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In its decision dated 17 April 2019, the Swiss Federal Supreme Court (SFSC) confirmed for the first time that an arbitration clause may validly bind also a party which had not signed the main contract under the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) (case No. 4A_646/2018 (in German), selected for publication).

The reported dispute originates from a distribution relationship maintained over several years between the parties, a Slovenian and a Swiss company, respectively. The existence of the distribution relationship per se was uncontested between the parties. It was, however, disputed whether the underlying distribution agreement, containing an arbitration clause, had been validly concluded between the parties or only between claimant and a third party (a group company of respondent).

According to the SFSC, it is irrelevant in the case at stake to determine whether the respondent validly entered into the distribution agreement with claimant. The SFSC referred to its settled case law on the form requirements of an arbitration agreement under Article 178 para. 1 Private International Law Act, to hold that a party which continuously intervenes in the performance of a contract containing an arbitration clause accepts also such arbitration clause by implied consent (e.g. generally in 134 III 565 (in French) citing, as examples, the assignment of a claim, the assumption (simple or cumulative) of a debt, the transfer of a contractual relationship or the intervention in the performance of the contract containing the arbitration agreement; in 4A_376/2008 (in Italian) where two contracts (signed on the same day) were closely connected to one another and the parties to the one contract were closely involved also in the negotiation of the other contract containing the arbitration clause; or in 4P.126/2001 (in French) where the non-signatory party had undertaken a financial commitment towards the claimant on behalf of the signing party and had expressly referred to the (main) contract containing the arbitration clause in numerous documents). It follows that the formal requirement of Article 178 para. 1 PILA only applies to the declarations of intent of the (original) parties to the arbitration agreement, while its extension to third parties is governed by the applicable substantive law. The extension of an arbitration agreement to a non-signatory party by its conduct had thus been confirmed already several times – but in an exclusively Swiss law context.

In the present case, however, the formal requirements of the arbitration clause had to be assessed based on Art. II (2) New York Convention and the SFSC thus discussed the interpretation of the said provision. It found, based on scholarly writings, that the requirement “signed by the parties” in Art. II para. 2 means that the arbitration agreement must be signed by the (original) parties at the time the agreement is entered into (i.e. in the sense of “signed by the parties at the time of entering into the contract”). The SFSC thus assumed that the distinction between the formal and substantive validity of an arbitration agreement’s extension to a third party under the New York Convention does not deviate from its own established case law. In conclusion, the SFSC held that the respondent intervened in the performance of the distribution agreement and indicated thus that it had also accepted the arbitration clause contained therein.

Moreover, the claimant contested the validity of the arbitration agreement also because, after the distribution agreement’s expiry, the parties continued to perform their obligations under the agreement for some time. According to the claimant, the prolongation of the arbitration agreement was not compliant with the formal requirements under Art. II (2) New York Convention. The SFSC ruled that the implied extension of the distribution agreement did not lead to a substantive change in the contractual rights and obligations and did not violate any formal requirements for the validity of the arbitration clause under Art. II (2) New York Convention.