In a recent decision published on 18 May 2020, the Swiss Federal Supreme Court (“SFSC”) upheld an arbitral award in which the arbitral tribunal had declined jurisdiction in the absence of a valid arbitration agreement (case no. 4A_418/2019 (in German)).
The reported dispute stems from a trilateral agreement for the construction of a housing project between a Turkish company, an Iranian state company and an Iranian state bank. The trilateral agreement contained an arbitration clause in Article 4. The arbitration clause mirrored the dispute resolution clause in the bilateral Investment Agreement between Turkey and Iran. The arbitration clause referred any dispute to settlement pursuant to the United Nations Commission on International Trade Law Arbitration Rules (“UNCITRAL”).
Subsequent to numerous issues and disagreements, the Turkish company, allied with an Iranian subcontractor (claimants), initiated arbitration proceedings against the two state-controlled Iranian parties (respondents). Geneva was the seat of arbitration. Following the respondents’ objection, the arbitral tribunal declined jurisdiction for lack of a valid arbitration agreement. The arbitral tribunal found that the parties to the trilateral agreement did not agree on UNCITRAL arbitration despite the respective arbitration agreement in Article 4 of the trilateral agreement. The arbitral tribunal found – after hearing witness testimony – that it was clear to both parties that the arbitration clause in Article 4 of the trilateral agreement did not apply to disputes arising from the trilateral agreement.
The claimants filed an appeal against this decision with the SFSC.
The parties’ actual intent to arbitrate is not subject to review by the SFSC’s legal review
The SFSC examines from a legal point of view all issues of jurisdiction with unfettered powers of review. The interpretation of the parties’ presumed intent (so-called objective interpretation) is a question of law that the SFSC can review freely. However, the determination of the parties’ actual and common intent (so-called subjective interpretation) is a factual finding and thus not subject to review unless there is a ground for annulment on admissible grounds. As the claimants did not raise any such grounds, the SFSC dismissed the appeal.
The SFSC’s ruling reaffirms its constant practice
When a decision on jurisdiction is challenged, the scope of the review by the SFSC often raises difficulties in practice. The SFSC recalled in this decision that it cannot review factual findings unless the factual findings are challenged on admissible grounds (art. 190(2) Swiss Private International Law Act (“PILA”)), or, by way of exception, if novenas are taken into account. According to the SFSC, this recent decision relies on its repeatedly confirmed case law and there is no reason to deviate from this practice (e.g. Decisions of the SFSC 142 III 239 (233) or 142 III 220 (224)).