Swiss Supreme Court rules on New York Convention requirement to produce certified translation of award

Practical Law UK Legal Update 1-521-2440 (Approx. 5 pages)

Swiss Supreme Court rules on New York Convention requirement to produce certified translation of award

by Practical Law

Background

Pursuant to Article IV of the 1958 New York Convention:

"1. To obtain the recognition and enforcement mentioned in the preceding article, the party applying for recognition and enforcement shall, at the time of the application, supply:

a) The duly authenticated original award or a duly certified copy thereof;

b) The original agreement referred to in article II or a duly certified copy thereof.

2.If the said award or agreement is not made in an official language of the country in which the award is relied upon, the party applying for recognition and enforcement of the award shall produce a translation of these documents into such language. The translation shall be certified by an official or sworn translator or by a diplomatic or consular agent."

Pursuant to Article V(2)(b) of the New York Convention:

"Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that:

b)The recognition or enforcement of the award would be contrary to the public policy of that country."

Pursuant to Article 31(1) of the 1969 Vienna Convention on the Law of Treaties (VCLT):

"A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose".

Facts

A dispute arose between X and Z concerning an exclusive distribution and licensing agreement they had entered into in 2002. The agreement was governed by Swiss law and contained an arbitration clause (ICC sole arbitrator, seat in London, English as language of the proceedings). X initiated ICC arbitration proceedings against Z in 2006. The sole arbitrator rendered an English-language award on 3 November 2009, ordering Z to cease using X's trademarks and ordering X to pay:

US$50,000 to Z.
Half of the arbitration costs (that is, US$185,000).
Compensation for Z's legal costs (US$3,794,824.98).

X's request for the interpretation of the award was rejected by the sole arbitrator in a decision dated 8 January 2010.

In October 2010, Z filed a request for debt collection to recover the amounts due under the award. X filed an objection to the payment order which was notified to him. Z produced the following documents with its request to set aside X's objection:

A certified copy of the agreement (including the arbitration clause).
A certified copy of the award.
A certified copy of the decision on interpretation of the award.
A certified translation of the order section of the award.

An uncertified translation of the costs section of the award and of the decision on interpretation of the award was subsequently filed by Z with its rejoinder.

X's objection was set aside by a first instance court in the canton Schwyz. X appealed that decision, arguing that Z had failed to produce a full, certified translation of the award, as required by Article IV(2) of the New York Convention, and that the recognition and enforcement of the award was contrary to public policy (Article V(2)(b)).

The second instance court of the canton Schwyz held that a full translation of the award was not needed for reasons of procedural economy, as it had a sufficient command of English. The court had access to a translation, albeit uncertified, of the disputed decision on costs which enabled it to assess the alleged public policy violation. X filed an appeal against this new decision with the Swiss Federal Supreme Court.

Decision

The Swiss Supreme Court dismissed the appeal.

Pursuant to Article IV(1) of the New York Convention, the party applying for recognition and enforcement has to supply a duly authenticated original or a duly certified copy of the award and the original or a duly certified copy of the arbitration clause. Article IV(2) of the New York Convention also requires the production of a translation, certified by an official or sworn translator or by a diplomatic or consular agent, of these documents if they are in a language other than that of the country in which enforcement is sought.

As X did not object that a translation of the arbitration clause had not been provided by Z, this issue was neither analysed by the cantonal courts nor by the Supreme Court. Furthermore, X did not dispute the fact that the cantonal courts had taken into account the additional documents produced by Z during the second exchange of submissions (that is, the uncertified translation of the decision on costs and of the decision on interpretation of the award). X only argued that Article IV(2) of the New York Convention was unambiguous and had to be complied with even if the enforcement court had a sufficient command of the English language.

This is the first time the Supreme Court has considered whether Article IV(2) requires that a full translation of the award always be produced by the applicant. The Supreme Court emphasised that there was no consensus on this issue amongst legal scholars and that the practice of enforcement in the courts of New York Convention contracting states was not consistent. Interpreting the Convention pursuant to Article 31(1) VCLT, the Supreme Court held that the general aim was to facilitate recognition and enforcement so that a pragmatic, flexible and non-formalistic approach should be applied. As already underlined by the Supreme Court in previous decisions, Article IV(2) was therefore not to be applied strictly (Case 5A_427/2011) (see Legal update, Swiss Supreme Court holds that formal requirements under the NYC are not to be applied restrictively). The objective of this provision is that the enforcement court must be able to decide whether the grounds listed in Article V are satisfied.

In the present instance, the Supreme Court ruled that the requirement of a full translation of the award was too formalistic. A translation of the order section of the award and of the decision on costs, which was disputed and precisely underlay the ground for refusal invoked by X (that is, the violation of public policy), were already available. Moreover, the Supreme Court noted that nowadays the courts usually have a sufficient command of the English language and therefore the aim of Article IV(2) was achieved even in the absence of a translation.

As regards X's argument based on public policy, the second instance court of the canton Schwyz held that there was no violation of public policy because the sole arbitrator understood the cost allocation agreed on by the parties in the arbitration clause as a "loser pays it all" allocation and applied such an apportionment. In the light of the total amount in dispute, Z had clearly prevailed for the most part, so that the decision on costs was not contrary to public policy. As X merely reproduced before the Supreme Court the argument made before the cantonal courts, which is not admissible pursuant to the Federal Supreme Court Act, the Supreme Court did not have to determine whether the decision on costs was contrary to public policy or not.

Comment

In this decision, which will be published in the official case reporter, the Supreme Court made it clear that, if a party wishes to object to the lack of translation of an arbitration clause, it had to raise that issue. More importantly, with regard to the issue of the translation of the award, this decision confirms Switzerland's readiness to facilitate the enforcement of foreign arbitral awards (see Case 5A_427/2011, discussed in Legal update, Swiss Supreme Court holds that formal requirements under the New York Convention are not to be applied restrictively).

This is to be welcomed. However, the impact of this decision for practitioners is not entirely clear since in this particular case, the court was in possession of a translation of the disputed part of the award (the issue of the award on costs) and was, therefore, in a position to assess the content of the award in one of the official languages. The enforcement judge's knowledge of English (a fact which is usually not known to the applicant) would appear to be decisive. For this reason, in order to save the potentially considerable costs of translation, the courts should adopt a pragmatic approach and be prepared to accept awards (at least in English) without a translation, just requesting a translation of the whole or part of the award in the course of the recognition and enforcement procedure if necessary.

Another point which is left unclear by the decision is whether or not the translation of the award, partial or in full, must be certified. Indeed, the Supreme Court did not address the fact that an uncertified translation of the decision on costs had been produced by Z.

Case

5A_754/2011.

Swiss Supreme Court rules on New York Convention requirement to produce certified translation of award | Practical Law