Article
Reference
Correction and interpretation of awards in international arbitrations held in Switzerland : note on a recent decision of the Swiss Supreme
Court (ATF 126 III 524)
KAUFMANN-KOHLER, Gabrielle, RIGOZZI, Antonio
KAUFMANN-KOHLER, Gabrielle, RIGOZZI, Antonio. Correction and interpretation of awards in international arbitrations held in Switzerland : note on a recent decision of the Swiss Supreme Court (ATF 126 III 524). Jusletter, 2001, no. 19 mars
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Correction and interpretation of awards in international arbitrations held in Switzerland
Note on a decision of the Swiss Federal Court (ATF 126 III 524 )
The Swiss Private International Law Act ("PIL Act") is one of the only international arbitration statutes in Europe which contains no provision on the correction and interpretation of arbitral awards. In a decision handed down on 2 November 2000, and published in February 2001, the Swiss Federal Court held that an arbitral tribunal sitting in an arbitration governed by Chapter 12 PIL Act has jurisdiction to correct and interpret its award. Though the Court`s reasoning and terminology may give rise to some perplexity, the result is certainly a welcome development, which adequately fills a gap in the statute.
Jusletter
Autoren/Autorinnen: Gabrielle Kaufmann-Kohler / Antonio Rigozzi Rechtsgebiete: Schiedsgerichtsbarkeit
Zitiervorschlag: Gabrielle Kaufmann-Kohler / Antonio Rigozzi, Correction and interpretation of awards in international arbitrations held in Switzerland, in: Jusletter 19. März 2001
I. Facts and procedure
[1]Entreprise Industrielle SA, a French company (sometimes also referred to as the Respondent), as claimant and counterrespondent on the one hand, and the German company Philipp Holzmann AG, together with another French company Nord France SA (sometimes also referred to as the Petitioners), as respondents and counterclaimants, on the other hand, were adversaries in an ICC arbitration held in Geneva under the ICC Rules of 1988, in connection with a dispute arising out of a subcontract for heating and air-conditioning installations related to the construction of the Eurodisney Park at Marne-la-Vallée near Paris.
[2]On 15 March 2000, the Arbitral Tribunal rendered its final award disposing of all the claims before it. In paragraph 2 of the operative part or dispositif of the award, the Arbitral Tribunal awarded a claim made by Entreprise Industrielle in an amount of FFR 6212154 "with interest". In paragraph 3 of the dispositif, it awarded the counterclaim in an amount of FFR 1743658 "with interest".
[3]On 25 May 2000, the Arbitral Tribunal issued a further award which held, by reference to paragraph 2 of the dispositif of the earlier award, that the amount awarded to to Entreprise Industrielle was to bear compound interest computed under the terms of the relevant French statutory provision [Fn 1].
[4]Philipp Holzmann and Nord France filed an action to set aside this second award before the Federal Court upon the ground that the Arbitral Tribunal was functus officio after the first award and, thus, lacked jurisdiction to render the second award under Article 190(2)(b) PIL Act.
II. The issues before the court
[5]Article 190(2)(b) PIL Act provides that "the award may […] be annulled […] if the arbitral tribunal wrongly accepted or declined jurisdiction". Hence, the Federal Court considered that the following two questions needed to be resolved:
1. Did the Arbitral Tribunal have jurisdiction to issue a second award correcting its previous decision?
2. If so, had the Arbitral Tribunal gone beyond that jurisdiction by holding that the interest on the amount awarded on the claim was to be compound interest under the terms of Art. 1154 of the French Civil Code?
III. The Court decision
1. The first question: jurisdiction to correct or to interpret an award
[6]The Federal Court proceeded in two steps. First, it reviewed the procedural rules chosen by the parties. Contrary to the 1998 version, the 1988 ICC Rules make no provision for correction or interpretation of awards. Unless the arbitration agreement (including the institutional arbitration rules selected by the parties) did not clearly rule out such mechanisms, the Court held that correction and interpretation may be available if the law governing the arbitration, i.e. in the present case Chapter 12 PIL Act, so provides.
[7]Second, the Court went on to review whether Chapter 12 actually provided for interpretation or correction. Though Chapter 12 is silent on this question, Swiss writers unanimously accept that an arbitral tribunal may correct or interpret its award and the Federal Court followed this view.
[8]As a consequence, the Arbitral Tribunal was deemed to have jurisdiction to interpret its award and rectify an inadvertent error.
2. The second question: scope of jurisdiction
[9]With respect to the second issue, the Petitioners argued that the Arbitral Tribunal had acted like an appellate body and modified the substantive contents of its final award on legal grounds.
[10]The Federal Court held that this argument was ill-founded. In the reasons for its first award, the Arbitral Tribunal had expressly stated that the interest on the claim was to be compound interest under Art. 1154 of the French Civil Code. It had also stated that simple, not compound interest was due on the counterclaim. In other words, in its second award, the Arbitral Tribunal had "merely repeated in paragraph 2 of the dispositif what it had already decided and clearly spelled out […] in its first award", which had thus not been "corrected as to its substance".
[11]Thus, the Arbitral Tribunal was held not to have exceeded its jurisdiction to correct or interpret the award and the action to set aside the second award was dismissed.
IV. Comments
[12]The Petitioners relied on the "general rule that an arbitral tribunal becomes functus officio on the issue of a final award" [Fn 2]. The Federal Court accepted that there was an exception to this rule, pursuant to which an arbitral tribunal may have a "residual power" [Fn 3] to "improve" [Fn 4] its award under certain conditions. It is generally considered that such residual power covers three situations: first, the additional award (para. 1 below); second, the correction of errors (para. 2 below); and, third, the interpretation of the award (para. 3 below).
1. Additional award
[13]In international arbitration practice, the term "additional award" is generally used for a decision as to claims presented in the arbitral proceedings but which the arbitral tribunal has omitted from the award [Fn 5].
[14]The Federal Court (and the Arbitral Tribunal?) referred to the second award of 15 May 2000 as the "additional award", which precisely it is not. Indeed, in the terms of the Federal Court itself, the Arbitral Tribunal had "ruled on all the heads of claims [or requests for relief] submitted to it". There was thus no issue of "additional award" as defined above, but merely of rectification of an inadvertent error.
[15]Therefore, despite the misleading terminology, the decision under review has not made any finding with respect to an arbitral tribunal`s jurisdiction to issue an "additional award".
2. Correction
[16]What the decision is really about is the second exception to the functus officio rule, i.e. the correction of errors in the award [Fn 6]. The exception requires either a legal basis or consent, i.e.
an extension of the scope of the arbitrators` jurisdiction by agreement of the parties. Article 22 of the UNCITRAL Model Law and most international arbitration statutes in Europe permit the arbitral tribunal to correct manifest computing errors on its own initiative [Fn 7]. When the law governing the arbitration contains no such provision, "arbitration rules to which the parties have referred may come to rescue" [Fn 8]. And, indeed, many [Fn 9], though not all [Fn 10], of the better known arbitration rules provide for correction of errors by the arbitral tribunal.
[17]Chapter 12 PIL Act, however, does not do so. In the case at bar, the applicable arbitration rules were of no help either, since they were silent too. Following the apparently [Fn 11] unanimous interpretation of Swiss writers [Fn 12], the Federal Court nevertheless held that an arbitral tribunal sitting in an international arbitration may correct its award. This determination will put an end to the contradictory practices followed by arbitral tribunals so far [Fn 13].
[18]The Federal Court does not specify whether the arbitral tribunal may correct its award only in the event that it is requested to do so by a party, or whether it may also do so on its own initiative, i.e. ex officio. This being said, the decision makes no reference to a request by one of the parties, with the result that one can infer that the ruling also applies to the correction of an award on the tribunal`s own motion.
[19]This decision constitutes a welcome addition to Swiss international arbitration law, as it discards any existing uncertainty and is in line with the UNCITRAL Model Law and other arbitration statutes in Europe.
3. Interpretation
[20]The decision of the Federal Court is less convincing when it systematically assimilates the correction of errors and the interpretation of awards [Fn 14]. In doing so, the Federal Court ignores a generally accepted fact, i.e. that interpretation and correction are different matters [Fn 15].
[21]First, contrary to correction, interpretation was traditionally not found in arbitration statutes [Fn 16]. Even some recently enacted statutes contain no interpretation provision [Fn 17]. And where it is found, it is often very restricted. For instance, in the UNCITRAL Model Law, it is conditional upon the parties` agreement [Fn 18], while the same restriction does not apply to the correction of an award [Fn 19]. Furthermore, certain important arbitration rules do not provide for interpretation, whereas they provide for correction and issuance of an additional award [Fn 20]. Moreover, apart from France, the countries whose arbitration laws provide for interpretation do not allow the arbitral
[22]The very reason of this reluctance to allow interpretation is that interpretation may give the loosing party not only an opportunity to delay the enforcement of the award [Fn 21], but also an occasion to reopen the case [Fn 22]. In theory, it is true that both the correction of errors and the interpretation of an award seek to achieve the same purpose, which is to restore the true meaning of the award, not to change or supplement it [Fn 23]. In practice, the two operations may, however, be very different. It can be very relatively easy to correct a clerical or typographical mistake, or an error in computation, while it is likely to be considerably more difficult to interpret an ambiguous ruling.
IV. CONCLUSION
[23]In a nutshell, what does this decision bring? What answers does it give? What issues does it leave unanswered?
First, the decision does bring the following clarifications:
the correction and interpretation of an arbitral award is governed by the parties` agreement, whether they have agreed directly or indirectly by reference to a set of arbitration rules. This appears correct. As remedies which are brought before the very body that issued the initial decision and which do not seek to amend the latter, correction and interpretation fall within the scope of the parties` procedural autonomy. This implies that, if the arbitration rules provide for specific requirements in connection with correction and interpretation of the award, including for a time-limit to make a pertinent request, then these rules govern to the exclusion of different rules of the law of the place of arbitration [Fn 24].
If the arbitration rules selected by the parties do not institute such mechanisms, but at the same time do not exclude them, then the Swiss arbitration law governs. As a matter of principle, it permits correction and interpretation.
Second, the decision leaves the following matters unsettled:
Because this matter was a clear-cut instance of correction, the Federal Court did not discuss the requirements for correction or interpretation. With respect to the correction of an error, it seems fairly obvious – in particular from the decision`s consistent reference to an
"inadvertent error" – that the Federal Court aimed at errors of typographical, clerical, computational or similar nature. Though it was not discussed either, one can reasonably assume that such error may be corrected at any time, be it upon the request of a party or ex officio.
More questions remain outstanding in connection with the interpretation of awards. Under what conditions is it open? Is Article 145 of the Federal Act on Judicial Organization
applicable by analogy? Is interpretation available at any time or only within a given time period following the issuance of the award? To know the answers, we will have to await further case law.
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Prof. Gabrielle Kaufmann-Kohler, Geneva / Antonio Rigozzi, LLM, Geneva
[Fn 1] Specifically, the interest was to be "capitalisés dans les conditions de l`art. 1154 du Code civil français" to use the Arbitral Tribunal`s wording.
[Fn 2] Alan REDFERN / Martin HUNTER, Law and Practice of International Commercial Arbitration, 2nd Ed., London (Sweet & Maxwell) 1999, N. 8-93, 94, p. 410.
[Fn 3] Andreas BUCHER / Pierre-Yves TSCHANZ, International Arbitration in Switzerland, Basle and Frankfurt (Helbing & Lichtenhahn) 1989, N. 268, p. 134, according to whom "an arbitral tribunal retains some residual powers […], in particular the powers […] to interpret or correct the award […]”.
[Fn 4] See Bertrand MOREAU, Le prononcé de la sentence entraîne-t-il le dessaisissement des arbitres?, Etudes de procédure et d`arbitrage en l`honneur de Jean-François Poudret, p. 453 (456, 460) referring to the “pouvoir résiduel de l`arbitre […] [d`]amélioration de la sentence” as an
“exception générale au principe du dessaisissement de l`arbitre”.
[Fn 5] Pieter SANDERS, Arbitration, International Encyclopedia of Comparative Law, Vol. XVI, Chap. 12, Tubingen etc. (Mohr etc.) 1996, N. 12-196; e.g. Art. 33(3) UNCITRAL Model Law on International Commercial Arbitration; Section 57 English Arbitration Act (1996); Section 1061 Netherlands Arbitration Act.
[Fn 6] Redfern / Hunter, referred to in footnote 2, N. 8-93, 94, p. 410, with reference – among others – to Section 57(3) of the English Arbitration Act (1996).
[Fn 7] See, for example, Art. 1475 French Code of Civil Procedure; Section 57(3) of the English Arbitration Act (1996); Art. 1060(1) and (4) Dutch Code of Civil Procedure; § 1058 German Code of Civil Procedure; Art. 1702bis Belgian Code of Civil Procedure; Art. 826 Italian Code of Civil Procedure.
[Fn 8] SANDERS, referred to in footnote 5, N. 12-197.
[Fn 9] See for example Art. 36 UNCITRAL Rules; Art. 27 LCIA Rules; Art. 66 WIPO Rules; Art. 29 ICC Rules 1998.
[Fn 10] See for example the Zurich Chamber of Commerce Rules and the Geneva Chamber of Commerce Rules.
[Fn 11] Some authors accept that an arbitral tribunal may correct inadvertent errors, but exclude any possibility of interpretation (Thomas RÜEDE / Reimer HADENFELDT, Schweizerisches Schiedsgerichtsrecht: nach Konkordat und IPRG, 2nd ed., Zurich (Schulthess) 1993, p. 366, ch. 5 [à vérifier].
[Fn 12] The Court refers to Anton HEINI, IPRG Kommentar, N. 59 ad Art. 190 PIL Act; Stephen BERTI / Anton K. SCHNYDER, Basler Kommentar, Internationales Privatrecht, N. 97 ad Art. 190 PIL Act; Bernard DUTOIT, Commentaire LDIP, 2nd ed., N. 12 ad Art. 191 PIL Act; Pierre LALIVE /
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Suisse, N. 6 ad. Art. 191 PIL Act and Andreas BUCHER, Le nouvel arbitrage international en Suisse, N. 410, p. 134. In addition, one can also mention Marc BLESSING, Introduction to Arbitration – Swiss and International Perspectives, Basle and Frankfurt (Helbing & Lichtenhahn) 1999, N. 561; Cesare JERMINI, Die Anfechtung der Schiedssprüche im internationalen Privatrecht nach dem schweizerischen Bundesgesetz über das Internationale Privatrecht, Zurich (Schulthess) 1997, N. 710-723 and Pierre-Yves Gunter: L`interprétation de la sentence: examen de quelques questions à la lumière d`un cas réel, Bull. ASA 1996, p. 574 (579-580).
[Fn 13] See the arbitration proceedings in Geneva referred to by BLESSING, referred to in footnote 12, N. 560, where the arbitral tribunal admitted its jurisdiction, and the ICC proceedings also held in Geneva cited by GUNTER, referred to in footnote 12, where the arbitral tribunal refused to rule on the request.
[Fn 14] In the original French text, the Court refers indistinctly to "compétence pour corriger une inadvertance […] ou pour interpréter la sentence".
[Fn 15] REDFERN / HUNTER, referred to in footnote 2, N. 8-95.
[Fn 16] SANDERS, referred to in footnote 5, N. 12-198.
[Fn 17] E.g. the Italian Code of Civil Procedure provides for correction of the award (Art. 826), but not for interpretation.
[Fn 18] Art. 33(1)(b). The same rule has been adopted in Belgium (Art. 1702bis Belgian Code of Civil Procedure). In Germany, the interpretation is also open when the parties have not expressly so agreed (§ 1058 German Code of Civil Procedure).
[Fn 19] Art. 33(1)(a).
[Fn 20] Art. 27 LCIA Rules; Art. 66 WIPO Rules.
[Fn 21] Andrew N. VOLLMER / Angela J. BEDFORD, Post-Award Arbitral Proceedings, Journal of International Arbitration 1998, p. 37 (48).
[Fn 22] REDFERN / HUNTER, referred to in footnote 2, N. 8-95.
[Fn 23] Which leads Jean-François POUDRET to writing that “il n`y a pas lieu d`opérer de distinction, au démeurant aléatoire, entre la correction d`erreurs de plume ou de calcul et l`interprétation d`un dispositif obscur, équivoque ou lacunaire”, L`interprétation des sentences arbitrales, Recueil de travaux suisses sur l`arbitrage international, Lausanne (Schulthess) 1984, p.
269 (280).
[Fn 24] See for example Art. 29(2) ICC Rules 1998 providing for interpretation within 30 days.
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