Article
Reference
When is a Swiss arbitration international? : Comments on a Swiss Federal Tribunal decision of June 24, 2002
KAUFMANN-KOHLER, Gabrielle, RIGOZZI, Antonio
Abstract
In a decision recently published on its website, the Swiss Federal Tribunal deals with the issue of the scope of application of Chapter 12 of the Swiss Private International Law Act («PIL Act») and clarifies the distinction between international arbitration and domestic arbitration.
KAUFMANN-KOHLER, Gabrielle, RIGOZZI, Antonio. When is a Swiss arbitration international? : Comments on a Swiss Federal Tribunal decision of June 24, 2002. Jusletter , 2002, no. 7
October
Available at:
http://archive-ouverte.unige.ch/unige:16386
Disclaimer: layout of this document may differ from the published version.
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When is a Swiss arbitration international?
Comments on a Swiss Federal Tribunal decision of June 24, 2002 (4P.5412002)
Gabrielle Kaufmann-Kohler I Dr. iur. Antonio Rigozzi
In
a
decision recently published on its website, the Swiss Federal Tribunal deals with the issue of the scope of application of Chapter 12 of the Swiss Private International Law Act ( <<PIL Act») and clarifies the distinction between international arbitration and domestic arbitration.I. Facts and procedure
[Rz 1] Both A. AG (also «the Respondent») and B. AG (also «the Petitioner») are incorporated under Swiss law and have their registered office in Switzerland.
[Rz 2] On November 1st, 2000, B. AG started an arbitration relying on an arbitration clause set forth in a 1995 contract between B. AG, C. AG (which was the legal predecessor of A. AG) and other non- Swiss parties. This clause provided for ICC arbitration in Zurich.
[Rz 3] On January 7, 2002, the Arbitral Tribunal (composed of three well known Swiss arbitrators) rendered an award affirming its jurisdiction over the dispute. The arbitrators also held that the proceedings were governed by Chapter 12 of the Swiss Private International Law Act ( «PIL Act») by virtue of Article 176(1) of the Act.
[Rz 4] Arguing that it was not bound by the arbitration agreement concluded by its legal predecessor, A. AG filed an action to set aside that award before the Federal Tribunal upon the ground that the arbitrators lacked jurisdiction under Article 190(2)(b) 1.
11. Issues before the Court
[Rz 5] The issue raised by the Petitioner was the one of the jurisdiction of the Arbitral Tribunal.
However, on its own motion, the Federal Tribunal raised the issue of its own jurisdiction to decide the appeal according to Article 191 (1) PIL Act. Indeed, such article, which states that «[a]n appeal may be taken only to the Swiss Federal Tribunal»2, is applicable only to international arbitrations within the meaning of Article 176 and not to appeals against domestic awards which are brought before the Cantonal Court pursuant to Articles 36 and 3 of the lntercantonal Arbitration Concordat.
[Rz 6] The Federal Tribunal eventually held that it did not have jurisdiction under Article 191 (1) and dismissed the appeal on this ground, without reviewing the question of the arbitrators· jurisdiction.
Ill. The Court decision
[Rz 7] The Federal Court first restates the principle according to which it reviews its own jurisdiction motu proprio, even if the parties do not challenge it (reference being made to A TF 128 I 46 E.1 a and the cited authorities).
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under challenge (Anfechtungsobjekt; acte attaquable). The Court holds that an appeal pursuant to Articles 190 ff. PIL Act (i.e. before the Federal Tribunal) can be brought «only against an award rendered in Switzerland in an arbitration with international character, to which the provisions of Chapter 12 are applicable».
[Rz 9] According to Article 176, this implies that «the seat of the arbitral tribunal is located in Switzerland[ ... ] and that, at the time of the conclusion of the arbitration agreement, at least one of the parties had neither its domicile nor its habitual residence in Switzerland». The question was then whether the relevant «parties» are the ones to the arbitral agreement or the ones to the arbitral proceedings. In answering this question one has to consider that, in the words of the Federal Tribunal, «the internationality test set forth in this article [176], based on formal requirements like domicile, was chosen for the sake of clarity».
[Rz 10] The Federal Tribunal first sets out the reasoning of the Arbitral Tribunal. Relying on the wording of Article 176(1 ), the arbitrators considered that the relevant criterion was the one of the domicile of the parties to the arbitration agreement. Therefore, they held that Chapter 12 governed even though both parties to the proceeding had their domicile in Switzerland. In their view, relying on the domicile of the parties to the proceeding would have the (decisive) disadvantage that the law governing the arbitration (/ex arbitril) could not be determined until the actual beginning of the arbitration.
[Rz 11] The Federal Court dismisses these arguments. Referring to the interpretation given by Vischer3, the Court holds that it does not suffice that one of the parties to the arbitration agreement had, at the relevant time, its domicile outside Switzerland: «only the domicile of the parties to the arbitra/ proceedings is relevant» in order to assert the international character of an arbitration. For the Court, «neither the text nor the spirit of Article 176 indicates that the domicile of (other) contract parties which are not participating in the proceeding should be taken into account». The Court further notes that the Arbitral Tribunal's interpretation of Article 176(1) is at odds with the aim of this provision, which is to ensure clarity in the determination of the applicable regime. In particular, the Court states that the Arbitral Tribunal's approach leads to the «internationalization» of a dispute involving two Swiss corporations, a result that the legislators intended to avoid.
[Rz 12] Accordingly, the Federal Tribunal holds that the arbitration between the Petitioner and the Respondent, both domiciled in Switzerland, must not be deemed as international within the meaning of Article 176(1 ). Thus, it dismissed the appeal for lack of (its own) jurisdiction.
[Rz 13] In a nutshell, this decision sets the following rule: Chapter 12 is applicable only if one of the parties to the arbitra/ proceedings had its domicile outside Switzerland at the time of the conclusion of the arbitration agreement.
[Rz 14] In an apparent effort to narrow down the scope of application of Chapter 12, the Federal Tribunal seems inclined to revisit the issue of internationality, even if the Arbitral Tribunal and the parties considered the arbitration international and acted accordingly.
IV. Some comments
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[Rz 15] Let us first focus on the wording of Article 176(1), on which the Federal Tribunal and the arbitrators do not share the same view. Under the heading "Scope of application; seat of the Arbitral Tribunal", Article 176(1) reads as follows:
«The provisions of this Chapter shall apply to all arbitrations if the seat of the Arbitral Tribunal is in Switzerland and if at least one of the parties had, at the time of the conclusion of the arbitration agreement, neither its domicile nor its habitual residence in Switzerland»4 .
[Rz ] This wording is a literal translation of the French official text providing that:
«[l]es dispositions du present chapitre s'appliquent
a
tout arbitrage si le siege du tribunal arbitral se trouve en Suisse et si au moins l'une des parties n'avait, au moment de la conclusions de la convention d'arbitrage, ni son domicile, ni sa residence habituelle en Suisse».[Rz 16] From a grammatical point of view, one may argue that the phrase «at the time of the conclusion of the arbitration agreement» only refers to the moment at which the domicile has to be determined. Accordingly, one could conclude that the word «parties» refers to «the arbitration». By contrast, one could also argue that the other officials versions (i.e. German5 and ltalian6, of Article 176(1) state that «[t]he provisions of this chapter shall apply to the Arbitral Tribunals [«Schiedsgerichte»; «tribunali arbitrali»] which have their seat in Switzerland if, at the time of the conclusion of the arbitration agreement, at least one of the parties had ... ». In both these versions, Article 176(1) does not even speak of «arbitration», so that the word «parties» must logically refer to the arbitration agreement. On such basis, it is difficult to agree with the Federal Tribunal when it considers that nothing in the wording of Article 176(1) indicates that the relevant parties are the ones to the arbitration agreement. Quite to the contrary.
[Rz 17] Let us turn to the second argument made by the Federal Tribunal, namely to the purpose of Article 176(1 ). Admittedly the purpose of achieving clarity could be undermined by the need to investigate whether persons, which are not parties to the proceedings, are bound by the arbitration agreement and where they had their domicile at the relevant time. On the other hand, the Arbitral Tribunal is right when it considers it useful to be able to determine the applicable legal regime before the arbitration actually starts. lt suffices to mention the case of the so-called exception d'arbitrage in which a party invokes an arbitration agreement to oppose a claim brought before a state court.
Several issues that may arise at this stage, for instance arbitrability, could be treated differently depending on the applicable arbitration regime (Chapter 12 or Concordat). In such a case, the test adopted by the Federal Tribunal could lead to practical difficulties.
[Rz 18] The last reason relied upon by the Federal Tribunal seems the most persuasive. lt is true that the rationale of Article 176(1) was originally dictated by political considerations. lt consisted in avoiding that an arbitration between two Swiss parties be governed by Chapter 127. In the case at bar, the interpretation adopted by the arbitrators did indeed lead to the opposite result.
[Rz 19] The result of this decision is a relatively narrow definition of internationality. One may question whether this is still adequate in a globalized economy. Does it reflect the true nature of the dispute resolution if an arbitration between a Swiss subsidiary of an multinational group and a Swiss corporation about a project performed entirely abroad is treated like a Swiss domestic arbitration? Or if an arbitration between an international sports federation established in Switzerland (as many) and a French athlete competing for France, but domiciled in Switzerland, arising out of a competition in a third country is subject to the rules governing domestic proceedings? Certainly not.
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itself already restrictive. By contrast, the objective test, which hinges on the international nature of the transaction giving rise to the dispute and is used in France for instance, better mirrors the character of the arbitration.
[Rz 21] The Federal Court is obviously bound by the test adopted by the legislators. However, considering the inherent flaws of such test, one would expect the Court not to narrow it down even further. One would also expect the Court to seek guidance from the UNCITRAL Model Law. By application of the Model Law, the arbitration at stake would have been regarded as international.
Among other instances of internationality, the Model Law indeed provides for a broader approach:
«An arbitration is international if[ ... ] the parties to the arbitration agreement have, at the time of conclusion of that agreement, their places of business in different States [ ... ]»8 .
[Rz 22] Let us hope that in future cases the Court will again pay due attention to international instruments and to the need for harmonization, which is particularly strong in international arbitration.
Prof. Gabrielle Kaufmann-Kohler, Geneva I Antonio Rigozzi, LLM, Geneva.
1 According to this provision, «The award may be annulled[ ... ) if the Arbitral Tribunal wrongly accepted or declined jurisdiction».
2 For the sake of completness, one should also mention that Article 191 (2) PIL enables the parties to opt for the jurisdiction of the Cantonal court at the seat of the arbitral tribunal. In the case at stake, the parties did not exercise this option.
3 Frank Vischer, in: Heini/Keller/SiehrNischerNolken, IPRG Kommentar, 11 ad Art. 176 IPRG, p. 1495, according to whom, « Voraussetzung fOr die Anwendung des 12. Kapitels ist dass eine Partei des Schiesverfahrens Wohnsitz oder gewonlichen Aufentha/t im Ausland hat».
4 See translation by Blessing, Briner and Karrer annexed to the ZHK Arbitration Rules
5 «Die Bestimmungen dieses Kapitels gelten fOr Schiedsgerichte mit Sitz in der Schweiz, sofem beim Absch/uss der Schiedsvereinbarung wenigstens eine Partei ihren Wohnsitz oder ihren gewohnlichen Aufenthalt nicht in der Schweiz hatte.»
6 «Le disposizioni del presente capita/a si app/icano ai tribunali arbitrali con sede in Svizzera sempreche, a/
momento del/a stipulazione del patto di arbitrato, a/meno una parte non fosse domici/iata ne dimorasse abitualmente in Svizzera».
7 The example set forth in the preparatory works is the one of an arbitration between two Swiss parties concerning a contract to be performed abroad.
8 Article 1(3)(a), emphasis added.
Categorie(s) : Arbitration
Paru dans: Jusletter 7. Oktober 2002
Proposition de citation : Gabrielle Kaufmann-Kohler I Antonio Rigozzi, When is a Swiss arbitration international?, in: Jusletter 7.
Oktober 2002 [Rz]
