This article was featured in Jus Mundi‘s 2024 Arbitration Year in Review, in collaboration with VYAPs, a yearly collection of articles from jurisdictions all around the globe updating you on arbitration-related developments from the previous year.
THE AUTHOR:
Sumin Jo, Associate at Bonnard Lawson
Challenging International Arbitral Awards in Switzerland
The Swiss Federal Supreme Court (“SFSC”) has the exclusive jurisdiction to review set aside applications of international arbitral awards rendered by arbitral tribunals seated in Switzerland. This mechanism is a central aspect of Switzerland’s arbitration-friendly legal framework, governed primarily by Chapter 12 of the Swiss Private International Law Act (“PILA”). Pursuant to Article 190(2) PILA, international awards can be challenged on limited grounds, such as:
- Improper appointment of the sole arbitrator or improper constitution of the arbitral tribunal (Article 190(2)(a) PILA);
- Incorrect ruling on jurisdiction (Article 190(2)(b) PILA);
- Decision beyond the claims submitted to the arbitral tribunal (ultra petita) or failure to decide a claim (infra petita) (Article 190(2)(c) PILA);
- Violation of the right to be heard or the principle of equal treatment (Article 190(2)(d) PILA); and
- Violation of Swiss public policy (Article 190(2)(e) PILA).
Moreover, although it is not a set aside mechanism per se, the SFSC can revoke an international award through review proceedings under Article 190a PILA. The success rate for overturning international awards on this basis is relatively low in Switzerland—around 7% on average. In 2024, this rate was even lower, with only one successful application among 58 decisions rendered.
This article examines significant 2024 cases that have influenced Switzerland’s arbitration landscape, highlighting key decisions and their implications.
Violation of the Right to Be Heard and the Principle of Equal Treatment (Article 190(2)(d) PILA)
In the case ATF 150 III 238 (4A_603/2023 of 25 March 2024) – the only successful set aside application of 2024 – the SFSC acknowledged a violation of the right to be heard and the principle of equal treatment in the interpretation proceedings of an arbitral award. The case concerned an award issued by the rabbinical arbitral tribunal of Zurich, whose procedure was governed by Jewish law. The award lacked legal reasoning and factual background of the dispute due to the principle of oral proceedings in Jewish procedural law. Following the claimant’s request for an interpretation of the award, the arbitral tribunal issued an interpretative award, without notifying or hearing the respondent. The respondent subsequently filed a set aside application to the SFSC against the interpretive award, invoking a breach of his right to be heard.
In its reasoning, the SFSC first stated that interpretation proceedings under Article 189a(1) PILA must adhere to the same procedural rules as the initial arbitration. This requires that both parties’ right to be heard is respected, even when an interpretive award is rendered on the arbitral tribunal’s own initiative (except in cases where it merely involves clerical corrections). In this case, the SFSC identified a serious violation of the respondent’s rights to be heard and to equal treatment, as the respondent was neither notified of the claimant’s request for interpretation nor given an opportunity to present its position. Notably, the SFSC ruled that when a party is entirely excluded from new proceedings, such as interpretation proceedings, it is not required to prove that the violation materially affected the outcome of the proceedings. This decision underscores the importance of ensuring procedural fairness in interpretation proceedings.
Review of Arbitral Awards and Impartiality of Arbitrators (Article 190a(1)(c) PILA)
Under Article 190a(1)(c) PILA, a party may request a review of an arbitral award if the grounds for disqualification of arbitrators set out in Article 180(1)(c) PILA are discovered only after the conclusion of the proceedings and no other legal remedy is available. In decision 4A_572/2023 of 11 June 2024, related to the Crescent v. NIOC (II) case, the SFSC examined whether an arbitrator’s public statements, made three years after issuing an award and potentially raising doubts about his impartiality, could justify revising the award.
The SFSC ruled that, for revision under Article 190a(1)(c) PILA, only disqualification grounds existing at the time of the award’s issuance are relevant. Events occurring after the award, such as statements made years later, do not meet this requirement. The SFSC further emphasized that the arbitrator’s duty of impartiality ends with the final award’s issuance.
The requesting party argued that the arbitrator’s post-award statements reflected bias predating the award or, at the very least, raised legitimate doubts about his impartiality. The SFSC rejected this argument, stressing that revision is an extraordinary legal remedy with stricter requirements than set aside proceedings, and legitimate doubts alone are insufficient. The SFSC reasoned that arbitrators’ opinions or beliefs may evolve over time, and that allowing post-award events to justify revision would introduce excessive subjectivity and speculation about intent, leaving room for potential abuse. The SFSC also emphasized that the burden of proof lies with the requesting party. Presuming the retroactive existence of the alleged bias at the time of the award’s issuance would unfairly shift this burden to the opposing party, requiring them to prove the contrary.
This decision highlights the importance of temporal limitations in challenging arbitrators’ impartiality. However, whether different timelines – such as, for instance, statements made only a few months (rather than years) after the award’s issuance – might warrant reconsideration remains an open question to be further developed through case law.
Jurisdiction of Arbitral Tribunals (Article 190(2)(b) PILA)
In 2024, the SFSC rendered two significant decisions on arbitral jurisdiction in investment disputes.
The decision ATF 150 III 89 (4A_172/2023 of 11 January 2024) in the AsiaPhos and Norwest v. China case concerned a set aside application against the arbitral tribunal’s denial of jurisdiction. The dispute involved phosphate mining operations conducted by Singaporean companies in China under the China-Singapore (1985) Bilateral Investment Treaty (“BIT”). The dispute resolution clause in the BIT provides for state courts’ jurisdiction for any investment-related disputes, including the issue of legality of expropriation measures, while reserving arbitral jurisdiction for disputes “involving” compensation amounts.
In their set aside application, the Singaporean companies argued for a broader interpretation of the arbitration clause to encompass a review of the legality of expropriation measures. They invoked the principle of effectiveness, particularly given the challenges they had faced in accessing Chinese courts. However, the SFSC rejected this argument, stating that under the interpretation rules of Article 31 of the Vienna Convention on the Law of Treaties 1969 (“VCLT”), the arbitration clause clearly reflected the parties’ intention to grant only limited arbitral jurisdiction. The SFSC emphasized that had the parties intended a broader jurisdiction, they would have explicitly provided for it. Consequently, the principle of effectiveness, as applied in commercial arbitration, cannot be used to override the jurisdiction of state courts in the absence of an exclusive arbitral jurisdiction clause. Furthermore, the SFSC held that difficulties in accessing Chinese courts were irrelevant to the interpretation of the arbitration clause.
This decision illustrates the scope of the principle of effectiveness in investment arbitration and the potential limitations of investor protection under the BITs that grant jurisdiction to both state courts and arbitral tribunals. It also underscores the challenges investors may encounter when navigating dual jurisdiction frameworks.
In the landmark decision ATF 150 III 280 (4A_244/2023 of 3 April 2024) regarding the EDF v. Spain case, the SFSC diverged from the case law of the Court of Justice of the European Union (“CJEU”), in particular in the Achmea v. Slovakia and Komstroy v. Moldova rulings, which held that intra-EU arbitration under Article 26 of the Energy Charter Treaty (1994) (“ECT”) is incompatible with EU law, notably the Treaty on the Functioning of the European Union (“TFUE”). The case concerned a French company’s arbitration claim against Spain over regulatory changes affecting its renewable energy investments. The arbitral award partially upheld the claim, prompting Spain to file a set aside application to the SFSC, challenging the tribunal’s jurisdiction.
In response to Spain’s arguments on the incompatibility of Article 26 ECT with EU law based on CJEU rulings, the SFSC refused to consider CJEU case law, stating that, since Switzerland is not an EU member state, CJEU case law is not binding on Swiss courts. The SFSC also held that the ECT, as a multilateral treaty, cannot be interpreted solely through the lens of EU law. Relying on Article 31 VCLT, the SFSC determined that the term “unconditional consent” to arbitration under Article 26 ECT should be construed to encompass intra-EU disputes. Spain further argued that, due to conflicting provisions between the TFUE and the ECT, its consent to arbitration does not extend to intra-EU disputes. However, the SFSC rejected this argument, emphasizing that as the TFEU and the ECT regulate distinct areas – the TFUE governs the functioning of the EU, while the ECT provides a legal framework for the energy sector – the TFUE cannot override the ECT. Additionally, the SFSC stated that Article 16 ECT safeguards the treaty’s arbitration framework and investors’ right to seek the most favourable dispute resolution mechanism by preventing any subsequent agreement from being interpreted in a way that derogates from the ECT. Finally, the SFSC stressed that the ECT must be interpreted uniformly for all contracting parties, meaning that Spain cannot limit its consent to arbitration by excluding intra-EU disputes. The set aside application was therefore dismissed.
This landmark decision demonstrates Switzerland’s continued autonomy in arbitration matters, strengthening its reputation as a neutral venue. It also reinforces Switzerland’s pro-arbitration stance, positioning it as a favourable seat for intra-EU investment arbitration, though its implications for EU-Swiss relations warrant monitoring. Similar issues have recently arisen in the sports field regarding the incompatibility of sports regulations and CAS arbitration mechanism with EU competition law (See CJEU’s rulings inthe ESL v. FIFA and UEFA, Judgment C-333/21 of 21 December 2023, ISU v. European Commission, Judgment C-124/21 P of 21 December 2023 and FIFA v. Lassana Diarra, Judgment C-650/22 of 4 October 2024 which reaffirm the primacy of EU law).
Key Takeaways
The SFSC’s 2024 case law demonstrates Switzerland’s commitment to maintaining a robust arbitration framework while balancing procedural fairness, legal certainty, and investor protection. Its rulings clarify the procedural rules for interpretation proceedings, establish temporal limits on challenging arbitrators’ impartiality, and highlight a cautious approach to interpreting arbitration clauses in investment treaties. Moreover, the SFSC’s affirmation of Switzerland’s independence from EU law in arbitration matters strengthens its position as a leading jurisdiction for international arbitration, despite potential challenges for EU-Swiss relations in the long term across various types of disputes, including commercial, investment and sports arbitration. As Switzerland continues to adapt its legal framework to emerging challenges, its pro-arbitration stance ensures its competitiveness in the global arbitration landscape.
ABOUT THE AUTHOR
Sumin Jo is a Swiss-qualified attorney with background experience working for several United Nations agencies. She is an associate at Bonnard Lawson in Geneva, Switzerland, where
her practice focuses on international commercial and sports arbitration. She regularly serves as secretary to arbitral tribunals, and represents clients before Swiss courts, including in enforcement and set aside proceedings of arbitral awards. Fluent in English, French and Korean, Sumin is also a foreign legal correspondent for Korea Law Times, Korea’s leading legal journal.
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