Federal Tribunal recalls the elements of a valid arbitration clause

Case information
July 19, 2021
Interest to foreign readers: 
Very interesting
Arbitration clause
Original language: 




Introductory note: 

A.________ and company B.________ negotiated a contract for the sale of helicopters. At the time of signing, B.________’s representatives signed the contract at A.________’s armed forces officers’ club, at which point A.________’s representatives took the contract signed by B.________ so it could be signed by A.________’s head of state (referred to here as ‘His Majesty’). While B.________ never received a signed contract back from A._________, it completed acts in accordance with the contract, such as furnishing a performance bond (accepted by A.________), as did A.________.   


The contractual relationship eventually failed, with A.________ not accepting delivery of the helicopters and B.________ making several attempts for reimbursement. In accordance with the contract, B.________ made a request for arbitration, under the aegis of the ICC. Settlement negotiations were attempted following this, during which representatives of A.________ showed B.________’s lawyers a signed version of the disputed contract. The settlement negotiations failed and a sole arbitrator was appointed, in accordance with the arbitration agreement contained in the contract.


In the arbitration proceedings, A.________ principally claimed that the sole Arbitrator lacked jurisdiction, as there was no valid arbitration agreement between the parties. A.________ claimed His Majesty had never signed the contract with B.________. By an Award on Jurisdiction of February 9, 2021, the Arbitrator found he did, in fact, have jurisdiction over the dispute.


A.________ appealed to the Federal Tribunal, requesting the Award on Jurisdiction be annulled and the Court issue a finding that the sole Arbitrator did not have jurisdiction over the dispute. This was because, it alleged, there was no signed contract and therefore no agreement to arbitrate.


The Federal Tribunal did not concur, and the following points are of note in the decision:


i)                     The Federal Tribunal reiterated that the substantive validity of an arbitration clause is determined by reference to the conditions of the law chosen by the parties, or the lex causeae, or Swiss law (in accordance with Art. 178(2) PILA, in favorem validitatis). As the arbitration agreement is considered a contract in itself, independent of the main contract (unless otherwise agreed), it may not be governed by the same law (and unlawfulness of the main contract does not necessarily affect the arbitration clause). Furthermore, and perhaps most importantly, where an arbitral tribunal has examined the substantive validity of the arbitration agreement and found an intent to arbitrate, this is a factual finding and therefore binding on the Federal Tribunal. (See, in particular, sections 5.3.2 and 5.5.1 of the decision in this respect.)


ii)                    The Federal Tribunal recalled that the formal validity of an arbitration clause does not depend on whether the parties have signed a written document containing an arbitration agreement. Under Art. 178(1) PILA, it is necessary and sufficient that the arbitration agreement is in writing or in any other way that can be proved by a text. The text in question must contain the essential elements of the arbitration agreement, i.e., the identity of the parties, their intention to have recourse to arbitration, and the subject matter of the arbitration proceedings, but Art. 178(1) PILA is nonetheless satisfied with a simplified written form. (See in particular sections 5.2.1 and 5.5.2 of the decision in this respect.)


iii)                  Finally, a brief reminder: an appellant may not raise new arguments in their Reply brief. The Federal Tribunal will find such arguments inadmissible. (See Section 5.5.2 of the decision in this respect.)


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Charles PONCET and Luisa MOCKLER