Article 190(2)(d) of the Swiss Federal Statute on Private International Law (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."

Following soccer club X's early termination of a 3-year contract with soccer player Y, Y brought a claim for monetary relief to the Dispute Resolution Commission of the Soccer Federation of country Z, and obtained partial relief . The club and the player appealed to the CAS. On 24 April 2009, a CAS panel (the Panel), applying the rules of the Fédération Internationale de Football Association (FIFA) and the laws of Z, rejected the club's appeal and decided that the contract had been wrongfully terminated. Relying on the criteria contained in Article 17(1) of the FIFA regulations regarding the status and transfer of players (FIFA Regulations), the Panel granted the player monetary damages of approximately US$1.5 million, representing the player's expected interest.

On 25 May 2009, X filed a setting aside petition with the Swiss Federal Tribunal. X argued that the award violated Article 190(2)(d) PILA as incompatible with public policy. Specifically, X submitted that the Panel had violated the principles of pacta sunt servanda and of good faith by finding that the player's damages should be calculated in accordance with both the laws of Z and the FIFA Regulations, but then failing to take into account the former.

The Swiss Federal Tribunal rejected the petition.

It held that for the purposes of challenges under Article 190(2)(d) PILA, the principle of pacta sunt servanda is only violated if an arbitral tribunal refuses to apply a contractual provision that it has determined is binding on the parties, or, conversely, if a tribunal imposes a contractual provision that it has determined is not binding on the parties. The arbitral tribunal thus must have applied or refused to apply a contractual provision in contradiction of its own interpretation as to the existence or content of that provision. By contrast, the process of contractual interpretation itself and the legal consequences drawn from it are not grounds for an ordre public challenge. The same holds true for the interpretation by an arbitral tribunal of the statutes of a private organisation.

Here, the Federal Tribunal reasoned that under the guise of an ordre public challenge, the petitioner was actually seeking a review of the application of the law by the Panel. But it was not the Federal Tribunal's obligation to review whether the Panel had made a proper selection among the rules on the calculation of damages potentially applicable under the damages clause of the contract, nor to review the CAS's application of that rule.

The Federal Tribunal nonetheless engaged in some limited review of the Panel's legal reasoning. It found that the Panel had in fact explained why it relied on a particular article of the FIFA Regulations. Contrary to X's claims, the Panel had also taken into account the laws of Z in applying the FIFA Regulations. There was no "internal contradiction" in the award of the sort referenced above that would run counter to ordre public. Finally, the Federal Tribunal found that there was nothing contrary to public policy in awarding to a soccer player the monies he would have earned had the employment agreement been carried through its term.

The case joins a long list in Switzerland of failed ordre public challenges to arbitral awards. It highlights once again that the Federal Tribunal will narrowly interpret the scope of Article 190(2)(d) and will not permit a review of questions of law framed as ordre public infringements. There may be circumstances where the line between the two is not so easy to draw, but not so here, which the Federal Tribunal demonstrated by engaging in a limited review of the CAS tribunal's legal analysis.