Award extending jurisdiction to non-signatory on basis of implied consent annulled

In a recently published German-language decision to be published in the official register, the Swiss Supreme Court set aside a partial final award on jurisdiction rendered by an ICC arbitral tribunal.

The underlying dispute arose out of the construction and operation of power plants, involving a supplier and subcontractor, both incorporated in South Korea, and purchasers, incorporated in Singapore and Bangladesh. The supplier subcontracted the delivery of diesel engines for the plant to a subcontractor. Several technical problems occurred after the installation of the engines. Following many unsuccessful attempts to find a solution through technical investigations and negotiations, the purchasers refused to comply with their payment obligations under the supply contracts.

The supplier initiated ICC arbitration against the purchasers, based on the identical arbitration agreement contained in the supply contracts.

The purchasers subsequently requested that the subcontractor be included as a party to the arbitration. The subcontractor disputed the jurisdiction of the ICC tribunal.

The tribunal decided to bifurcate the proceedings in order to address the issue of jurisdiction over claims against the subcontractor at the outset. In its partial final award on jurisdiction, the ICC tribunal found that it had jurisdiction over the subcontractor based on the implied consent doctrine.

The subcontractor consequently filed an application to set aside the award with the Swiss Supreme Court.

The court granted the application, finding that while the subcontractor played an important role in the relationships between the supplier and the purchasers, its actions could not qualify as an expression of implied consent to be bound by the arbitration clause. Therefore, the ICC tribunal had no jurisdiction to hear claims against the subcontractor on that basis. (Decision 4A_124/2020 (13 November 2020).)