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Right to be heard not violated by arbitrator's refusal to hear witness whose evidence anticipated to be irrelevant
Practical Law UK Legal Update 8-519-2655 (Approx. 4 pages)
Right to be heard not violated by arbitrator's refusal to hear witness whose evidence anticipated to be irrelevant
by Practical Law
| Published on 02 May 2012 • Switzerland |
PD Dr. Nathalie Voser (Partner) and Dr. Petra Rihar (Associate), Schellenberg Wittmer (Zurich)
In two German-language decisions both dated 23 January 2012, published on 28 March 2012, the Swiss Supreme Court dismissed the petitions to set aside awards, holding, among other things, that the parties' right to be heard is not violated if an arbitrator refuses to hear a witness because he concluded by way of anticipated assessment of evidence on file that the testimony would be irrelevant to the outcome of the dispute.
Background
Article 190(2)(d) of the Swiss Private International Law Act (PILA) permits an arbitral award to be set aside where "the principle of equal treatment of the parties or the right of the parties to be heard was violated".
Facts
A dispute between parties Y and Z (claimants) and parties U, V, W and X (respondents) was referred to a sole arbitrator in two separate arbitrations under the Swiss Rules. The dispute concerned the same economic issues but partly different companies. The claimants made several detailed requests for information in connection with a mandate entered into with the respondents on 20 May 2006 and terminated by the claimants with immediate effect on 9 April 2010.The respondents requested that the claimants' claim be dismissed and, in the alternative, filed a counterclaim for payment of outstanding fees under the mandate.
In the awards dated 30 June 2011, the sole arbitrator upheld the majority of the claimants' detailed requests for information. The respondents' counterclaim was dismissed without examining the merits (Nichteintreten) because they failed to pay the requested registration fee.
The respondents appealed to the Swiss Supreme Court, requesting that the awards be set aside. They argued, among other things, that the sole arbitrator violated their right to be heard under Article 190(2)(d) PILA by refusing to hear the witness testimony of their witness, M.
Decision
The Supreme Court dismissed the respondents' appeal. It held that the sole arbitrator had put forward valid reasons for not hearing M's testimony. In two procedural orders, the sole arbitrator held that:
- The respondents failed to show that they made their best efforts to submit M's witness statements at the latest with their rebuttal.
- Although it was clear from the respondents' submissions that M was willing to testify, the respondents neither submitted M's witness statements nor showed that such submission was impossible to be obtained despite their best efforts to make the witness statements available.
- M's testimony was inappropriate to prove the alleged facts because M was neither a party to the disputed mandate nor acted as counsel in connection with the mandate, and the respondents failed to show to what extent M was involved in relevant negotiations and the extent to which M's testimony could be relevant when discussing the contractual terms of the mandate.
- The alleged facts were evidenced in other documents (Confirmation of Fiduciary Holdings).
The Supreme Court further held that the anticipated assessment of evidence (antizipierte Beweiswürdigung) by an arbitral tribunal can only be appealed against based on the limited ground of a violation of the public policy (ordre public; see Article 190(2)(e) of the Swiss Private International Law Act), however, the respondents had (rightly) not argued that the sole arbitrator violated public policy by not hearing M's testimony.
Comment
With this decision, the Supreme Court has confirmed its practice that, as before state courts, in arbitration proceedings the right to be heard (which includes the right to present evidence) is not unlimited. An arbitral tribunal may declare the taking of evidence closed and decline to consider further evidence if it:
- Deems the remaining requests for the taking of evidence to relate to allegations of fact which are neither relevant nor material for the outcome of the case.
- Deems such requests to be inappropriate to prove the alleged facts.
- Has already formed its opinion on the basis of the evidence before it and concluded by way of anticipated assessment of evidence that this opinion would not change through further evidence (see also case 4P.23/2006 of 27 March 2006).
Accordingly, when unable to submit a witness statement in time or in accordance with the agreed procedural rules, parties' counsel are well advised to demonstrate that they used their best efforts to make the witness statement available in due time or explain why such submission was not possible. Counsel will also need to show that the witness statement would be appropriate to prove facts relevant and material to the outcome of the case. If they fail to do so, the arbitral tribunal may decide by way of anticipated assessment of evidence not to hear the witness.