A Swiss court has to dismiss a claim as inadmissible if the claim is barred by the res judicata effect of another court decision or arbitral award.

The Swiss Supreme Court decision concerns a consultancy agreement between the Dutch company, X BV, and A, who is domiciled in Venezuela. Under this consultancy agreement, A claimed outstanding consultancy fees against X in the amount of approximately USD 2.6 million. In November 2005, A obtained a freezing order in Switzerland against assets owned by X in Switzerland. In December 2005, A commenced ICC arbitration in Rotterdam. X brought a counterclaim and asserted a claim for damages for breach of the arbitration agreement contained in the consultancy agreement, claiming losses caused by the freezing order.

In August 2006, a Swiss court of appeal lifted the freezing order because there was neither a sufficient link of the matter to Switzerland nor a recognition of a debt. X then issued civil proceedings in the Swiss courts seeking compensation for the losses caused by the freezing order. X based its claim on Swiss statutory enforcement law. Before the Swiss civil court decided on X's claim, the ICC tribunal in the parallel arbitral proceedings dismissed X's counterclaim for breach of the arbitration agreement.

The Swiss civil court dismissed X's claim as inadmissible. It held that it lacked jurisdiction due to the arbitration agreement and that the arbitral tribunal's decision on X's counterclaim had the effect of res judicata. The Swiss court of appeal upheld the decision, dismissing the claim, but on partially different grounds. The court of appeal was inclined to hold that the Swiss courts had jurisdiction for X's claim for damages. According to the court of appeal, X's claim for obtaining an unjustified freezing order constituted a tort claim, and the arbitration agreement governed tort claims only if the tort consisted of conduct in breach of the contract. The court of appeal found that there was no connection between the contract and the claim for obtaining an unjustified freezing order: the freezing order had been unjustified because the requirement of a connection with Switzerland or of a recognition of a debt was not satisfied, and not for reasons concerning the parties' contract. However, the court of appeal left the question of jurisdiction undecided because it dismissed X's claim based on the effect of res judicata of the arbitral tribunal's award, dismissing X's counterclaim.

The Supreme Court annulled the decision and referred the matter back to the court of appeal. It held that the decision of the court of appeal did not contain the necessary determinations of fact and the legal reasons as required by law. Therefore, the Supreme Court was not in a position to examine whether the court of appeal had applied the law correctly. However, the Supreme Court did clarify the requirements of res judicata of a foreign arbitral award, which the court of appeal now has to examine. The Supreme Court held that a Swiss court is only bound by the res judicata effect of an arbitral award rendered abroad if the arbitral award can be recognised in Switzerland. The requirements of recognition of a foreign arbitral award are governed by the New York Convention (NYC). Thus, the party invoking the res judicata effect of the arbitral award has to present the documents required by Article IV NYC, and the opposing party can invoke the grounds for non-recognition contained in Article V NYC. In this case, the Supreme Court held that the court of appeal had to examine, in particular, Article V(1)(c) NYC, according to which recognition of an arbitral award can be refused if the award deals with a dispute not falling under the arbitration agreement. The court of appeal was thus wrong in leaving the question of the arbitral tribunal's jurisdiction undecided.

If the requirements of recognition of the foreign arbitral award are fulfilled, the award has to be treated like an award rendered in Switzerland. The Supreme Court held that the award has the effect of res judicata only to the extent provided by both the foreign and Swiss procedural law. Thus, in the present case, the court of appeal has to examine under Dutch and Swiss law whether the Dutch award has a res judicata effect on X's claim for damages before the Swiss courts. Under Swiss law, the award has a res judicata effect if the content of the claims is identical, that is, if the claims are based on the same set of facts and on the same legal grounds. The Supreme Court did not decide whether these requirements were fulfilled, but referred the matter back to the court of appeal to decide.

The decision of the Supreme Court clarifies the requirements that a Swiss court has to examine when the defendant invokes the res judicata effect of a foreign arbitral award. It clarifies in particular that a foreign award can have a res judicata effect in Switzerland only if it can be recognised under the NYC. The decision provides valuable guidance for counsel who are faced with a res judicata situation.

One important requirement of the recognition of a foreign arbitral award is that the arbitral tribunal had jurisdiction to decide on the dispute. The decision of the Supreme Court indirectly concerns the question of whether an arbitral tribunal has jurisdiction to decide on claims for compensation of losses caused by state court proceedings that were commenced in breach of the arbitration agreement. As reported previously (see Legal update, Swiss Federal Supreme Court confirms award granting damages in principle for breach of an arbitration clause), the Supreme Court has considered this question before. It dismissed an appeal against an award of an arbitral tribunal with a seat in Switzerland that had accepted jurisdiction over a request for a declaration that damages were owed for breach of an arbitration clause. The Supreme Court did not directly decide on the question of jurisdiction of the arbitral tribunal for procedural reasons. However, it held that the tribunal's decision on damages did not violate Swiss public policy.

In the present case, the Supreme Court held that the court of appeal will have to decide, amongst other issues, whether the arbitral tribunal had jurisdiction to decide on X's counterclaim for damages and whether the claims are identical. With regard to the question of jurisdiction, it should be noted that it is X who filed the present appeal to the Supreme Court and who resists the res judicata effect of the arbitral tribunal's decision on his counterclaim. It would seem that X could not, without behaving contradictorily, argue successfully that the arbitral tribunal did not have jurisdiction to decide on his counterclaim as X can be deemed to have accepted this jurisdiction by bringing his counterclaim before the arbitral tribunal.

4A_508/2010 (14.02.2011).