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Urs Boller
Matthias Leemann
In a recent decision, the Swiss Federal Supreme Court dealt with an application for revision against an arbitral award. The applicant had claimed that one of the arbitrators had represented the counterparty at the same time in proceedings in England. As in its recent decision in the Sun Yang case, the Federal Supreme Court confirmed that in arbitration proceedings the parties are subject to a duty to enquire into potential grounds for challenge of arbitrators and must present such grounds for challenge without delay. However, the scope and depth of this duty remain difficult to assess.
The Decision
The decision of the Federal Supreme Court discussed here concerns an application for revision against an arbitral award from 2014. In those arbitration proceedings the respondent had nominated an English barrister as its party appointed arbitrator. In its award of 23 December 2014, the Zurich-seated arbitral tribunal upheld the claimant’s claim and ordered the respondent to pay the amount claimed.
Several years later, bankruptcy proceedings were opened against the respondent. The bankruptcy estate assigned the respondent’s right to request a revision of the arbitral award to the later applicant for revision pursuant to art. 260 of the Swiss Debt Collection and Bankruptcy Act. Subsequently, in February 2022, the applicant filed a request for revision with the Swiss Federal Supreme Court, invoking the subsequent discovery of a ground for challenge (art. 190a para. 1 lit. c of the Swiss Private International Law Act (PILA)).
Specifically, the applicant requested that the award be set aside and the dispute be referred back to the arbitral tribunal (to be newly constituted in whole or in part) for a new decision. The applicant requested a determination that the arbitrator appointed by the respondent at that time was subject to a conflict of interest and may no longer be part of the arbitral tribunal. The applicant justified its request for revision by stating that it had discovered circumstances that gave rise to justified doubts as to the arbitrator’s independence and impartiality.
According to art. 190a para. 1 lit. c PILA, a party may request a revision of an arbitral award if a ground for challenge under art. 180 para. 1 lit. c IPRG was not discovered until after the arbitral proceedings had been concluded, despite due diligence, and provided that no other remedy is available.
The Federal Supreme Court first explained that the revised PILA, which entered into force on 1 January 2021, contained its own provisions on the revision of arbitral awards in art. 190a et seq., and that these provisions apply to revision proceedings filed after 1 January 2021, even if the arbitral award had been issued earlier.
The Federal Supreme Court further explained that a party must invoke a ground for challenge against an arbitrator as soon as it becomes aware of it. This rule applies not only to grounds for challenge of which the party was actually aware, but also to those of which it could have become aware had it exercised due diligence. In this context, a party’s decision to remain unaware may, depending on the individual case, be regarded as an abusive conduct. According to the principle of good faith, the objection against an improper constitution of the arbitral tribunal is forfeited if it is not raised immediately.
For these reasons, an application for revision on the ground of an arbitrator’s alleged partiality can only be considered if the applicant, despite having exercised due diligence, was not able to discover the facts giving rise to the challenge already during the arbitral proceedings. Depending on the circumstances of the individual case, the parties are under a duty to make enquiries – in particular on the internet – in order to identify elements that could reveal a possible risk of dependence or partiality of an arbitrator. The PILA therefore not only requires that a ground for challenge under art. 180 para. 1 lit. c has only been discovered after the termination of the arbitral proceedings, but also that the applicant demonstrates that despite having paid due attention it was not possible for him to discover and invoke the ground for challenge already in the arbitral proceedings.
The applicant submitted that in the arbitrator’s CV, which had been provided at the beginning of the arbitral proceedings, there was no indication of a possible connection between the arbitrator and the counterparty. Neither had the arbitrator in the context of his nomination disclosed any possible conflict of interest. However, according to the applicant, there were “clear indications” that at the time there existed a close relationship between the arbitrator and the claimant. In his current CV, the arbitrator listed, among other things, proceedings before the High Court of England and Wales that had lasted from August 2013 to February 2015 and involved the claimant. Although the written briefs that the claimant had filed in those proceedings were not signed by the arbitrator himself, the case listed in the arbitrator’s CV gave reason to assume that indeed he had been involved in those proceedings supporting the claimant at least in an advisory role. Furthermore, it could be inferred from the High Court’s judgement that in addition arbitration proceedings between the same parties had been brought before the London Court of International Arbitration (LCIA). Based on information provided by the arbitrator in his CV – although the parties were not named – it could be inferred that he had represented the claimant also in the LCIA arbitration. In addition, it emerged from online databases that there existed close links between the arbitrator or his chamber and the respondent’s legal representatives (solicitors) in the disputed arbitration in Switzerland.
The Federal Supreme Court found that, based on the statements in the application for revision, it was not clear as to why the alleged connections between the arbitrator or his chamber and the claimant’s solicitors could not have been asserted already during the arbitration proceedings if due diligence had been exercised. The Court pointed out that the applicant itself had argued that the information it brought forward could be obtained from publicly available databases on English court decisions. Hence, it would have been obvious to make enquiries about previous legal representation already during the arbitration proceedings. It was not acceptable to bring forward such grounds for a challenge only several years later with a request for revision.
The Court further pointed out that the applicant itself submitted that in November 2013 the arbitrator asked respondent’s counsel by email whether he could represent the claimant in a matter unrelated to the arbitration. The respondent, too, had been informed of this. Respondent’s counsel then stated that the respondent was “not happy” that the arbitrator would take instructions from the claimant while at the same time he would act as a co-arbitrator in the arbitration proceedings in question. Subsequently, Respondent’s counsel sent to the respondent an email regarding the Swiss Rules and the possibility of challenging the arbitrator. It was therefore clear for the respondent that a conflict of interest existed or could arise. The respondent was therefore under a duty to clarify in more detail the arbitrator’s conduct and his relationship with the parties and, if necessary, to submit an application for challenge. The Court came to the conclusion that the respondent had failed to demonstrate that despite having exercised due diligence, the circumstances giving rise to a potential challenge had been discovered only after termination of the arbitration proceedings. Accordingly, the application for revision was dismissed.
Discussion
Already in the 2021 decision 4A_318/2020 (Sun Yang case), the Federal Supreme Court dealt with an application for revision concerning an arbitrator who had published problematic tweets which were discovered subsequently.
In the Sun Yang case, the Federal Supreme Court held that despite the arbitrator’s statement of independence, a party must make enquiries as to the independence of an arbitrator, but not to an unlimited extent. The most important internet search engines should be used and other sources should be consulted, such as the websites of prominent arbitral institutions, the parties, their legal representatives and the law firms involved. Social media accounts should also be checked, if necessary; however, a party cannot be expected to be aware of tweets which a frequently tweeting arbitrator had published almost ten months ago.
The decision discussed here is in line with the Sun Yang case. The Court’s finding that public databases on English court decisions should be consulted in the case of an English arbitrator matches the Court’s conclusion in the Sun Yang case, according to which the websites of the most important arbitral institutions should be checked. However, it should be noted that the LCIA, unlike the CAS, does not publish arbitrator mandates. It also seems unclear as to how the respondent should have been able to discover the arbitrator’s involvement before the English High Court, particularly as the arbitrator had not even signed the submissions and apparently published corresponding references only later in his CVs. Presumably, the decisive factor in this case was that even though the arbitrator had informed the respondent’s counsel by email that he was intending to represent the claimant in an unrelated matter, the respondent neither objected nor raised a challenge.
It remains unclear how deep and over what time span clarifications and enquiries have to be made. According to the above-mentioned decisions, in-depth investigations are recommended, in particular with the larger arbitral institutions and by using databases from the jurisdiction in which the arbitrator in question is primarily active. It is confirmed and certain that immediate action must be taken if grounds for challenge become known, otherwise a request for revision will remain unsuccessful.
