In its decision dated 6 January 2020, the Swiss Federal Supreme Court (SFSC) decided that an arbitration clause included in an agreement specifically regulating quality assurance encompasses all contractual disputes between the parties if the agreement’s wording and the circumstances support such broad interpretation (Case No. 4A_342/2019 (in German)).
The reported dispute was preceded by respondent winning a tender procedure for the supply of thin-film transistor displays to claimant. During the negotiations of the supply contract, the parties signed a contract named “Quality Assurance Agreement” (QAA). The QAA, as its name suggests, contained specific provisions on quality assurance and corporate social responsibility. Moreover, the QAA contained the following dispute resolution clause:
“If all parties in a dispute have their headquarters in Germany, the sole place of jurisdiction for any contract dispute is Stuttgart. […] In all other cases, contract disputes shall be settled definitively in accordance with the Rules of Arbitration of the International Chamber of Commerce […]”.
The parties also negotiated a so-called corporate agreement and the general terms and conditions for the supply, but they could not reach agreement and the documents were not signed. Ultimately, respondent informed claimant that it intends to close its display business and that respondent must thus abandon the project. Claimant thereupon initiated an ICC arbitration against respondent and sued for damages. Respondent contested the jurisdiction of the arbitral tribunal because, according to respondent’s interpretation, the arbitration clause in the QAA encompasses only disputes in connection with such agreement; claims relating to non-performance of the supply would thus not fall under the arbitration clause. The tribunal affirmed its jurisdiction with a partial award. Respondent filed an appeal against this decision with the SFSC.
The SFSC recalled in its decision the principles applicable for the determination of the objective scope of an arbitration agreement under Swiss law: the decisive element of an arbitration agreement is the parties’ expression of their will to have certain disputes decided by an arbitral tribunal. The interpretation of an arbitration agreement follows then the principles generally applicable to the interpretation of private contracts. Accordingly, the decisive factor is first and foremost the corresponding actual will of the parties.
If no actual corresponding will of the parties is established regarding the arbitration agreement, the latter must be interpreted in accordance with the principle of trust. According to such principle, the presumed will of the parties must be determined in such a way as it could and had to be understood in good faith by the respective recipient of the declaration.
On one hand, according to the SFSC’s case law, a waiver to state court jurisdiction severely limits the possibility to file an appeal and can thus not be assumed lightly. A restrictive interpretation is therefore required in cases of doubt.
On the other hand, if the interpretation of the arbitration clause clearly shows that the parties wanted to subject the dispute to arbitration, but there are only differences regarding the conduct of the arbitration proceedings, the utility principle generally applies: in such case, a contractual understanding should be sought that allows the arbitration agreement to remain in existence.
The SFSC analyzed the findings of the partial award and decided that respondent could not understand the arbitration clause in the QAA as covering only specific aspects of the supply relationship (i.e. quality assurance and corporate social responsibility) according the principle of good faith. To the contrary, based on the following facts, the SFSC held that the arbitration clause should apply to the entire supply relationship pursuant to the utility principle:
- the arbitration clause in the QAA explicitly embraces “contract disputes”. Moreover, “contract disputes” was not defined in the QAA and the arbitration clause, unlike other provisions of the QAA, did not contain a limitation to disputes arising “out of or in connection with ‘this Agreement'”;
- respondent suggested to replace a dispute resolution clause in the draft general terms and conditions – providing for Stuttgart courts as competent forum – with an ICC arbitration clause during negotiations;
- the draft corporate agreement provided for an ICC arbitration clause;
- one of the QAA’s preambles reads: “this agreement (and with it the ICC arbitration clause contained in Art. 9 (3)) forms part of the supply agreement with [claimant] and is binding for business relationships between [respondent] and [claimant]”. The SFSC especially emphasized the broad wording of the preamble and its general extension to “business relationships”;
- had it been the parties’ intention that the QAA, including the arbitration clause, should only take effect after the final execution of all contracts, they would have executed all agreements at the same time, or at least on condition that all other contracts would also be concluded.
According to the SFSC, the arbitral tribunal correctly interpreted the arbitration agreement in the QAA and rightly held that the term “contract disputes” used in the arbitration clause had to be understood to embrace all disputes relating to the supply relationship in question. This would include also disputes concerning the existence of an obligation to supply. Consequently, the SFSC dismissed the appeal.
