A dispute arose between two parties concerning the construction of a small interior timber structure. The principal, company X, claimed that the structure was flawed and that the contractor, company Y, was liable. Company Y attributed the flaws to the nature of the materials used and denied liability. With a view to resolving the dispute, the parties entered into an agreement providing that a Mr. Z should render a decision as "sole arbitrator", on the issues (inter alia) of whether the structure was flawed and, if so, whether Y was liable and for what amount. Mr. Z handed down a decision which contained no operative part and no ruling on costs. Company X petitioned the Supreme Court to have the decision set aside.

The two parties had their seat in Switzerland and the seat of the arbitration was also in Switzerland. The arbitration was, therefore, domestic. The Supreme Court first determined that the requirements for appeal were in this case governed by Articles 389-395 of the Swiss Code of Civil Procedure (CCP), which entered into force on 1 January 2011.

The arbitration agreement contained a clause according to which the parties undertook not to appeal Mr. Z's decision to the Supreme Court. The Supreme Court indicated that this clause was inoperative, as the rules applicable to domestic arbitration (in particular the CCP) did not allow for such an advance waiver of the right to challenge an award.

The Supreme Court then examined the nature of the decision rendered by Mr. Z in order to determine whether it did, in fact, constitute an arbitral award, which has res judicata effect and can be challenged before the Supreme Court, or an expert determination, against which there can be no direct challenge pursuant to the CCP. The court set out the criteria to be taken into consideration when making this determination, namely:

In this case, the Supreme Court found that the terms used by the parties in their agreement ("arbitration agreement" and "sole arbitrator"), as well as the further provisions of the agreement, in particular those governing the procedure to be observed by the "sole arbitrator" and the undertaking not to appeal the decision, all spoke in favour of qualifying Mr. Z's decision as an arbitral award with res judicata effect. While these circumstances were not per se decisive, it was clear that Mr. Z understood his mandate to be that of an arbitrator and that he fulfilled it accordingly.

Although the decision lacked certain characteristic elements of an arbitral award (for example, an operative part and a ruling on costs), this fact was not in itself sufficient to render the award invalid, especially as the parties chose to appoint an arbitrator who was not a lawyer, but rather an expert in the construction business. The minimum requirements of an award, that is, a written and signed document mentioning the names of the parties and setting out the decisions taken by the signatory with regard to the dispute, were fulfilled.

Notwithstanding the above, the Supreme Court rejected the petition to set aside Mr. Z's award, as the grounds invoked by company X did not fall under the limited number of grounds for which a domestic award may be set aside pursuant to Article 393 CCP, or at least not in a manner that was clearly recognisable. The Supreme Court held that it was not its function to try to categorise the arguments brought forward by the petitioner under one or several of the grounds set out in Article 393 CCP.

This is the first case to be heard by the Supreme Court under the provisions of the new CCP on domestic arbitration. The court's obiter finding that parties cannot waive the right to challenge a domestic award in advance provides useful clarification, as the legislator did not expressly include a provision to this effect in the CCP.

The qualification of a decision as an expert determination or an arbitral award is not always easy to make in practice. The rather vague nature of the criteria applied by the Supreme Court means that this qualification must always be undertaken on a case by case basis, having regard to all relevant circumstances. This decision nevertheless provides a useful and concrete example, showing that it is the parties' and the expert or arbitrator's intention which must prevail over other considerations. The findings of the Supreme Court in this respect may apply both in domestic and international arbitration.

Moreover, the Supreme Court once again demonstrated that parties must fulfill some fairly stringent requirements when setting out their arguments in support of a petition to set aside an arbitral award, since the court will not attempt to determine whether a poorly presented or unclear argument could be subsumed under a ground for setting aside. This holds equally true for international arbitration.

4A_254/2011.