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No grounds for challenge to arbitrator who was counsel to related party 12 years previously

10 March 2015

Authors: Nathalie Voser; Sevim Berkcan

The Swiss Supreme Court has dismissed an application to set aside a domestic arbitral award on the grounds of irregular composition of the arbitral tribunal and of arbitrariness. This update focuses on the ground of irregular composition of the tribunal.

The petitioner alleged that the sole arbitrator lacked impartiality, relying on Article 393(a) of the Civil Procedure Code (CPC). It claimed that a "few years" before the arbitration, the arbitrator served as counsel for a company, which had sued another company in which the petitioner was the director.

The Supreme Court held that a lawyer appears objectively biased not only when he represents, or has recently represented, one of the parties to the proceedings in which he currently sits as arbitrator, but also when he has recently acted in litigation against one of those parties. However, on the facts of this case, there was no violation of Article 393(a) CPC for two particular reasons:

  • 12 years had elapsed between the litigation and the arbitration.
  • The petitioner was not a party to the judicial proceedings, but was merely a director of the opposing company.
Although this decision concerns a domestic arbitral award, the principles elaborated apply equally in international arbitration. The decision confirms that the question of impartiality will depend on the circumstances of each specific case. Furthermore, the decision would have been the same, had the petitioner been a party to the litigation, given the long period of time between both proceedings.

Finally, it is worth noting that a challenge to the sole arbitrator by the petitioner at the start of the arbitration was rejected by the Arbitration Court of the Swiss Chambers' Arbitration Institution. This is noteworthy since institutions tend to be cautious and may prefer to accept a challenge so as not to run the risk of a challenge to the award on the grounds put before them. However, this case demonstrates that institutions can and should apply a realistic standard to protect the parties' right to nominate the arbitrator of their choice and also so as to discourage purely obstructive challenges.

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 Published in Practical Law Arbitration


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