Valid waiver despite lack of technical accuracy of the wording
The case involved a 2006 contract for the delivery of a piece of machinery, which failed the final acceptance test upon delivery in 2007.
While the summary of the facts does not indicate which law governed the contract, there was an ICC arbitration clause with seat in Zürich and in October 2013, arbitrator Gabriel Simon upheld the claim and rejected the counterclaim.
Furthermore the contract contained the following wording: “neither party shall seek recourse to a law court nor other authorities to appeal for revision of this decision”. The contract had not been written by or with the assistance of practising lawyers.
The issue was therefore whether or not the somewhat lackadaisical wording of the waiver met the requirements of Swiss case law and the Court answered in the affirmative, reiterating its often expressed view that a waiver must be clear enough to include an unmistakable renunciation to appeal the award to the Federal Tribunal.
Judgment of April 3, 2014
First Civil Law Court
Federal Judge Klett (Mrs.), Presiding
Federal Judge Kolly
Federal Judge Hohl (Mrs.)
Federal Judge Kiss (Mrs.)
Federal Judge Niquille (Mrs.)
Clerk of the Court: Hurni
Represented by Mr. Philipp Groz and Mrs. Olivia Furter,
Represented by Mr. Tobias Zuberbühler and Dr. Michael Lazopoulos,
X.________ GmbH (Appellant and Defendant in the arbitration) is a corporation seated in A.________ [name of city omitted].
Y.________ Ltd. (Respondent and Claimant in the arbitration) is a corporation seated in B.________ [name of city omitted].
On the basis of a document described as “contract 2006 – 160”, X.________ GmbH delivered and installed a machine in the purchaser’s plan in August 2007. Thereafter, the machine failed the so-called “final acceptance test” and a dispute arose between the parties.
Based on the arbitration clause in §13 of the “contract 2006 – 160”, Y.________ Ltd. started arbitration proceedings in the International Chamber of Commerce (ICC) against X.________ GmbH on April 25, 2012.
The Claimant sought an amount of EUR 732’780 with interest from the Defendant while the Defendant counterclaimed for an amount of EUR 70’000.
In an arbitral award of October 10, 2013, the Sole Arbitrator sitting in Zürich upheld the claim and rejected the counterclaim.
In a civil law appeal, X.________ GmbH submits that the Federal Tribunal should annul the arbitral award of October 10, 2013, in ICC case 18671/GFG entirely.
Y.________ Ltd. submits in its brief that the appeal should be rejected if the matter is capable of appeal. The Arbitral Tribunal did not state its position.
According to Art. 54(1) BGG,2 the judgment of the Federal Tribunal is issued in an official language,3 as a rule in the language of the decision under appeal. When the decision is written in another language, the Federal Tribunal uses the official language resorted to by the parties. The award under appeal is written in English. As this is not an official language, the judgment of the Federal Tribunal shall be issued in the language of the appeal in accordance with practice.
In the field of international arbitration, a civil law appeal is allowed under the requirements of Art. 190-192 PILA4 (SR 291) (Art. 77(1)(a) BGG). The seat of the Arbitral Tribunal is in Zürich. At the relevant point in time, the parties had their seat outside Switzerland. As they did not opt out of the provisions of Chapter 12 PILA in writing, they are applicable (Art. 176(1) and (2) PILA).
The Respondent argues that the parties validly opted out of any legal recourse in the arbitration clause and that the matter is therefore not capable of appeal.
When none of the parties has its domicile, its habitual residence, or a branch in Switzerland, as is the case here, they can opt out of any recourse against the arbitral awards according to Art. 192(1) PILA by way of an explicit declaration in the arbitration clause or in a subsequent written agreement. According to the case law of the Federal Tribunal, the declaration must reflect the unmistakable will of the parties to avail themselves of that opportunity within the meaning of Art. 192(1) PILA and to opt out of the recourse to the Federal Tribunal against the international arbitral award. Whether or not this is the case must be determined by interpretation of the arbitration agreement at hand (see BGE 133 III 235 at 4.3.1, p. 240 f.; 131 III 173 at 4.2, particularly at 188.8.131.52, p. 177 ff,; both with references).
The requirement that the parties have no territorial connection with Switzerland is not disputed in the case at hand. The only issue to be examined is whether or not they validly opted out of an appeal against the arbitral award.
The arbitration clause in §13 of the “contract 2006 – 160” reads as follows:
13. Arbitration and Applicable Law
13.1 All disputes in connection with this contract or the execution thereof shall be settled through friendly negotiations. In case no settlement can be reached, the disputes shall be finally settled under the rules of conciliation and arbitration of the international chamber of commerce by one or more arbitrators appointed in accordance with the rules.
Arbitration shall take place in Zurich (Switzerland) and the proceedings shall be in English language.
13.2 The decision of the arbitration committee shall be final and binding upon both parties; neither party shall seek recourse to a law court nor other authorities to appeal for revision of this decision. Arbitration fees and other costs related shall be borne by the losing party.5
3.3.1. The Respondent takes the view that the declaration in the arbitration agreement expressed the clear and explicit common will of the parties to opt out of any recourse against the arbitral award. As so the wording of the waiver, it must be taken into account that none of the parties comes from an English-speaking area. The use of the word “revision” suggests that the parties wanted to waive any extraordinary recourse. At least the Appellant, which is domiciled in Germany where the extraordinary legal recourse of revision is known, expressed in this way that it wanted to waive not only the ordinary but also all extraordinary legal remedies. Insofar as the parties waived in their common declaration not only any recourse to the state courts against the arbitral award but also any possibility of review by other instances or bodies, they reinforced their common agreement to waive any possible (judicial or other) legal remedy or review possibility.
3.3.2. The Appellant argues to the contrary that the wording in §13.2 whereby “neither party shall seek recourse to a law court nor other authorities”6 is too broad and therefore does not constitute a legally valid waiver. Nor is a valid waiver found in the second part of §13.2 (“shall seek recourse […] to appeal for revision of this decision”7) because the expression “to appeal for revision” is unclear and ambiguous. The concept “appeal for revision” should be understood, according to the Appellant’s opinion, as meaning that the body where recourse is sought could alter and/or correct the arbitral award and therefore had full power of review. While not totally excluded, it appears rather improbable that the parties would have wanted to exclude only the legal recourse of revision. A holistic assessment does not clarify if, through the wording of the clause, the parties merely wanted to waive ordinary legal remedies (with full power of review) or if the waiver (also) included the appeal to the Federal Tribunal within the meaning of Art. 190 PILA. The additional wording “nor other authorities” also speaks against the latter as it would make no sense in connection with Art. 190 PILA.
The Appellant’s argument is not persuasive. The wording “neither party shall seek recourse to a law court nor other authorities to appeal for revision of this decision”8 can only be understood in good faith as meaning that the parties wanted to opt out of any appeal to a state body to review the arbitral award. That the concept “appeal for revision” would have to be understood as meaning that the body seized of a recourse could correct the award and therefore have full power of judicial review makes absolutely no sense at all. The combination of the concepts “recourse,” “appeal,” and “revision” in the same sentence does lead to the conclusion that legal concepts were not used in their technical meaning and the Appellant sees an ambiguity there or even a contradiction. On close examination, however, the expression “neither party shall seek recourse to a law court […] to appeal for revision” does express the clear will of the parties to exclude any legal remedy or legal recourse to any state bodies against the arbitral award (“of this decision”) and therefore also to waive appeal to the Federal Tribunal pursuant to Art. 190 PILA. Despite the use of various legal concepts (“recourse,” “appeal,” “revision”), the will is not ambiguous but rather clear.
The matter is therefore not capable of appeal due to a valid waiver within the meaning of Art. 192(1) PILA.
In such an outcome of the proceedings, the Appellant must pay the cost of the federal proceedings and compensate its opponent (Art. 66(1) and Art. 68(2) BGG).
Therefore the Federal Tribunal Pronounces:
The matteris not capable of appeal.
The judicial costs of CHF 15’000 shall be paid by the Appellant.
The Appellant shall pay CHF 17’000 to the Respondent for the federal judicial proceedings.
This judgment shall be notified in writing to the parties and to the ICC Arbitral Tribunal.
Lausanne, April 3, 2014
In the name of the First Civil Law Court of the Swiss Federal Tribunal
Presiding Judge: Clerk:
Klett (Mrs.) Hurni
- 1. Translator’s Note: Quote as X.________ GmbH v. Y.________ Ltd., 4A_577/2013. The original decision is in German. The full text is available on the website of the Federal Tribunal, www.bger.ch.
- 2. Translator’s Note: BGG is the German abbreviation for the Federal Statute of June 17, 2005 organizing the Federal Tribunal, RS 173.110.
- 3. Translator’s Note: The official languages of Switzerland are German, French and Italian.
- 4. Translator’s Note: PILA is the most commonly used English abbreviation for the Federal Statute on International Private Law of December 18, 1987, RS 291.
- 5. Translator’s Note: In English in the original text.
- 6. Translator’s Note: In English in the original text.
- 7. Translator’s Note: In English in the original text.
- 8. Translator’s Note: In English in the original text.