Arbitration Case Digest

Tribunal's jurisdiction to hear claims for damages over breach of licence agreement upheld

09.07.2020

Case Number: 4A_12/2019 (17 April 2020)

Tribunal's jurisdiction to hear claims for damages over breach of licence agreement upheld

In a recently published French-language decision, the Swiss Supreme Court rejected an application to set aside a final award in which the arbitral tribunal had accepted jurisdiction over a licensee's direct claim for compensation against the licensor, as well as over claims relating to loss of profits that a sublicensee had sustained due to the licensor's breach of the licence agreement.

The case concerned a licence agreement that conferred the licensee the worldwide exclusive right to operate seafood bars in airports and train stations. The agreement contained an arbitration clause providing for arbitration with a Geneva seat.

In practice, the licensee, a British multinational catering and travel retail group, sub-licensed the right to establish seafood bars to its local affiliate. Upon expiration of the first term of a concession to run the seafood bar in a Swiss airport, the airport refused to renew the concession and awarded it to the licensor who had also submitted an offer. The licensee initiated arbitral proceedings against the licensor for breach of the exclusive rights under the licence agreement, namely arguing that the licensor had engaged into direct discussions with the airport and had failed to disclose that it had conferred exclusive rights to operate seafood bars to the licensee. The various heads of claim contained, among other things, requests for compensation for the fees and royalties the sub-licensee would have paid had the concession been prolonged for one additional term and loss of profits sustained by the sub-licensee who was not party to the licence agreement. The arbitral tribunal accepted jurisdiction and upheld the licensee's claims. With regard to the loss profit claim, this was based specifically on the holding that the parties had agreed on a third-party beneficiary clause in favour of the sub-licensee.

The licensor applied to the Supreme Court to set aside the award on the ground that the arbitral tribunal had wrongly accepted jurisdiction with regard to the loss of profits claim insofar as the sub-licensee was a non-signatory third-party to the licence agreement and the arbitration clause contained therein. It also asserted that its right to be heard had been violated and that the award breached substantive public policy.

In its decision, the Supreme Court rejected all of the licensor's arguments. In particular, it upheld the arbitral tribunal's jurisdiction on the ground that the arbitration clause encompassed the licensee's right to bring direct claims against the licensor for damages incurred by its sub-licensee. (Decision 4A_12/2019 (17 April 2020).)

 

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