BY SA (a company of the Y Group) bought 79% of the capital stock of E SA (E); the minority shareholders of E, including X SA (X), subscribed to the sales contract. The new shareholders of E (companies of the Y Group) and a few minority shareholders having kept shares of E (including X) then signed a shareholder agreement.

These three agreements (sales agreements) each contained a similar non-competition clause. The sales agreements also included an identical arbitration clause.

Seven years earlier, F SA (a subsidiary of E) and X had entered into a framework collaboration agreement (FCA) which also contained an arbitration clause. The FCA was terminated and there was a dispute as to the winding-up of the agreement.

Four companies of the Y Group initiated ICC arbitration proceedings against X on the basis of the arbitration clauses in the sales agreements, claiming a breach of the non-competition clauses. X accepted the jurisdiction of the arbitral tribunal, but immediately denied its competence as to the resolution of the issues pertaining to the FCA.

In its final award, the arbitral tribunal ruled that the non-competition clauses had been breached and ordered X to pay damages accordingly.

X then challenged the award before the Supreme Court, relying on Article 190(2)(b) of the Private International Law Act (PILA), contending that the arbitral tribunal had resolved questions pertaining to the winding-up of the FCA although it was not competent to do so.

The Supreme Court held that the arbitral tribunal was competent to decide on the winding-up of the FCA as this agreement contained its own arbitration clause.

Referring to its case law, the Supreme Court reaffirmed that an arbitral tribunal is competent to rule on preliminary questions which are not covered by the arbitration clause or even not arbitrable. The Supreme Court justified its position by reference to the practice regarding the similar problems of set-off defences. The Supreme Court noted that the rule according to which the arbitral tribunal shall have jurisdiction to hear a set-off defence, even when the relationship out of which the defence is said to arise is not within the scope of the arbitration clause or is the object of another arbitration agreement or forum-selection clause (Article 21(5) of the Swiss Rules of International Arbitration), had become prevailing in legal doctrine. The Supreme Court further noted that this principle had been crystallised under Swiss law in the context of domestic arbitration (Article 377(1) of the new Code of Civil Procedure).

The Supreme Court considered that the arbitral tribunal needed to establish who the customers belonged to at the moment of the termination of the FCA, in order to be able to determine the amount of damages due by X as a consequence of the breach of the non-competition clauses, and that it had not exceeded its powers in so doing. The petition to set aside the award was therefore dismissed.

This decision is a strong reaffirmation of the principle that the arbitral tribunal is competent to decide on preliminary issues.

It is also noticeable that the Supreme Court referred to Swiss law of domestic arbitration in order to support a view in the context of international arbitration. This appears to be the first time that the Supreme Court has referred to the new domestic arbitration law, which only came into force on 1 January 2011 (see Legal update, Switzerland: round up 2010/2011: New Rules on domestic arbitration). However, as the new domestic law on arbitration contains several novelties, it can be expected that this will not be the last.

4A_482/2010 (07.02.2011).