On 7 August 2024, the Swiss Federal Supreme Court (“SFSC”) deliberated on the courts interpretation of an award by an arbitral tribunal seated in Switzerland (case no. 4A_34/2024 [in German]).
Factual background
The dispute at stake originated between a Dutch company (the claimant and subsequently appellant before the SFSC proceedings) and a German company (the respondent and defendant before the SFSC proceedings) concerning a 1985 agreement for the sale of Dutch natural gas.
Over time, the parties regularly agreed on contractual amendments. They also validly entered into an arbitration agreement which referred any dispute to settlement pursuant to the United Nations Commission on International Trade Law Arbitration Rules (“UNCITRAL”) with Zurich as seat of the arbitral tribunal. Subsequent to numerous issues and disagreements, the Dutch company initiated arbitration proceedings in Switzerland.
Upon issuance of the arbitral tribunal’s award, the claimant filed an appeal with the SFSC, arguing – in essence – that the arbitral tribunal had first misinterpreted the underlying contract and then applied the wrong findings.
SFSC is bound by the findings of fact in the challenged arbitral award
Swiss law provides only one level of challenge in international arbitration matters, namely before the SFSC (Art. 186(1) of the Private International Law Act [“PILA”]). The grounds for setting aside an award are narrowly defined and exhaustive (Art. 190(2) PILA). The SFSC cannot correct or supplement the arbitral tribunal’s findings of fact, even if they are manifestly incorrect or based on a legal violation. An anticipated assessment of the facts by an international arbitral tribunal may be reviewed in setting-aside proceedings only from the limited perspective of a violation of public policy.
Consequently, in the case at hand, the SFSC was unable to determine whether the alleged misinterpretation of the contract and inconsistent application actually occurred.
Concluding remarks regarding challenging arbitral awards in Switzerland
It is important to emphasise that arbitration is a prevalent and beneficial method for resolving cross-border disputes. However, parties should be aware that this typically efficient method of dispute resolution comes with stricter requirements for appeals. Therefore, it is paramount for the parties to comprehend and effectively manage these constraints to ensure the optimal efficiency and benefits of arbitration.
