Arbitration Case Digest

Application to annul recognition and enforcement of two awards dismissed: only blatant violation of right to impartial arbitrator breaches Swiss public policy

06.08.2019

Case Number: 4A_663/2018 (27 May 2019)

In a recently published German-language decision, the Swiss Supreme Court dismissed an application for annulment of a decision of the High Court of Zurich, which had confirmed a Court of First Instance decision to recognise and enforce two International Chamber of Commerce (ICC) awards.

The case concerned a Swiss subsidiary (the respondent) of a Spanish group of companies and a natural person (the appellant), both of which had entered into a share purchase agreement in 2007. A dispute arose and the respondent initiated two ICC arbitration proceedings.

In November 2011, the tribunal rendered two awards ordering the appellant to pay the respondent more than USD 100 million. The president of the ICC tribunal was a partner in a large international law firm in New York. The appellant challenged the president's impartiality before the ICC and he subsequently resigned.

In 2018, the respondent successfully applied for the recognition and enforcement of the two awards in Switzerland. The appellant challenged this decision before the Swiss Supreme Court, alleging that the enforcement and recognition violated Swiss public policy, as per Article V.2(b) of the New York Convention (NYC). In particular, the appellant alleged the president's lack of impartiality because of his law firm's involvement in providing legal assistance to companies pertaining to the same group of companies of the respondent.

The Swiss Supreme Court confirmed that the public policy exception must be construed objectively and restrictively, and based on an analysis of all the circumstances. It recalled its jurisprudence on conflict of interest and notably that one cannot simply overlook the reality of international arbitration and the increasing size of international law firms. Accordingly, the court pointed out that the fact that other lawyers from the arbitrator's law firm performed work for companies pertaining to the same group of companies of one of the parties in the arbitration is not, on the face of it, sufficient to establish a lack of impartiality.

In addition, the fact that the arbitrator's law firm received fees during the arbitration by one party for work performed in relation to companies belonging to the same group of companies of one of the parties in the arbitration, even if considered critical by the Supreme Court, was not sufficient to establish a lack of impartiality. Finally, the Supreme Court left the question open as to whether punitive damages violates Swiss public policy. (Decision 4A_663/2018 (27 May 2019)).

 

Subscribe to our Newsletter

*Required fields

Monthly selected key topics from our practice areas and sectors, plus Newsflashes on current events.
Monthly email with the latest updates on and summaries of the Swiss Federal Supreme Court's case law in arbitration matters.
A regular look (1 – 2 per year) from a unique M&A perspective on legal changes, economic developments and societal trends in Switzerland.