Publications

Axel Buhr; in: dRSK, 10.07.2023

Accord­ing to the Swiss Fed­er­al Tri­bunal, par­ties are de fac­to unable to suc­cess­ful­ly request the set­ting aside of an unrea­soned award in cas­es where the release of an unrea­soned award is in line with the pro­ce­dur­al rules agreed by the par­ties. In such a sit­u­a­tion, the scruti­ny of the Swiss Fed­er­al Tri­bunal is «inac­ces­si­ble».

I. Back­ground

[1] In Sep­tem­ber 2022, the three par­ties to the relat­ed set­ting-aside pro­ceed­ings had agreed in writ­ing that their pre- exist­ing dis­pute over a real estate invest­ment was to be resolved by three rab­bis, whom the par­ties had des­ig­nat­ed in their agree­ment (sec. A).

[2] At the time when the arbi­tra­tion agree­ment had been signed, one of the par­ties was a res­i­dent of Israel and at least one of the par­ties was liv­ing in Switzer­land. This infor­ma­tion is not includ­ed in the sum­ma­ry of facts of the Swiss Fed­er­al Tri­bunal’s deci­sion, but fol­lows from the court’s con­sid­er­a­tions (sec. 2.1 and sec. 2.3).

[3] The orig­i­nal arbi­tra­tion agree­ment had been writ­ten in Hebrew. A Ger­man trans­la­tion was pro­vid­ed by the appel­lant in the set­ting-aside pro­ceed­ings and appar­ent­ly remained uncon­test­ed. The trans­la­tion was repro­duced by the Swiss Fed­er­al Tri­bunal in its deci­sion. For the ben­e­fit of Ger­man-speak­ing read­ers and the sake of com­plete­ness, the Ger­man trans­la­tion of the orig­i­nal agree­ment reads (sec. A):

«Wir, die Parteien […] haben einen Hän­del mit Geld­forderung bezüglich D.________ Invest und haben unter uns beschlossen, dass zwis­chen uns gerichtet werde über alle diese Forderun­gen durch die fol­gen­den (Schieds)Richter: […] Und wir verpflicht­en uns und (unter Verpfän­dung) unser(es) Vermögen(s) zur Ein­hal­tung all dessen was sie entschei­den (wer­den), sei dies als (hartes) Urteil oder sei dies als Kom­pro­miss (welch­er sich aber an einem harten Urteil anlehnt) und selb­st bei einem Irrtum. Wir haben kein Recht, dieses Urteil anzufecht­en, wed­er bei (anderen) jüdis­chen Gericht­en noch bei weltlichen Gericht­en. All dies geschieht aus freiem Willen (und unter den hiefür nach jüdis­chem Gesetz geregel­ten Proze­duren), und unter Berück­sich­ti­gung der jüdis­chen und weltlichen Gesetze.»

[4] Accord­ing to the trans­la­tion, the Par­ties waived any legal reme­dies against the final award («Wir haben kein Recht, dieses Urteil anzufecht­en, wed­er bei (anderen) jüdis­chen Gericht­en noch bei weltlichen Gericht­en.») and agreed that the pro­ceed­ings were to be con­duct­ed in accor­dance with Jew­ish rules of pro­ce­dure («All dies geschieht aus freiem Willen (und unter den hiefür nach jüdis­chem Gesetz geregel­ten Proze­duren), und unter Berück­sich­ti­gung der jüdis­chen und weltlichen Geset­ze.»).

[5] The Swiss Fed­er­al Tri­bunal’s sum­ma­ry of facts does not include any infor­ma­tion about the start of the pro­ceed­ings. Appar­ent­ly, the des­ig­nat­ed arbi­tra­tors accept­ed their mandates.

[6] Accord­ing to the Swiss Fed­er­al Tri­bunal’s descrip­tion of the course of the arbi­tra­tion pro­ceed­ings, a hear­ing took place on 7 Decem­ber 2022, of which min­utes were tak­en. The min­utes, which were not signed, includ­ed a sec­tion which was titled «judg­ment» («Urteil (Psak Din)») and put on record a num­ber of find­ings of the three arbi­tra­tors – such as, among oth­er things, that the rela­tion­ship between the par­ties clas­si­fied as a «part­ner­ship» («Part­ner­schaft») that had not been ter­mi­nat­ed (sec. B.a).

[7] On 12 Jan­u­ary 2023, the arbi­tral tri­bunal released a writ­ten deci­sion. The deci­sion con­sist­ed of an oper­a­tive part stat­ing the relief grant­ed by the arbi­tral tri­bunal, but did not con­tain any con­sid­er­a­tions (sec. B.b).

[8] Pur­suant to the oper­a­tive part, the appel­lant was ordered, among oth­er things, to pay to the two oth­er par­ties «all out­stand­ing debts» («alle bish­er aufge­laufe­nen Schulden»). In addi­tion, the oper­a­tive part includ­ed instruc­tions for the lawyer of the appel­lant as well as the com­pa­nies owned by the appel­lant (sec. B.b).

[9] There­after, the appel­lant request­ed the Swiss Fed­er­al Tri­bunal to set aside the deci­sions ren­dered in Decem­ber 2022 and Jan­u­ary 2023 (sec. C). The pro­ce­dur­al his­to­ry of the Swiss Fed­er­al Tri­bunal is silent on the pre­cise date when the request was filed. Based on the Swiss Fed­er­al Tri­bunal’s con­sid­er­a­tions on the admis­si­bil­i­ty of the request (sec. 1.3), the request was time­ly filed with­in the time-lim­it of 30 days set by Arti­cle 100.1 of the Swiss Fed­er­al Tri­bunal Act («die Beschw­erde­frist ist unbe­strit­ten­er­massen einge­hal­ten»).

[10] The set­ting-aside request was based on Arti­cle 190.2 lit. b, c, d and e of the Swiss Pri­vate Inter­na­tion­al Law Act («PILA»; sec. 1.2). More specif­i­cal­ly, the appel­lant complained,

1. based on Arti­cle 190.2 lit. d and e PILA that the prin­ci­ple of lata sen­ten­tia iudex desinit esse iudex had been dis­re­gard­ed (i.e. that the arbi­tral tri­bunal had no longer been com­pe­tent to ren­der its sec­ond deci­sion after the release of the first decision).
2. based on Arti­cle 190.2 lit. b PILA that the arbi­tral tri­bunal had not been com­pe­tent to give orders to third par­ties that had not been par­ties to the arbi­tra­tion agreement.
3. based on Arti­cle 190.2 lit c PILA that some of the orders giv­en by the arbi­tral tri­bunal had not been request­ed by any par­ty, and
4. based on Arti­cle 190.2 lit. d PILA that the right to be heard and the right to equal treat­ment of the appel­lant had been violated.

[11] The respon­dents in the set­ting-aside pro­ceed­ings request­ed the Swiss Fed­er­al Tri­bunal to ful­ly dis­miss the request. The respon­dents in par­tic­u­lar argued that the deci­sion ren­dered in Decem­ber 2022 did not clas­si­fy as an award and could not be set aside by the Swiss Fed­er­al Tri­bunal in the first place (sec. C).

II. Deci­sion

[12] With its deci­sion dat­ed 12 May 2023, the Swiss Fed­er­al Tri­bunal entire­ly dis­missed the set­ting-aside request (sec. 5).

[13] At the begin­ning of its analy­sis, the Swiss Fed­er­al Tri­bunal high­lights the fact that a reli­gious arbi­tra­tion – such as the rab­binic arbi­tra­tion in the case at hand – is admis­si­ble under Swiss law, as a mat­ter of prin­ci­ple, pro­vid­ed that the sub­ject mat­ter of the dis­pute is arbi­tra­ble under the applic­a­ble Swiss lex arbi­tri (sec. 2.2).

[14] The Swiss Fed­er­al Tri­bunal notes that at least one of the par­ties was liv­ing in Israel at the time when the arbi­tra­tion agree­ment had been signed (sec. 1.1 and 2.1) and that the arbi­tral tri­bunal had its seat in Zurich (sec. 1.1). Based on the Swiss Fed­er­al Tri­bunal’s con­sid­er­a­tions, the fac­tu­al basis for these find­ings is unclear. Be it as it may, the Swiss Fed­er­al Tri­bunal con­cludes that as a result, the arbi­tra­tion clas­si­fies as an inter­na­tion­al arbi­tra­tion in the sense of Arti­cle 176.1 PILA and is gov­erned by the 12^th chap­ter of the PILA (sec. 2.1).

[15] As far as the waiv­er of poten­tial reme­dies against the final award is con­cerned («Wir haben kein Recht, dieses Urteil anzufecht­en, wed­er bei (anderen) jüdis­chen Gericht­en noch bei weltlichen Gericht­en.»), the Swiss Fed­er­al Tri­bunal notes that at least one of the par­ties was a res­i­dent of Switzer­land when the arbi­tra­tion agree­ment was signed. Accord­ing to the Swiss Fed­er­al Tri­bunal, it fol­lows from Arti­cle 192.1 PILA that the par­ties could not valid­ly waive their right to request the Swiss Fed­er­al Tri­bunal to set aside an award ren­dered in the arbi­tra­tion (sec. 2.3).

[16] The Swiss Fed­er­al Tri­bunal con­cludes that the request to set aside the final deci­sion of Jan­u­ary 2023 is admis­si­ble as a mat­ter of prin­ci­ple (sec. 2.5). In con­trast, the deci­sion of Decem­ber 2022 was, so the court rules, a pre­lim­i­nary deci­sion which was not final. The Swiss Fed­er­al Tri­bunal con­cludes that the deci­sion of Decem­ber 2022 does not clas­si­fy as an arbi­tral award and it dis­miss­es the request to set aside the same accord­ing­ly. More­over, the court rejects the com­plaint that the deci­sion of Jan­u­ary 2023 was at odds with the prin­ci­ple of lata sen­ten­tia iudex desinit esse iudex on the same grounds (sec. 2.4 and 4.1).

[17] The Swiss Fed­er­al Tri­bunal dis­miss­es the com­plaint that instruc­tions had been giv­en to third par­ties. Accord­ing to the Swiss Fed­er­al Tri­bunal, the poten­tial over­reach may have adverse­ly affect­ed the con­cerned third par­ties, but not the appel­lant who had filed the request to set aside the award (sec. 4.1).

[18] As far as the remain­ing com­plaints are con­cerned (ultra peti­ta and due process), the Swiss Fed­er­al Tri­bunal does not find itself in a posi­tion to scru­ti­nize their mer­its, for lack of a pro­ce­dur­al his­to­ry in the award (sec. 3).

[19] The Swiss Fed­er­al Tri­bunal empha­sizes that, pur­suant to Arti­cle 189.1 PILA, par­ties are at lib­er­ty to agree on the require­ments as to the form and con­tent of an award. How­ev­er, so the court adds, in the event that the par­ties agree that an award may be com­mu­ni­cat­ed oral­ly or that no rea­sons must be giv­en by an arbi­tral tri­bunal, the lack of a rea­soned award comes with con­se­quences, as it de fac­to reduces the like­li­hood of suc­cess­ful set­ting-aside pro­ceed­ings sig­nif­i­cant­ly (sec. 3.2).

[20] Accord­ing to the Swiss Fed­er­al Tri­bunal, the par­ties valid­ly agreed that the arbi­tra­tion pro­ceed­ings were to be con­duct­ed in line with Jew­ish rules of pro­ce­dure «All dies geschieht aus freiem Willen (und unter den hiefür nach jüdis­chem Gesetz geregel­ten Proze­duren), und unter Berück­sich­ti­gung der jüdis­chen und weltlichen Geset­ze.»). Cit­ing a legal author­i­ty, the Swiss Fed­er­al Tri­bunal empha­sizes that the Jew­ish arbi­tra­tion pro­ce­dure heav­i­ly relied on the con­cept of oral­i­ty. The Swiss Fed­er­al Tri­bunal sees no basis to ques­tion the par­ties’ choice and con­cludes that the par­ties accept­ed the pro­ce­dur­al dis­ad­van­tages com­ing with their agree­ment (sec. 3.5).

[21] The Swiss Fed­er­al Tri­bunal recalls that it is bound by the facts stat­ed in an arbi­tral award, pur­suant to Arti­cle 105.1 of the Swiss Fed­er­al Tri­bunal Act (sec. 3.3). For the ease of ref­er­ence, the first two para­graphs of Arti­cle 105 PILA pro­vide (infor­mal translation):

«(1) The Swiss Fed­er­al Tri­bunal bases its deci­sion on the facts that the pre­vi­ous instance determined.
(2) It may ex offi­cio cor­rect or sup­ple­ment the fac­tu­al find­ings of the pre­vi­ous instance if they are man­i­fest­ly incor­rect or based on a vio­la­tion of the law with­in the mean­ing of Arti­cle 95.»

[22] The Swiss Fed­er­al Tri­bunal empha­sizes that it is pre­vent­ed from cor­rect­ing or sup­ple­ment­ing the facts stat­ed in an award based on Arti­cle 105.2 of the Swiss Fed­er­al Tri­bunal Act. Indeed, Arti­cle 77.2 of the Swiss Fed­er­al Tri­bunal Act express­ly excludes the appli­ca­tion of Arti­cle 105.2 of the same act in arbi­tra­tion-relat­ed set­ting-aside pro­ceed­ings. The Swiss Fed­er­al Tri­bunal recalls that it is barred from cor­rect­ing or sup­ple­ment­ing the facts stat­ed in an arbi­tral award even in the event that the pre­sent­ed facts are evi­dent­ly erro­neous or based on a vio­la­tion of Swiss law (sec. 3.3).

[23] The Swiss Fed­er­al Tri­bunal finds that the same rules apply in a sit­u­a­tion like in the present case, where no rea­sons are giv­en in an award. More specif­i­cal­ly, the Swiss Fed­er­al Tri­bunal holds that in such a sit­u­a­tion, it is not the task of the court to gath­er the rel­e­vant facts from the case file of the arbi­tra­tion, let alone to take evi­dence (sec. 3.3):

«If the facts are miss­ing or too scarce, it is not the task of the Swiss Fed­er­al Tri­bunal to gath­er them from the arbi­tra­tion file itself, let alone to take evi­dence on dis­put­ed sub­mis­sions. In such a case, it will there­fore be of no use to the par­ties to refer to their sub­mis­sions, the course of the pro­ceed­ings and facts that emerge from the arbi­tra­tion file, even if these are undis­put­ed. The Swiss Fed­er­al Tri­bunal can­not take all this into account as long as it does not find any sup­port in the chal­lenged arbi­tral award.»

[24] As a con­se­quence, the Swiss Fed­er­al Tri­bunal finds itself unable to ana­lyze whether the relief grant­ed by the arbi­tral tri­bunal had been request­ed by a par­ty to the arbi­tra­tion pro­ceed­ings, as the requests for relief of the par­ties had not been repro­duced in the award (sec. 4.3).

[25] Sim­i­lar­ly, the Swiss Fed­er­al Tri­bunal does not con­sid­er itself in a posi­tion to ana­lyze whether the appel­lan­t’s right to be heard or the right of equal treat­ment has been dis­re­gard­ed by the arbi­tral tri­bunal, as no pro­ce­dur­al his­to­ry has been includ­ed in the award. The Swiss Fed­er­al Tri­bunal notes that it is «not its task» to «recon­struct» the pro­ce­dur­al his­to­ry based on the case file of the arbi­tra­tion (sec. 4.4).

[26] The Swiss Fed­er­al Tri­bunal con­cludes that, for lack of a rea­soned award, the scruti­ny of the Swiss Fed­er­al Tri­bunal is «inac­ces­si­ble» («unzugänglich») for the appel­lant and that, accord­ing­ly, the set­ting-aside request was doomed to fail from the start (sec. 4.5).

[27] As a result, the set­ting-aside request was ful­ly dis­missed and the appel­lant was ordered to bear the costs of the pro­ceed­ings (sec. 5).

III. Com­ments

[28] The fol­low­ing aspects of the Swiss Fed­er­al Tri­bunal’s deci­sion may be worth highlighting:

[29] First, suc­cess with a set­ting-aside request is unlike­ly if an award comes with­out rea­sons. A dis­missal is cer­tain in sit­u­a­tions where the release of an unrea­soned award is in line with the rules of pro­ce­dure to which the par­ties agreed. In the Swiss Fed­er­al Tri­bunal’s own words, the scruti­ny by the Swiss Fed­er­al Tri­bunal is «inac­ces­si­ble» (sec. 4.5) in such a situation.

[30] Sec­ond, the Swiss Fed­er­al Tri­bunal inter­prets Arti­cle 105.1 of the Swiss Fed­er­al Tri­bunal Act broad­ly. As a result, the Swiss Fed­er­al Tri­bunal con­sid­ers itself bound not only by the descrip­tion of the facts which the arbi­tral tri­bunal deter­mined to be rel­e­vant for its ver­dict. The Swiss Fed­er­al Tri­bunal deems itself bound also by the pro­ce­dur­al his­to­ry, as it is described in a chal­lenged deci­sion (the so-called «Prozess­sachver­halt»). This was express­ly con­firmed by the Swiss Fed­er­al Tri­bunal in a deci­sion which was pub­lished in 2013 (BGE 140 III 16, sec. 1.31).

[31] Third, as may be seen from the deci­sion at hand, the Swiss Fed­er­al Tri­bunal is of the firm view that, in a sit­u­a­tion where the release of an unrea­soned award is in line with the agreed pro­ce­dur­al rules, it is also bound by the absence of a descrip­tion of the facts which the arbi­tral tri­bunal deter­mined as rel­e­vant for its deci­sion, as well as by the absence of a pro­ce­dur­al history.

[32] Fourth, in cas­es where par­ties agree that an arbi­tral award may be released with­out a pro­ce­dur­al his­to­ry, the Swiss Fed­er­al Tri­bunal does not con­sid­er itself in a posi­tion to «recon­struct» the rel­e­vant facts under­ly­ing the arbi­tral tri­bunal’s ver­dict or the course of the arbi­tra­tion pro­ceed­ings based on the sub­mis­sions of the par­ties and the case file of the arbi­tra­tion. Let alone is the Swiss Fed­er­al Tri­bunal pre­pared to hear par­tic­i­pants to the arbi­tra­tion pro­ceed­ings as witnesses.

[33] In the author’s view, the con­sid­er­a­tions of the Swiss Fed­er­al Tri­bunal are not entire­ly per­sua­sive in each and every respect:

[34] First, the Swiss Fed­er­al Tri­bunal’s inter­pre­ta­tion of Arti­cle 105.1 of the Swiss Fed­er­al Tri­bunal Act, accord­ing to which it con­sid­ers itself bound to base its deci­sion not only on the (pro­ce­dur­al) facts deter­mined by the arbi­tral tri­bunal, but also on the absence there­of, appears not ful­ly con­vinc­ing. The fact that Arti­cle 105.2 of the Swiss Fed­er­al Tri­bunal Act does not apply in arbi­tra­tion-relat­ed set­ting-aside pro­ceed­ings does not nec­es­sar­i­ly mean that the Swiss Fed­er­al Tri­bunal is pre­vent­ed from estab­lish­ing the facts that are rel­e­vant for the adju­di­ca­tion of a set­ting-aside request relat­ing to an unrea­soned award based on oth­er means of evi­dence (such as the case file).

[35] Sec­ond, the Swiss Fed­er­al Tri­bunal’s refusal to adju­di­cate requests to set aside unrea­soned arbi­tral awards in cas­es where their release is in line with the agreed rules of pro­ce­dure is at odds with the inten­tion of the Swiss law­mak­er to ensure that arbi­tral awards which do not com­ply with the manda­to­ry require­ments of the Swiss lex arbi­tri will be set aside by the Swiss Fed­er­al Tri­bunal upon the request of a par­ty, if they have a suf­fi­cient con­nec­tion to Switzer­land. This is why Arti­cle 192.1 PILA does not allow par­ties to waive their right to request the set­ting-aside of an award in cas­es where one par­ty, at the time of the waiv­er, is a res­i­dent of Switzerland.

[36] Third, while there is hope that the Swiss Fed­er­al Tri­bunal’s refusal only applies to cas­es where the par­ties agreed to the release of an unrea­soned award, the appli­ca­tion of such lim­i­ta­tion is hard­ly pos­si­ble in prac­tice, as may be seen in the present case: Nec­es­sar­i­ly, the Swiss Fed­er­al Tri­bunal’s analy­sis of whether or not the release of an unrea­soned award is in line with the agreed pro­ce­dur­al rules can­not be based on (pro­ce­dur­al) facts which are described in the unrea­soned award itself.

[37] Fourth, the pro­ce­dur­al restric­tions that are applied by the Swiss Fed­er­al Tri­bunal to set­ting-aside pro­ceed­ings appear over­ly strict. It may be worth­while to recall that there is a the­o­ret­i­cal pos­si­bil­i­ty to con­duct a hear­ing and take wit­ness evi­dence as part of the set­ting-aside pro­ceed­ings, even though such option lit­er­al­ly exists only on paper (see Arti­cles 44 and 57 of the Swiss Fed­er­al Tri­bunal Act). Swiss arbi­tra­tion prac­ti­tion­ers have well accept­ed the fact that the set­ting-aside pro­ceed­ings are con­duct­ed with­out a hear­ing based on doc­u­ments only in vir­tu­al­ly all cases.

[38] While this lim­i­ta­tion appears accept­able in most cas­es, the Swiss Fed­er­al Tri­bunal’s heavy reliance on the chal­lenged arbi­tral award as the only doc­u­ment which is rel­e­vant for the adju­di­ca­tion of a set­ting-aside request is often prob­lem­at­ic. This is true not only for set­ting-aside requests that con­cern an unrea­soned award like in the present case. The Swiss Fed­er­al Tri­bunal’s focus on the pro­ce­dur­al his­to­ry described in the chal­lenged award is equal­ly dif­fi­cult to swal­low in sit­u­a­tions where the appel­lant argues that the pro­ce­dur­al his­to­ry is sim­ply inac­cu­rate. It ren­ders the enforce­ment of the manda­to­ry require­ments of the Swiss lex arbi­tri and its pro­ce­dur­al guar­an­tees difficult.

[39] While such pro­ce­dur­al restric­tions may be tout­ed as arbi­tra­tion-friend­ly, they should still be applied care­ful­ly. Evi­dent­ly, they come with the risk of dimin­ish­ing the qual­i­ty assur­ance the Swiss Fed­er­al Tri­bunal is sup­posed to provide.

[40] This being said, the arbi­tral award that the Swiss Fed­er­al Tri­bunal was request­ed to set aside was evi­dent­ly not typ­i­cal for com­mer­cial arbi­tra­tions in Switzer­land. There­fore, gen­er­al­iza­tions from the Swiss Fed­er­al Tri­bunal’s con­sid­er­a­tions may only be made with a grain of salt. Arbi­tra­tion prac­ti­tion­ers would cer­tain­ly appre­ci­ate if the Swiss Fed­er­al Tri­bunal explained in more detail to what extent its con­sid­er­a­tions apply to requests for the set­ting aside of rea­soned awards at its ear­li­est oppor­tu­ni­ty. In par­tic­u­lar, it would be help­ful if the Swiss Fed­er­al Tri­bunal clar­i­fied whether, and to what extent, the case file may be used as a basis for a com­plaint that the pro­ce­dur­al his­to­ry in a chal­lenged award is inac­cu­rate or incomplete.

[41] Final­ly, the take-away for par­ties is clear: They should resist the urge to speed up the arbi­tra­tion pro­ce­dure and opti­mize its effi­cien­cy by enabling the arbi­tral tri­bunal to release an unrea­soned award. It can­not be rec­om­mend­ed to any par­ty to waive its right under Arti­cle 189.2 PILA to a rea­soned award, as such waiv­er ren­ders the only rem­e­dy avail­able under the Swiss lex arbi­tri against such award «inac­ces­si­ble».