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Blogs - Arbitration Case Digest

Swiss Supreme Courts' restrictive approach to "surprise" decisions by arbitral tribunals confirmed

08.03.2019 – Case Number: 4A_301_2018 (19 November 2018)

In a German-language decision, the Swiss Supreme Court has refused to set aside an award dated 17 April 2018, rendered under the Rules of the International Chamber of Commerce by a three-member tribunal seated in Zurich.

The underlying dispute relates to a consultancy agreement whereby the Claimant agreed to provide services to the Respondent relative to a construction project. The project eventually failed and a dispute arose regarding Claimant's consultancy fees and his performance under the contract. In its award, the tribunal found that the Claimant breached the consultancy agreement by failing to inform the Respondent about the risks of the project, thereby inducing Respondent to make misguided investment decisions. However, the tribunal also found that the hiring of a local consultant did not remove risks altogether and that the Respondent ultimately made the business decisions. Accordingly, the tribunal reduced the amount of compensation awarded to Respondent, considering the "Respondent's own fault" (Selbstverschulden) pursuant Article 44 of the Swiss Code of Obligations ("CO"). Article 44 provides for a reduction of compensation, where the injured party's contribution to its own harm does not break the link of causation completely. Respondent applied to the Supreme Court to vacate the award on the grounds that  the arbitrators violated its right to be heard by a "surprising" application of Article 44 CO.

The Supreme Court confirmed its long-standing case-law, emphasizing that a surprising decision can only exist when the tribunal intends to base its decision on a legal rule that was not raised by the parties and the relevance of which could not have been reasonably expected. In the present case, the tribunal's application of article 44 CO was not "surprising" because Claimant challenged the causation of the damages. Considering the arguments raised in the arbitration, Respondent should have expected that the tribunal would uphold causation but reduce the amount of the compensation. In the context of the facts on which the Supreme Court relied to calculate the reduction, the Court held that a tribunal may rely on facts that it considers established by the evidence submitted even if such a fact was not formally alleged by a party.