adding a temporal requirement – that the Claimants must have held a protected investment at the time of the alleged breaches – which is not provided for under the BIT. The court emphasized that the Treaty only requires the dispute to arise after its entry into force in August 1997, without imposing any condition regarding when the investment must have been made.
The court further clarified that the rule invoked by Uruguay – that the treaty protection cannot apply to acts of the host State occurring before an investor acquires investment – is not a condition of consent to arbitration but a substantive condition of protection. The court criticized the tribunal’s reliance on this ground as a basis for declining jurisdiction.
Thus, whether the Claimants held rights over the investment prior to the dispute was deemed irrelevant to the tribunal’s jurisdiction and instead a matter for the merits.
Following this conclusion, the Court of Appeal proceeded to examine the additional jurisdictional objections raised by Uruguay, including the claim that the investors had failed to submit the dispute to local courts before initiating arbitration, as stipulated in the Treaty. Uruguay contented that this omission deprived the arbitral tribunal of jurisdiction (ratione voluntaris). However, the Court of Appeal rejected this argument, determining that the prior domestic litigation requirement constituted a matter of admissibility rather than jurisdiction.
After a thorough review of Uruguay’s arguments, the court found no legal justification for the tribunal’s refusal to upheld its jurisdiction.
As a result, the Paris Court of Appeal held that the arbitral tribunal wrongly declined jurisdiction and that the award must be annulled in accordance with Article 1520, 1° of the French Code of Civil Procedure.
This expansive approach to annulment was short-lived. In a ruling dated 2 April 2025, the French Court of Cassation quashed the decision of the Paris Court of Appeal.
Annulment Decision Overturned: the Court of Cassation Reasserts the Limits of the Powers of the Paris Court of Appeal
In its appeal to the French Court of Cassation, Uruguay sought to overturn the Paris Court of Appeal’s decision that annulled the arbitral award.
Uruguay first argued that Article 8(2) of the BIT – requiring investors to submit their claims to local courts before initiating arbitration – was a condition precedent to the host State’s consent to arbitrate. As such, a failure to comply with this requirement deprived the arbitral tribunal of jurisdiction. Uruguay asserted that the Court of Appeal erred by treating this issue as an issue of admissibility.
While the Court of Cassation ultimately quashed the Court of Appeal’s annulment of the award in its decision dated 2 April 2025,[3] it did not reverse the Court of Appeal’s characterization of the requirement in Article 8(2) as an issue of admissibility rather than jurisdiction. The Court of Cassation confirmed that non-compliance with such procedural prerequisites is an admissibility issue and therefore does not invalidate the tribunal’s jurisdiction.
Uruguay further criticized the ruling, arguing that annulment is only permissible if the arbitral tribunal wrongly upheld or declined jurisdiction. The annulment judge’s review of the tribunal’s jurisdiction should exclude any review of the merits of the award. By annulling the award based on a substantive condition of protection under the treaty rather than a condition of consent to arbitration, the Paris Court of appeal reviewed the merits of the arbitral award, thereby violating Article 1520, 1° of the French Code of Civil Procedure.
The highest court agreed with Uruguay’s arguments and found that the Court of Appeal had exceeded its authority by engaging in a substantive reassessment of the award, contrary to the limited scope of judicial review permitted under Article 1520 of the French Code of Civil procedure.
Conclusion
The Court of cassation decision underscores the French judiciary’s commitment to upholding the autonomy of arbitral awards. It reaffirms the principle that judicial review of arbitral awards in France is strictly limited to the grounds enumerated in Article 1520 of the French Code of Civil procedure, thereby maintaining France’s reputation as an arbitration-friendly jurisdiction. It also confirmed that the BIT’s requirement to seize local courts before initiating arbitration is an issue of admissibility, not jurisdiction.
[1] Prenay Agarwal, Vinita Agarwal and Ritika Mehta v. Oriental Republic of Uruguay, PCA Case No. 2018-04, 6 August 2020 (Agarwal and Mehta v. Uruguay, Award, 6 Aug 2020).
[2] Paris Court of Appeal, 21 February 2023, n° 20/13899.
[3] French Court of Cassation, 2 April 2025, n° 23-16.338 (Agarwal and Mehta v. Uruguay, Judgment of the French Court of Cassation (First Civil Chamber) 23-16.338, 2 Apr 2025)
