Swiss Supreme Court applies strict approach to three setting aside petitions

Practical Law Legal Update 7-505-9765 (Approx. 4 pages)

Swiss Supreme Court applies strict approach to three setting aside petitions

Background

Article 190(2) of the Private International Law Act (PILA) allows setting aside petitions based on, among other grounds:

"(c) if the Arbitral Tribunal's decision went beyond the claims submitted to it, or failed to decide one of the items of the claim;(d) if the principle of equal treatment of the parties or the right to be heard was violated;(e) if the award is incompatible with public policy."

Case 1

In a decision dated 23 February 2011 and published on 1 April 2011, a case arose from proceedings before a tribunal constituted at the Court of Arbitration for Sport (CAS). At issue was which of two entities was the legitimate representative national soccer organisation of an African country in the Federation International de Football Association (FIFA). The dispute centered on a general assembly meeting of the old soccer organisation (X) on 15 November 2008, at which a new soccer organisation (Q) was purportedly created. FIFA subsequently recognised Q. X instituted arbitral proceedings against FIFA, demanding that FIFA recognise it and stop collaborating with Q. The CAS tribunal held against X. The Swiss Federal Supreme Court rejected X's setting aside petition, finding no violation of the right to be heard or the principle of equal treatment (Article 190(2)(d) PILA) or a violation of public policy (Article 190(2)(e) PILA). It found that:

The arbitral tribunal evaluated, and rejected, X's allegations as to the validity of the decisions rendered at the 15 November 2008 meeting.
X failed to show which factual allegations, properly introduced in the arbitral proceedings, were meant to be proven by documentary evidence that X alleged the arbitral tribunal ignored.
The arbitral tribunal used different wording ("apparently" and "allegedly") referring to allegations by claimant and by respondent.
The arbitral tribunal's alleged failure to apply, and misapplication of, the applicable law did not constitute an actionable violation of public policy.

Case: 4A_326/2010.

Case 2

In a decision dated 17 February 2011 and published on 29 March 2011, a matter also on review from the CAS pitted claimant X, an Istanbul soccer club, against respondent soccer player A, who contracted to play for X between 2005 and 2009. In 2007, A suffered from injuries and health problems and subsequently was diagnosed as unfit to play in competitive matches. In 2008, after A refused to cooperate with X regarding his further treatment, X filed claims before the FIFA Dispute Resolution Chamber. In the subsequent CAS award, the arbitral tribunal found that A had breached his employment contract, but that the contract was terminated prematurely in April 2008, and that, despite the fact that the contract contained a penalty provision, X suffered no damages as it had paid no salary between May 2008 and May 2009. In particular, in light of the "specificity of sport" (Article 17(1) of the FIFA rules governing player transfers), X had no claim to damages as it had actually saved expenses.

In its lengthy decision, the Supreme Court first rejected various factual and legal arguments styled as mere appellate arguments, and also dismissed allegations that had for the first time been raised before the court. The Supreme Court rejected X's setting aside petition, finding no violation of the ultra or infra petita provision (Article 190(2)(c) PILA), the right to be heard or the principle of equal treatment (Article 190(2)(d) PILA), or of public policy (Article 190(2)(e) PILA). Specifically, it found that:

By rejecting a group of claims, the arbitral tribunal also rejected a particular claim included in such group; the right to be heard did not entitle the claimant to an explanation of an arbitral award; and, in any event, the arbitral tribunal's reasoning reflected an assessment of the rejected claim.
The "specificity of sport" provision of the FIFA transfer rules granted broad discretion, it was at the centre of the dispute, and the claimant had to expect that the arbitral tribunal would resort to it including with respect to the contractual penalty clause. There was no "surprising" application of law.
The arbitral tribunal considered X's argument that A had been able to play soccer in 2009 and 2010 yet nevertheless concluded that A could not have played without exposing himself to major health complications; as such, the arbitral tribunal had not ignored a major factual submission, which, in any event, would not have constituted sufficient grounds for a violation of the right to be heard; the fact that the arbitral tribunal may have made a wrong factual finding was irrelevant, as the right to be heard "does not comprise the right to a correct decision."

Case: 4A_402/2010.

Case 3

In a decision dated 15 March 2011 and published on 4 April 2011, Cayman Island-domiciled X sued company Y for commission under four service contracts in connection with major public works projects awarded to Y in the 1990s. An ICC arbitral tribunal rejected almost all of X's claims as time-barred under the applicable limitation period. X sought to set aside the award under Article 190(2)(e) PILA, alleging that the tribunal had failed to recognise the principle of contractual fidelity (pacta sunt servanda). X essentially argued that the tribunal should have interpreted the provisions relevant to the prescription issue in all four contracts equally. X further argued that the award was intrinsically contradictory. The Supreme Court made short shrift of these allegations, finding that:

This allegation did not put at issue the principle of contractual fidelity (pacta sunt servanda) as defined in Swiss jurisprudence. The arbitral tribunal properly decided that certain claims were time-barred while others were not. In this context, the Supreme Court confirmed once more that the oft-invoked principle of pacta sunt servanda will only lead to an award being set aside if the arbitral tribunal contradicts itself as a result of its own findings regarding the existence or interpretation of a disputed contractual provision.
As the arbitral tribunal had already decided in a series of decisions starting in early 2009 and confirmed the last time in a January 2011 decision (4A_386/2010, discussed in Legal update, Swiss Supreme Court holds that principle of ne bis in idem forms part of public policy), intrinsically inconsistent awards do not constitute a violation of substantive public policy.

Case: 4A_481/2010.

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