Swiss Federal tribunal, 1st Court of civil law, 26 July 2018, X. v. Y, 4A_404/2017

The dispute was related to the successive transfer of company Z’s shares from company U to company X, and from company X to company Y. Regarding the first transfer, the share transfer agreement provided that the original vendor (the U company) would remain in charge of disputes relating to funds transferred abroad (offshore) and that arose before the date of signature of the contract. For a while, the original vendor complied with this clause and then ceased to assume its responsibilities. Company Y then turned against company X, which denied all responsibility. Company Y filed a request for arbitration against Company X. The latter company (“Claimant”) did not win the case before the arbitral tribunal and commenced annulment proceedings before the Swiss Federal Tribunal (“SFT”) for three main reasons.

First, Claimant alleged that its right to be heard had been violated. The SFT recalls that the complaint alleging a violation of this right must not be used to provoke a review of the application of law to the merits. In addition, it must be demonstrated how the alleged violation prevents the party from regularly asserting its rights in the arbitral proceedings. Having recalled that it is necessary to distinguish the situations where there is a procedural agreement stricto sensu between the parties from those where the two parties seem to simply share the same thoughts on how to resolve the legal issue, the SFT considers that in this case, even if this “pseudo-agreement” existed, there is no evidence of its violation and therefore of the right to be heard.

Second, Claimant considered that the arbitral tribunal went beyond the parties’ requests. The SFT holds that an arbitral tribunal may be convinced by legal arguments that have not been made previously, as far as this does not constitute a new claim as such, but only a new assessment of the facts of the case. The arbitral tribunal’s powers are, however, limited by the subject-matter and the amounts claimed in the submissions presented by the parties. In this case, the arbitral tribunal has not ruled extra or ultra petita by adding a potestative and suspensive condition to a debt that was the subject matter of the dispute.

Finally, Claimant considered the award to be contrary to material public policy because of the violation of the pacta sunt servanda principle. The SFT states that this principle is only violated when the arbitral tribunal refuses to apply a contractual clause while admitting that it binds the parties or, conversely, if it imposes on them the respect of a clause of which he considers that it does not bind them. The interpretation of the contract does not fall within the scope of this principle. The SFT considers that the arbitral award did not violate this principle. It therefore rejects the claims.

2018-09-08T20:29:54+00:00 July 26th, 2018|Swiss Federal Tribunal, Swiss jurisdictions|0 Comments

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