Article 190(2)(d) of the Swiss Private International Law Act (PILA) permits an arbitral award to be set aside where "the principle of equal treatment of the parties or the right of the parties to be heard was violated."

The case arises out of a 2001 Business Consultancy Agreement (2001 Agreement) between a Belgian company (X) and a Spanish company (Y) which contained an arbitration clause providing for ICC arbitration. Under the 2001 Agreement, Y undertook to facilitate the execution of an agreement for the construction of a storage facility for liquid gas between X and V. In January 2003, X executed the envisaged construction agreement with V. In February 2003, an affiliate of X (X.A.) executed another Business Consultancy Agreement with the Dutch company W (2003 Agreement). The 2003 Agreement was apparently intended to replace the 2001 Agreement between X and Y. Both the 2001 and 2003 Agreements were signed by the same person on behalf of Y and W.

On 11 April 2005, Y commenced the arbitration against X on the basis of the arbitration clause contained in the 2001 Agreement, requesting payment of a commission. X challenged the standing of Y to sue, and its own standing to be sued, on the ground that the 2003 Agreement had transferred the contractual relationship created under the 2001 Agreement to W and X.A. On 5 September 2007, the sole arbitrator rendered a "partial award" rejecting X's challenge and confirming the parties' standing and, more generally, the sole arbitrator's jurisdiction to hear the dispute. In particular, the sole arbitrator concluded that the 2003 Agreement was a mere sham agreement and that the 2001 Agreement between Y and X was still in force. The arbitrator further held that he was not able to determine the true intent of the parties relating to the 2003 Agreement.

On 15 March 2010, the sole arbitrator rendered a final award, awarding a commission to Y.

X filed a petition with the Swiss Supreme Court to set aside the final award and the preceding partial award under Article 190(2)(d) PILA, arguing, among other things, that Y should have filed the petition to set aside the partial award, that is, Y should not have waited for the final award. It also submitted that its right to be heard had been violated on the ground that the sole arbitrator based its partial award, and consequently also the final award, on legal considerations and concepts not introduced by the parties.

The Supreme Court rejected the petition to set aside the award.

The Supreme Court first rejected Y's admissibility argument against X's petition to set aside. It held that the sole arbitrator's first decision was primarily concerned with the parties' standing and not with jurisdiction, that in reality it was a preliminary award and not a partial award strictu sensu, and that such a preliminary award was not susceptible to appeal on the ground of violation of the right to be heard (Article 190, para. 3, PILA).

X's main arguments were based on the principle of the right to be heard and, more precisely, the Supreme Court's constant practice regarding a surprising legal basis for the arbitral tribunal's or sole arbitrator's decision, respectively. In this context, the Supreme Court analysed the interaction between the principles of the right to be heard and jura novit curia. It first observed that the right to be heard particularly covers the right to present the facts of the case, and not the right to make submissions on points of law. With regard to legal issues, as a rule, the principle of jura novit curia prevails, meaning that an arbitral tribunal can base its decision on legal provisions and concepts not introduced by the parties. Only under exceptional circumstances, if the application of a legal provision or concept were to come as a surprise, must the arbitral tribunal grant the parties an opportunity to develop their arguments as to the application of the legal provision. However, the Supreme Court emphasised that this exception is to be applied restrictively, or the argument that the consideration of a legal provision came as a surprise would be (mis)used for appealing the award on the merits.

In this case, the Supreme Court examined the parties' submissions in the arbitration proceedings. It found that X could not have ruled out the possibility that the sole arbitrator would base his decision on the pertinent legal concept. The Supreme Court therefore rejected X's petition to set aside the award.

The Supreme Court once again had to deal with the argument of a "surprising" legal basis. It confirms that the principle of the right to be heard primarily affords a party the right to present the facts of its case and to rebut the factual allegations submitted by the opposing party. With regard to legal arguments, the principle of the right to be heard is only applied under exceptional circumstances. As a rule, the principle of jura novit curia prevails, which means that an arbitral tribunal can base its decision on legal provisions and concepts not explicitly introduced by the parties.