The Swiss Supreme Court has recently issued a few decisions deserving a special mention1. They relate to the validity of the conventional waiver of judicial challenge against Swiss international arbitration awards, the parties' right to be heard on costs, and pre-arbitration conciliation duties.
Validity of the conventional waiver of judicial challenge against Swiss international arbitration awards:2
Swiss law expressly allows parties to waive whole or parts of the legal grounds of challenge against international awards issued in Switzerland (Private International Law Act (PILA) Art. 192), subject to none of the parties having their domicile, their habitual residence, or a business establishment in Switzerland.
Following its long standing restrictive practice, the Swiss Supreme Court would admit the validity of such waiver only subject to a clear and unequivocal joint declaration of the parties to exclude of all ordinary and extraordinary judicial challenges against the award. However, express reference to the relevant legal provisions or indeed to the specific name of the waived remedy would not be required3. The Supreme Court would thus deem insufficient a mere statement (or reference to arbitration rules stipulating) that the award is final and binding on all parties upon its issuance, or the general waiver of all (unspecified) challenges against the award4. Departing from its earlier, more restrictive findings, the Supreme Court recently considered as sufficiently explicit a waiver stipulated in the arbitration agreement whereby "Neither party shall be entitled to commence or maintain any action in a court of law upon any matter in dispute arising from or concerning this Agreement or a breach thereof except for the enforcement of any award rendered pursuant to arbitration under this Agreement. The decision of the arbitration shall be final and binding and neither party shall have any right to appeal such decision to any court of law"5.
It is unclear from the reasoning of the Court how far the first part of the jurisdiction clause (waiver of all judicial remedies in connection with the contract) influenced the interpretation of the waiver of appeal section, or indeed whether this decision heralds a certain easing in the Court practice on waivers. Consequently, the advice remains for parties intending to waive some or all grounds of judicial challenges against an international award to be issued in Switzerland to do so in a clear and explicit provision.
Parties' right to be heard on costs:6
Most rules and arbitration laws are silent on the procedure relating to the determination of the amount, allocation, advance and security of arbitration costs and expenses. More often than not, such issues are not controversial: parties would pay their advances, including VAT advances when so requested. The arbitral institution (or the arbitration tribunal where applicable) would then set the final costs and expenses of the arbitration process. The arbitral tribunal would apportion these between the parties based on the success in their respective claims and relying on the parties' final submission on costs.
What if no such submission has been filed? The Swiss Supreme Court recently held it unlikely that arbitrators operating in Switzerland be requested, under the parties' right to be heard, to invite the parties to make their determination specifically on the amount and apportionment of arbitration costs and expenses prior to any decision thereon, in the light of their discretion in the matter. It is sufficient that the parties be given the opportunity to express their view on the subject in the various submissions filed in the proceeding7. However, when the arbitral tribunal does request the parties' submission on the issue of costs and expenses, or the procedural timetable expressly provides for such submission, the tribunal may then not make its final determination thereon based on its sole discretion, prior to such submission having been filed. Such practice would be contrary to the parties' right to be heard, and would justify the annulment of the dispositive part on arbitration costs and expenses regardless of the chances of success of the disregarded arguments on the merits.
In that particular case, the parties had expressly requested the possibility to file such submission on costs, and the CAS arbitral panel had expressly invited the parties to file such submission within a given deadline. The CAS panel eventually issued its final award including a section on arbitration costs prior to the expiry of said deadline. Only the respondent party in the arbitration proceeding challenged the final award on that point. The Swiss judges upheld the challenge and annulled the part of the award on costs.
Pre-arbitration conciliation duties:8
In a decision of June 6, 20079, the Swiss Supreme Court had laid a number of benchmarks regarding pre-arbitration conciliation duties: pre-arbitration conciliation clauses are to be sufficiently specific as to the truly mandatory character of conciliation to be considered as a mandatory preliminary step prior to arbitration. The setting of a time limit for conciliation is a fair indication thereof. The Court had left undecided whether non-compliance with a pre-arbitration conciliation requirement would affect the arbitral tribunal's jurisdiction or result in liability.
In a recent case, the Court confirmed its 2007 finding on the content and interpretation of pre-arbitration conciliation clause. It considered it as insufficient for the purpose of truly mandatory conciliation, the following wording (our translation): "In the event of a dispute regarding the interpretation or performance of the [contract], the parties will first seek a friendly settlement. Possible disputes [....] will be referred, after the failure of the attempt of conciliation, to an arbitral tribunal [...]"10. The Court also reiterated that conciliation obligations are to be invoked in good faith with a fair perspective of positive outcome. It also considered it not unreasonable the arbitral tribunal's dismissal of the pre-conciliation objection based on the finding that the relationship had deteriorated to such an extent that there was no other alternative but resort to arbitration.
The Court acknowledged the complexity of the matter and the lack of consensus on possible solutions, but did not resolve the question of the incidence of non compliance with a pre-arbitration conciliation requirement. However, it implied against the two-fold alternative contemplated in its 2007 decision, that sanctions could be a combination of both procedural (lack of arbitral tribunal's jurisdiction or stay of the proceedings) and material sanctions (liability for damage incurred) ("It is indeed not certain that these two types of sanctions could not be combined" (our translation))11. On the procedural sanction, the Court indicate no favour between on the one hand the inadmissibility for lack of jurisdiction, and on the other hand Swiss scholar favoured stay of the proceeding pending conciliation. Rather, it suggested that the issue might best be resolved on a case by case basis ("[...] there is no point deciding the disputed issue here, assuming it could have an answer adapted to all instances, which we may reasonably doubt." (our translation))12. The pre-conciliation argument was thus dismissed. The award was still annulled for the infringement of the right to be heard, the award failing to address expressly one of the legal arguments raised by the defendant that could have lead to another outcome altogether (absolute statute of limitations objection)13
Footnotes
1.The full text of commented decisions are available in their original language at www.bger.ch/fr/index/juridiction/jurisdiction-inherit-template/jurisdiction-recht/jurisdiction-recht-urteile2000.htm.
2.Decision 4A_486/2010 of March 21, 2011, in the matter X v. Y SA.
3.ATF, 131 III 173 ground 4; 134 II 260, ground 3 (admitted).
4.Decisions 4A_194/2008 of August 21, 2008, in the matter X v. Y. Srl et Z. SpA, ground 2.2 (denied) ; 4A_224/2008 of October 10, 2008, in the matter X A.S. v. Y GmbH, ground 2.6 (denied).
5.Decision 4A_486/2010 of March 21, 2011, in the matter X v. Y SA, ground 4.
6.Decision 4A_600/2010 of March 17, 2011, in the matter Federation X v. Federation A et al.
7.Decision 4A_600/2010 of March 17, 2011, in the matter Federation X v. Federation A et al., ground 4.
8.Decision 4A_46/2011 of May 16, 2011, in the matter X GmbH v. Y Sàrl.
9.Decision 4A_18/2007 of June 6, 2007, in the matter X Ltd v. Y, ground 4.
10.Decision 4A_46/2011 of May 16, 2011, in the matter X GmbH v. Y Sàrl, ground 3.
11.,Id. ground 3.4.
12.Loc.cit.
13.Id. ground 4.
The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.
