Award withstands scrutiny of the Federal Tribunal in part due to broad request for relief
A._________ subcontracted the maritime portion of the construction of a sea terminal to B._________. In the course of the build, A.________ called in bank guarantees, split between USD and local currency (referred to in the anonymized decision as XXX). This forced B.________ to refinance. B.________ then initiated arbitration proceedings under the contract’s arbitration clause on several grounds. A three-member Arbitral Tribunal was constituted under the aegis of the ICC, with its seat in Geneva.
The Arbitral Tribunal found in B._________’s favor and ordered damages payable in USD.
A.________ appealed to the Federal Tribunal. It argued that the Arbitral Tribunal had ruled ultra petita, by awarding damages in USD (instead of a split between the local currency and USD, as the Claimant had requested). It also argued that the Arbitral Tribunal had done so in an unexpected manner and on its own motion, violating its right to be heard.
The Appellant was unsuccessful. The following points are of interest in the decision:
- The Federal Tribunal noted that while the Claimant had requested damages in USD and the local currency, it had also invited the Arbitral Tribunal to – in the alternative – award “any other amount that the Arbitral Tribunal deems appropriate.” The Federal Tribunal therefore found the Arbitral Tribunal had not departed from the parameters set out in the Claimant’s submissions in awarding damages solely in USD. (See Section 5.3 of the decision in this respect.)
- The Federal Tribunal observed that while the Appellant also raised an argument about the imprecision of the submission of the Claimant before the Court, it had not done so during the arbitration, rendering such a complaint inadmissible. (See Section 5.3 of the decision in this respect.)
- The Appellant argued a violation of its right to be heard relating to the currency used in the damages award. However, as the Federal Tribunal pointed out, it was in fact discussed during the arbitral proceedings. This meant there was no surprise and no consequent violation of the right to be heard. (See Section 6.2 of the decision in this respect.)
Charles PONCET and Luisa MOCKLER
Judgment of December 16, 2020
First Civil Law Court
Federal Judge Kiss, Presiding
Federal Judge Hohl,
Federal Judge May Canellas,
Clerk of the Court: Mr. Carruzzo
Represented by Mr. Phillip Landolt,
Represented by Mr. Antonio Rigozzi,
Under a contract entered into on August 31, 2007, A. Limitada (hereinafter, A.________), a [name of country omitted] company, subcontracted to B.________ S.A. (hereinafter, B.________), a company also headquartered in [name of country omitted], the maritime part of the construction work for a terminal in the bay of [name of bay omitted], in [name of country omitted].
An arbitration clause in the contract entrusted the settlement of disputes arising from the performance of the contract to a three-member arbitral tribunal, to be constituted under the aegis of the International Chamber of Commerce (ICC). The seat of arbitration was to be in Geneva. The contract provided mainly for the application of English law, but also of [name of country omitted] law, with regard to the performance of the work.
In the course of performing the work, as of December 20, 2012, A.________ called upon bank guarantees in the amount of XXX2 7’947’217’582 and USD 3’755’269.
This forced B.________ to enter into a new financing agreement with the Bank of X.________, which granted it a credit line of USD 20’505’649.
On June 12, 2015, B.________, relying on the arbitration clause in the contract, submitted a request for arbitration against A.________ with the ICC, asserting various claims. The submissions made by the claimant in the course of the arbitration proceedings will be referred to, to the extent appropriate, in the course of the consideration of the related claims.
A three-member Arbitral Tribunal was constituted, its seat fixed in Geneva and English designated as the language of the proceedings.
A.________ argued that the submissions made by the Claimant should be rejected. By way of counterclaim, it sought lump-sum damages because of the delays.
In a final award dated March 4, 2020, the Arbitral Tribunal issued the following finding with respect to the submissions, which are the only ones relevant to these proceedings:
9) DECLARES that A.________ wrongfully called the Bonds and owes to B.________ S.A. a principal amount of USD 20’505’649 (...) for Bond Values;
10) DECLARES that A.________ owes to B.________S.A. a further principal amount of USD 3’755’269 (...) for Bond Values;3
On May 15, 2020 A.________ (hereinafter, the Appellant) submitted a civil law appeal to the Federal Tribunal with a view to obtaining the annulment of the award.
With regard to the submissions relating to bank guarantees, the Appellant argues that the Arbitral Tribunal wrongly decided ultra or extra petita and violated its right to be heard. With regard to the issue relating to lump-sum damages for the delays, it argued that the Arbitrators failed to rule on part of its counterclaim.
On July 13, 2020, the Appellant indicated that the part of its appeal relating to the issue of lump-sum damages was moot, given the additional award of July 6, 2020, by which the Arbitral Tribunal had corrected the amount of the lump-sum damages.
By order of the Presiding Judge of July 14, 2020, the Appellant was invited, at the request of B.________ (hereafter, the Respondent), to pay the amount of CHF 60’000 to the Federal Tribunal as security for the costs of this party. This was done in good time.
At the end of its response of September 24, 2020, the Respondent requested that the appeal be rejected.
The Appellant voluntarily submitted a reply, prompting a rejoinder from the opposing party.
The Arbitral Tribunal referred to its award.
According to Art. 54(1) LTF4 the Federal Tribunal issues its judgment in an official language,5 as a rule, in the language of the award under appeal. When the decision was issued in another language (here, English) the Federal Tribunal uses the official language chosen by the parties. Before the Arbitral Tribunal, they used English, while in the appeal briefs sent to the Federal Tribunal, the Appellant used French, pursuant to the requirements of Art. 42(1) LTF in conjunction with Art. 70(1) Cst.6 (ATF 142 III 521 at 1). According to its practice, the Federal Tribunal shall consequently issue its judgment in French.
In the field of international arbitration, civil appeals are admissible against the decisions of arbitral tribunals under the conditions set out in Art. 190-192 of the Federal Law on Private International Law of December 18, 1987, (PILA7; RS 291), in accordance with Art. 77(1)(a) LTF. The seat of the Arbitral Tribunal is in Geneva. Neither party was based in Switzerland at the relevant time. The provisions of Chapter 12 of the PILA are therefore applicable (Art.176(1) PILA).
3.1 Whether as to the object of the appeal, the time limit to do so, the Appellant’s submission or the reason for appeal raised in the Appeal Brief, none of these admissibility requirements raises any problems in this case.
3.2 The admissibility of the present appeal presupposes, among other conditions, that the parties have not excluded the possibility of submitting an appeal.
3.2.1 According to Art. 192 PILA, if the two parties have neither domicile, habitual residence nor a place of business in Switzerland, they may, by explicit declaration in the arbitration clause or a subsequent written agreement, waive the right of appeal against the awards of the arbitral tribunal; they may also waive the right of appeal only for one or other of the reasons listed in Art. 190(2) PILA.
3.2.2 Federal case law has progressively developed the principles that result from the provision under review. It follows, in essence, that the practice only admits exclusionary agreements in a restrictive manner and considers that an indirect waiver is insufficient. As for the direct waiver, it does not have to include the reference to Art. 190 PILA and/or Art. 192 PILA. It is sufficient for the express declaration of the parties to show clearly and unequivocally their shared desire to waive their right to any appeal. Whether this is the case is a matter of interpretation (ATF 134 III 260 at 2.1.1).
3.2.3 In this case, the contract concluded by the parties states, in particular, the following at s. 65.3:
(vi) the decision of the arbitration tribunal will be final and binding, and the parties waive any rights to appeal or to review such award by any court or tribunal, except in case of manifest error of law, denial of justice or bias;8
While this clause undoubtedly highlights the common will of the parties to severely restrict the right to appeal against the Arbitral Tribunal's award before any court or tribunal, it must be noted that it does not exclude all recourse, as it expressly reserves the right to appeal in cases of manifest error of law.
In this case, neither the Appellant nor the Respondent referred to said clause. Moreover, the Respondent indicated that it did not contest the admissibility of the appeal. In these circumstances, it is appropriate to proceed, given that the parties have not excluded all possibility of appealing against the Award.
At this stage, the dispute only concerns the issue of bank guarantees.
4.1 In the Award, the Arbitral Tribunal held that the Appellant was not entitled to call upon the bank guarantees (Arbitral Award, no.1363). The Respondent can thus recover the full amounts released, i.e., XXX 7’947’217’582 and USD 3’755’269. The only contentious issue is the rate of XXX to USD conversion. Referring in particular to the testimony of the witness called C.________, the Arbitrators applied a conversion rate of XXX 474.45 for 1 USD (judgment, nos. 1374 and 1377). On this basis, they estimate that the value of the bank guarantees (“value of the bonds") amounts to USD 20’505’649. The Respondent can therefore claim payment of the said amount (Arbitral Award, no. 1377). The Respondent is also entitled to receive various sums from the Appellant to compensate it for the costs it had to bear in order to finance the release of the said bonds, that is to say the steps taken to obtain a new line of credit (Award, nos. 1405 and 1428 et seq.).
4.2 On April 17, 2020, the Appellant submitted a request for the correction of the award under appeal. In particular, it claimed that the Arbitral Tribunal had wrongly converted the released bank guarantee amounting to XXX 7’947’217’582 into U.S. dollars. In addition, it noted that the Arbitrators had double counted the amount of the released U.S. dollar guarantee, and that therefore the Respondent was unduly enriched.
In the Additional Arbitral Award of July 6, 2020, the Arbitral Tribunal rejected the first request for correction, since it did not result from a computational or typographical error, or any error of a similar nature, but rather implied a questioning of the Arbitrators' reasoning. The Arbitrators expressly stated that they did not wish to express an opinion on the merits of the request (Additional Arbitral Award, no. 36). The Arbitral Tribunal did, however, admit the second request for correction. It thus held that the value of the released guarantee amounting to XXX 7’947’217’582 was equivalent to USD 16’750’380, and therefore corrected point 9 of the operational part to this effect.
In a first argument, the Appellant argued that the Arbitral Tribunal wrongly decided ultra or extra petita.
5.1 Art. 190(2)(c) PILA allows an appeal against an award, in particular, when the arbitral tribunal has decided beyond the claims for which it was seized. Awards granting more or something other than that which was claimed (ultra or extra petita) fall within that provision. According to case law however, the arbitral tribunal does not go beyond the claims if ultimately it does not award more than the total amount sought by the claimant but assesses some of the elements of the claim differently from that party. Nor does the arbitral tribunal breach the rule ne eat iudex ultra petita partium when it qualifies the claim in different legal terms than the claimant’s. The principle jura novit curia, which applies to arbitral proceedings indeed requires the arbitrators to apply the law ex officio without being limited to the arguments raised by the parties. They are accordingly entitled to resort to arguments which were not raised because that is not a new claim or a different claim but merely a new qualification of the facts of the case. The arbitral tribunal is however bound by the object and the volume of the submissions before it, in particular when a party qualifies or limits its claims in the submissions themselves (judgments 4A_678/2016 of March 22, 2016, at 3.2.1 and 4A_440/2010 of January 7, 2011 at 3.1, not published, in ATF 137 III 85).
5.2 The Appellant submits that the Arbitral Tribunal went beyond the scope of the Respondent's submissions by awarding the sums of USD 20’505’649 (reduced to USD 16’750’380 in the additional award) and USD 3’755’269 as restitution of the wrongly-called guarantees. In this respect, it argued, citing various passages from the Respondent’s submissions, that the Respondent never claimed the conversion into U.S. dollars of the guarantee denominated in XXX.
5.3 Applied to the present case, these principles dictate that the Appellant's grievance, based on the legal considerations provided for in Art. 190(2)(c) PILA, be rejected.
It is undisputed that the guarantees were released in two separate currencies, i.e., XXX 7'947'217'582 and USD 3'755'269. However, contrary to the Appellant's assertions, the Respondent did not just claim the return of the guarantees in the amounts and currencies in which they were actually released. In its post-hearing brief of October 12, 2018, reflecting the final state of its submissions, the Respondent stated the following:
(94) Nature and extent of any liability for the value of the bond
Executive summary: B.________ is entitled to XXX 7,947,217,582 and USD 3,755,269, alternatively such other sum as the Tribunal deems fit (having regard to the Parties' claims).
474. B.________'s position is set out in [Opening/1102 and 1126]. The quantum experts have proceeded on the basis that the bond values are XXX 7,947,217,582 and USD 3,755,269 (...).
475. Without prejudice to B.________'s position that A.________'s call on the bond was wrongful/unlawful, to the extent that the Tribunal decides that A.________ was entitled to call the bonds but in a lesser amount, the Tribunal would need to reduce the bond values and B.________'s bond finance claim accordingly.9
Notwithstanding the Appellant's assertion, the Respondent's request that the Arbitral Tribunal award XXX 7’947’217’582 and USD 3’755’269 or, in the alternative, any other amount that the Arbitral Tribunal deems appropriate, undoubtedly allowed the Arbitrators to decide as they did and to award an amount expressed solely in U.S. dollars.
The fact that the Respondent did not expressly require the conversion of the U.S. dollar amounts does not change this. The fact that it mentioned, in the table summarizing its various claims, under no. 483 of the aforementioned brief, the amounts XXX 7’947’217’582 / 3’755’269 USD under the heading “Bond values”10 is not decisive, nor is the content of the footnote appearing under the said table ("All sums are expressed in XXX except for those claims where costs have been incurred by B.________ in US Dollars. For the avoidance of doubt, B.________ claims both the XXX and USD amounts”). Nor can the Appellant be followed in its attempt to limit the scope of the submission inviting the Arbitral Tribunal to award the amount it deems appropriate, arguing that the submission would only apply where the Arbitrators only partially satisfy the Respondent's claims.
As the Respondent correctly points out, the unjustified call on the guarantees obliged it to enter into a financing agreement for a total amount of USD 20’505’649. Accordingly, the Arbitral Tribunal was perfectly entitled, on the basis of the submissions before it, to award the Respondent the “value” of the improperly called guarantees. It therefore did not depart from the formal framework set out in the Respondent's submissions.
The Appellant further argues, citing a single legal opinion (Berger/Kellerhals, International and Domestic Arbitration in Switzerland, 3rd ed, n. 1208), that the submission at issue is not sufficiently precise. In doing so, however, it loses sight of the fact that, if it considered that the said submission lacked precision or left too much room for maneuver to the Arbitrators and put it at risk of having a solution imposed on it that it had not considered, it should have argued against it from the outset during the Arbitration proceedings, which the it does not establish, or even allege it had done (Judgment 4P.114/2001 of December 19, 2001, at 3b). Consequently, the plea of the imprecise nature of said submission is no longer admissible at this stage of the proceedings.
For the rest, it should also be noted that the judgment of the Federal Tribunal referred to by the Appellant in its brief is of no help to it. In this case, this Court ruled that the Arbitral Tribunal, before which a claim for the payment of “EUR 300,000 in Dinar counter value of 15 September 2010”11 was heard, had not violated Art. 190(2)(c) PILA by awarding a sum denominated in euros (Judgment 4A_654/2011 of May 23, 2012 at 5.2). The circumstances of the present case are in no way comparable, since the Respondent did not limit itself to demanding payment of a specific amount in a given currency.
The argument examined is thus unfounded.
In a second argument, the Appellant argued that there was a breach of its right to be heard. It returned to the attack by arguing that the Panel failed to take into account of the fact that the bank guarantees were called in XXX and USD. The Arbitral Tribunal also allegedly converted the XXX amount to U.S. dollars in an unexpected manner, without the Respondent requesting such conversion and without notifying the parties they planned to do so, thereby depriving the parties of an opportunity to express their views on the matter.
6.1 The case law on the right to be heard, as guaranteed by Art. 182(3) and 190(2)(d) PILA, has inferred a minimum duty for the arbitral tribunal to consider and deal with relevant issues. This duty is violated when, inadvertently or due to a misunderstanding, the arbitral tribunal does not take into consideration allegations, arguments, evidence submitted or proffered by one of the parties and that is of importance to the award to be issued. It is incumbent upon the alleged wronged party to demonstrate, in its appeal against the award, how the oversight of the arbitrators prevented it from being heard on an important issue. It is for it to establish, on the one hand, that the arbitral tribunal did not examine some of the factual, evidentiary or legal evidence that it had validly advanced in support of its findings and, on the other hand, that those factors were such that they could affect the outcome of the dispute (ATF 142 III 360 at 4.1.1 and 4.1.3; judgement 4A_478/2017 of May 2, 2018, at 3.2.1). If the award completely ignores something that appears to be important to the resolution of the dispute, it is for the arbitrators or the respondent to justify such omission in their submissions on the appeal. It is incumbent upon them to show that, contrary to the appellant's assertions, the omitted elements were not relevant to the case in point or, if they were, that they were implicitly refuted by the arbitral tribunal (ATF 133 III 235 at 5.2 p. 249; judgment 4A_478/2017, cited above, at 3.2.1).
In Switzerland, the right to be heard mainly concerns the findings of fact. The right of the parties to be asked for their views as to legal issues is recognized in a restrictive manner only. As a rule, state courts or arbitral tribunals freely assess the legal weight of the facts and may decide on the basis of rules of law other than those invoked by the parties. As an exception, they need to be asked for their views when the judge or the arbitral tribunal considers basing a decision on a norm or a legal consideration which was not invoked in the proceedings and the pertinence of which the parties could not anticipate (ATF 130 III 35 at 5 and references). Moreover, determining what is unforeseeable is a matter of appreciation. Therefore, the Federal Tribunal shows restraint in applying the aforesaid rule, for this reason and because the specificities of this type of procedure must be taken into account by avoiding the use of an argument of surprise with a view to obtaining substantive review of the award by this Court (judgment 4A_716/2016 of January 26, 2017, at 3.1). It regularly reiterates this, refusing to extend this case law to the establishment of facts (judgment 4A_525/2017 of August 9, 2018, at 3.1 and the judgments cited).
6.2 As presented, this grievance is unfounded.
Indeed, the Arbitral Tribunal did not ignore the fact that the bank guarantees had been called in an amount of XXX 7’947’217’582 and USD 3’755’269. On the other hand, it decided to allocate to the Respondent the "value" of the said guarantees – which it was entitled to do on the basis of the arguments submitted to it – which it obviously decided in view of the fact that the unjustified release of the guarantees had forced the Respondent to request a line of credit in US dollars. However, it must be seen that the issues relating to the conversion into US dollars of the guarantee called in XXX and the applicable conversion rate were indeed discussed during the Arbitral proceedings, which is also expressly stated in the Award (no. 1373).
As noted by the Respondent, the Appellant further indicated the following in its post-hearing submission of October 12, 2018:
511. The parties are agreed that the sums called against the bonds totaled XXX 7,947,217,582 and USD 3,755,269.
However, there is a dispute between the parties as to the amount of the sums called when converted into USD which arises from the parties using different exchange rates.
A.________'s position is that the correct rate to be applied is XXX 521.41 per USD, being the applicable conversion rate as at 20 December 2012 when the bonds were called.12
The applicable conversion rate was thus one of the points at issue. The fact that the Appellant raised this issue in the context of seeking a determination whether or not the call on the guarantees was valid does not mean that the Arbitrators could not legitimately take it into account when determining the amount finally awarded to the Respondent. Accordingly, the Appellant’s claim of surprise is unsuccessful and wrongly complains of a violation of its right to be heard.
On the basis of the foregoing, the appeal must be rejected.
The Appellant, who is unsuccessful, must pay the costs of the federal proceedings (Art. 66(1) LTF), which will be reduced and fixed at CHF 40'000, given the withdrawal of part of the appeal. It will be refunded the balance of the advance payment made.
The Appellant will also pay the Respondent compensation for costs of CHF 50’000, which will be taken from the security for costs provided by the Appellant. The balance of the amount paid as security for costs will be returned to the Appellant.
For these reasons, the Federal Tribunal pronounces:
The appeal is rejected.
The judicial costs, set at CHF 40’000, are to be borne by the Appellant. The balance of the advance of costs is returned to it.
The Appellant shall pay the Respondent a compensation of CHF 50’000 as costs. This amount shall be taken from the security for costs deposited with the Office of the Federal Tribunal. The balance of the amount paid as security for costs, i.e., CHF 10’000, is released in favor of the Appellant.
This judgment shall be communicated to the parties' representatives and to the Arbitral Tribunal with its seat in Geneva.
Lausanne, December 16, 2020
On behalf of the First Civil Law Court of the Swiss Federal Tribunal
The Presiding Judge: The Clerk of the Court:
- 1. Translator’s Note: Quote as A.________ Limitada v. B.________, S.A., 4A_244/2020. The decision was issued in French. The full text is available on the website of the Federal Tribunal, www.bger.ch.
- 2. Translator’s Note: The name of the currency was omitted.
- 3. Translator’s Note: In English in the original text.
- 4. Translator’s Note: LTF is the French abbreviation for the Federal Statute of June 17, 2005 organizing the Federal Tribunal, RS 173.110
- 5. Translator’s Note: The official languages of Switzerland are German, French and Italian
- 6. Translator’s Note: CST is the French abbreviation for the Swiss Federal Constitution.
- 7. Translator’s Note: PILA is the most frequently used abbreviation for the Swiss Private International Law Act of December 18, 1987
- 8. Translator’s Note: In English in the original text.
- 9. Translator’s Note: In English in the original text.
- 10. Translator’s Note: In English in the original text.
- 11. Translator’s Note: In English in the original text.
- 12. Translator’s Note: In English in the original text.