Article 192 of the Private International Law Act (PILA) allows parties not domiciled in Switzerland to "by an express statement in the arbitration agreement or by a subsequent written agreement, waive fully the action for annulment."

A partnership of brothers A and B made a fortune in the trade of metals through intermediary companies of group V. After their relationship soured, in 2000, they decided to dissolve their partnership. The dissolution process was intricate and rendered more complicated by the fact that certain entities within V were held by a Bahamas trust, run by trustee Y. Anthony Julius was a London attorney and long-time acquaintance and counselor of both brothers. In the past, he had also acted as consultant to several societies within V. Mr. Julius had been involved in previous attempts to resolve differences between the brothers.

In 2004, A purported to transfer certain assets of the Bahamas trust to other trusts controlled by him. Trustee Y subsequently lodged a criminal complaint against A with the Bahamian authorities. To settle their differences, on July 24, 2004, A, B, and Y signed an arbitration agreement. The agreement:

The agreement also provided that as a preliminary step, A would return documents and title transferred from the Bahamas trust to a third party, while Y would transmit a request to close the criminal investigation to the same third party. Mr Julius would then request the third party to deposit that letter with the authorities and to return the trust documents to Y.

The arbitral proceedings triggered a number of disputes, eventually resulting in proceedings brought by A in the English Commercial Court against Mr Julius, X, and Y challenging the validity of the arbitration agreement. The court rejected this action based on the principle of Kompetenz-kompetenz and that decision was upheld on appeal (as discussed in Article, Weissfisch v Julius).

While this action was pending, X also requested that Mr Julius recuse himself for an alleged lack of independence and impartiality. The parties agreed that as a first stage Mr Julius would limit his review of the challenge to the recusal issue. Mr Julius rejected the recusal challenge based on the waiver provision in the arbitration agreement, because he found that X's motion was part of a concerted effort to torpedo the arbitration proceedings, and because X had not acted in a timely manner.

On 14 September 2010, X filed an action with the Swiss Supreme Court. He petitioned, first, for a stay of the action pending Mr Julius' decision on the jurisdictional issue, and in the alternative for an examination of the validity of the arbitration agreement and the waiver provision.

The court questioned whether the petition was admissible at all, given that it was directed against a mere (procedural) decision refusing recusal. However, the Supreme Court did not need to determine the admissibility question and did not decide the merits of A's recusal claim. A's petition was barred by the waiver provision in the arbitration agreement, which was valid under Article 192 PILA.

The Supreme Court dismissed A's argument that the waiver was not valid because his consent was vitiated by coercion and, specifically that he had been forced to sign the arbitration agreement in order to rid himself of an unjustified criminal investigation instigated by Y. The Supreme Court considered this argument to be unconvincing and unsupported by the evidence.

The case raises, but ultimately does not answer, an interesting question: can a confidante serve as arbitrator? The facts of this case are unique in that here, Mr Julius was close to both parties. This would seem to make his role less problematic than if had been the trusted adviser to only one of the parties.

In any event, under Swiss law, the parties are free to waive any and all conflicts of interest. There has been recent discussion in Swiss legal commentary on whether that result should prevail in all cases, and whether, for example, the post-award discovery of grave conflicts of interest should also constitute a grounds for revision of an arbitral award. The issue is, however, not yet settled.

The case also raises but does not answer the interesting procedural question whether the arbitrator's decision on recusal constitutes an "appealable" interim award. The Supreme Court previously held in ATF 4A_210/2008 that a procedural order containing an implicit decision on the tribunal's jurisdiction constitutes to this extent an interim award.

4A_514/2010.