Puzzled about the allegations against Christine Lagarde? Here are CLC’s thoughts

Are you puzzled about press coverage of the predicament of Christine Lagarde in relation to the 2008 award to Bernard Tapie of €400 million in an arbitration to determine what he should have been paid for his Adidas shares in 1993?

We are. We have done our best to distil the facts from today’s (Friday 18 December 2015) press, but the reports vary. For what it is worth, Christine Lagarde’s lawyer says the decision to prosecute her is “incomprehensible” and we have some sympathy with that, but we bear in mind the immortal Mandy Rice-Davies.

As we read it in varying press reports:

  1. Christine Lagarde is “charged”
  2. With an “offence”
  3. And will stand “trial”
  4. In a “court” or “tribunal”
  5. Whose jurisdiction seems to be limited to “trying” ministers (and presumably ex-ministers)
  6. And faces the prospect of a year in prison

So far so bad:  this looks like a criminal charge.

What’s the offence? “Negligence” apparently – not a criminal offence we know, but “negligence in public office in relation to the misuse of public funds” – as snappy titles go is not in the same league as GBH – sounds as though it is a creature of the French system and this particular court’s jurisdiction.

What is the negligence? The reports differ. They are also more than a little vague – possibly with good reason.

One suggestion is that as the finance minister at the time, Christine Lagarde’s negligence consisted of (or included) referring to arbitration a commercial dispute involving state money, but one must ask ‘why is this negligence?’ If there is some French legislation or policy to the effect that disputes involving state money have to be aired in a public court and cannot be determined in arbitration, so be it, but that has not been made clear in our reports, and it does strike an English lawyer as in need of explanation.

The second and more popular suggestion is that as the minister responsible at the time, Christine Lagarde’s negligence consisted of (or included) failing to challenge the outcome of the arbitration – same question: ‘why is this negligence?’ The grounds for challenging arbitration awards are very limited and simply challenging a valid award if there was little prospect of success would itself have been an irresponsible waste of public money – even more so if the minister had been advised that a challenge would probably fail. Of course, even a legally-qualified minister must presumably take advice and the advice Christine Lagarde received may be crucial to the outcome, but hitherto no mention seems to have been made of her advice.

Third suggestion:  either the outcome of the arbitration or the decision by Christine Lagarde to refer the dispute to arbitration was “rigged” to reward Bernard Tapie for his support for the Sarkozy campaign. This is bold. If there is the evidence to make good the suggestion that the whole arbitration was rigged then the award would of course be treated as a nullity, but the evidence had better be very strong indeed. Everyone connected with the arbitration from start to finish – not just the responsible minister – should be in the frame: parties, lawyers, members of the arbitration panel, even the admin staff, so if it works, the cells will be pretty full.

There is much to puzzle over, but there are a few lessons:

  1. Beware use by others of terminology which we think we understand. International disputes (and international arbitration in particular) involve participants from varying legal backgrounds, varying languages, varying cultures, and whatever language is chosen as that of the arbitration there may be serious language problems which if recognised can be confronted only within the collaborative atmosphere of the arbitration process.
  2. Be careful about reading press reports, as today’s coverage demonstrates. If you have noticed the depressing frequency with which journalists get legal matters and terminology scrambled (the erroneous use of IP terms like trade mark, copyright and patent is a particular favourite) you will know why we urge caution.
  3. An award obtained in a “rigged” arbitration will do you no good at all.
  4. If you grew up believing that arbitration was always totally confidential, think again!

The moral is to take advice before it all happens.