Redfern Schedule acknowledged by the Federal Tribunal
A very short opinion dated December 2, 2016, which is of little interest, except for the reference made to a Redfern Schedule at 3.2.1 in the opinion.
Otherwise, regretfully in these writers’ opinion, the Federal Tribunal simply reiterates its very narrow construction of the principle of pacta sunt servanda to reject the appeal against the July 29, 2016 award in a dispute involving a claim against an estate raised in a Swiss Chambers Arbitration.
Judgment of December 2, 2016
First Civil Law Court
Federal Judge Kiss, Presiding
Federal Judge Kolly
Federal Judge Niquille
Clerk of the Court: Mr. Carruzzo
Represented by Mr. Nicolas Candaux,
The Heirs of the late Z.________, namely:
All four represented by Mr. Thimothée Bauer,
Factual and legal reasons:
1.1. In a final award of July 29, 2016, the Geneva lawyer2 deciding as Sole Arbitrator under the aegis of the Swiss Chambers’ Arbitration Institution, ordered Defendant X.________, an Algerian citizen, to pay to Claimants A.Z.________, B.Z.________, C.Z.________ and D.Z.________, all domiciled in Switzerland, in their status as heirs of the late Z.________, who died on April 19, 2008, the amount of EUR 1’219’592 with interest at 5% yearly since March 12, 2015, pursuant to an “Agreement on Reimbursement and Compensation” signed by Z.________ and X.________ on October 25, 2001.
1.2. On September 14, 2016, X._________ invoked Art. 190(2)(e) PILA3 and filed a civil law appeal with the Federal Tribunal with a view to obtaining the annulment of the award.
The four Claimants – here, Respondents – all represented by the same attorney, submitted that the appeal should be rejected. The Sole Arbitrator produced her file and waived the right to submit observations as to the appeal.
By letter of November 16, 2016, the Appellant stated that it did not intend to file a reply.
In the field of international arbitration, a civil law appeal is admissible against the decisions of arbitral tribunals, pursuant to the requirements at Art. 190 to 192 PILA (Art. 77(1)(a) PILA). Whether as to the object of the appeal, the standing to appeal, the time limit to appeal, the Appellant’s submission or the ground for appeal invoked, none of these admissibility requirements raises any problem in the case at hand. The matter is therefore capable of appeal.
The Appellant raises one single argument divided into two branches in which he argues that the Arbitrator violated substantive public policy within the meaning of Art. 190(2)(e) PILA.
3.1. An appeal brief aimed at an arbitral award must comply with the requirement to submit reasons as contained at Art. 77(3) LTF4 in connection with Art. 42(2) LTF and the case law concerning the latter provision (ATF 140 III 86 and 540/2016 of October 26, 2016, at 4.2). This requires the Appellant to discuss the reasons of the award under appeal and to indicate precisely why s/he considers that it disregarded the law (judgments 4A_536/2016 and 4A_540/2016 of October 26, 2016, at 4.2). It goes without saying that this can be done only within the limits of the grievances admissible against the aforesaid award, namely only in the light of the grounds for appeal listed at Art. 190(2) PILA when the arbitration is international in nature.
In the case at hand, it is doubtful the Appellant even satisfied the requirement to provide reasons thus defined. Indeed, he does not indicate even briefly the reasons on which the award under appeal relied but proceeds to directly criticize it, thus leaving it to this Court, in order to know what such criticism is about, to peruse itself the twenty pages or so that the Arbitrator devoted to the legal reasons of the solutions she found. Yet, it does not behoove the supreme judicial body of the Confederation to go looking sua sponte for the legal grounds of each solution to measure them against the arguments contained in the appeal brief. It hardly needs to be recalled that the Federal Tribunal is not a court of appeal and that this is even more true when, as in the case at hand, its judicial review is limited to the grievances raised and reasoned by the Appellant (see Art. 77(3) LTF).
Be this as it may, even if admissible, this appeal can only be rejected for the reasons indicated hereafter.
3.2. An award is contrary to substantive public policy when it violates some fundamental principles of substantive law to such an extent that it is no longer consistent with the governing legal order and system of values; among such principles are, in particular, contractual fidelity, compliance with the rules of good faith, the prohibition of the abuse of rights, the prohibition of discriminatory or confiscatory measures, as well as the protection of incapable persons (ATF 132 III 389 at 2.2.1).
3.2.1. In the first branch of his argument seeking to demonstrate the alleged incompatibility of the award under appeal with substantive public policy, the Appellant argues that the award gravely contradicts the principle of good faith when it held that the Respondents’ destruction of documents essential to the fact finding was not a factor in the apportionment of the burden of proof. After citing what he believes to be the relevant federal case law in this respect, the Appellant listed the exhibits he requested be produced and outlined the fate his request met in the ad hoc procedure known as a “Redfern Schedule” (on this procedure, characterized by a chart containing various columns which enables the Arbitral Tribunal or the Sole Arbitrator to decide the admissibility of the evidence requested, see Girsberger and Voser, International Arbitration, 3rd ed. 2016, n. 997-999). The Appellant then challenges the “reasoning” on the basis of which his criticism of the Respondents as to the destruction of a number of documents was set aside by the Arbitrator (see award n. 274). He argues that she gravely breached the rules concerning the distribution of the burden of proof and therefore to have violated the principle of good faith.
The argument is groundless. First, what was just written above as to the minimum reasons required of an appeal against an international arbitral award (at Section 3.1 of this decision) applies primarily to the argument under review because upon merely reading it, one does not understand where he is coming from. Then, the “reasoning” that the Appellant criticizes actually consists of an assessment of the evidence, which enables the Arbitrator to hold that,
… nothing permits the conclusion that the heirs deliberately destroyed some documents which they knew would be pertinent to resolve the dispute. The fact that they kept the documents concerning specifically the Defendant [i.e. the Appellant] […] and that they voluntarily turned over 479 documents to the Defendant for the purposes of the proceedings at hand indeed proves the opposite. (Award, n.274 i.f.)
Moreover, the Appellant overlooks that the manner in which the rules concerning the burden of proof are applied is exempted from the scrutiny of the Federal Tribunal when seized of a civil law appeal against an international award because such rules are not part of substantive public policy within the meaning of Art. 190(2)(e) PILA (Judgment 4A_616/2015 of September 20, 2016, at 4.3.1 and the precedents quoted). Moreover, claiming that the Sole Arbitrator violated the principle of good faith is tantamount to a judgment of intentions.
3.2.2. In the second branch of the same argument, the Appellant argues a violation of the principle pacta sunt servanda, to his detriment.
The principle of sanctity of contracts, expressed by the adage pacta sunt servanda, with the restrictive meaning it is given by case law concerning Art. 190(2)(e) PILA, is violated only if the arbitral tribunal refuses to apply a contractual clause while admitting that it binds the parties or conversely, if it imposes upon them compliance with a clause that it considers non-binding. In other words, the arbitral tribunal must have applied or refused to apply a contractual provision in contradiction with the conclusion of its interpretation as to the existence or the content of the legal deed in dispute. However, the process of interpretation itself and the legal consequences logically drawn therefrom are not governed by the principle of sanctity of contracts, so that they cannot be invoked as a violation of public policy. The Federal Tribunal has emphasized many times that almost all contractual disputes are outside the scope of protection of the principle pacta sunt servanda (judgment 4A_319/2015 of January 5, 2016, at 4.1).
In the case at hand, the Sole Arbitrator held that the Respondents had a claim against the Appellant, that the claim was not time barred, and that the debtor could not invoke set-off to escape his obligation to honor his debt to the heirs of the individual with whom he signed the “Agreement on Reimbursement and Compensation” of October 25, 2001. Having upheld the existence of the claim, she ordered the debtor to pay the corresponding amount to the creditors. One does not see why, by doing so, she would have contradicted the result of her interpretation of the aforesaid agreement. If one understands him well, the Appellant objects that the Arbitrator would have contradicted herself because in order to admit the existence of the claim in dispute, she found that Z.________ signed the reimbursement agreement of October 25, 2001, in his own name and as indirect representative of the two companies mentioned on the first page of the agreement, which would give him standing to claim the payment of the unpaid amount indicated in the agreement; whilst in order to exclude set-off, she would have held that the payments made into the accounts of the aforesaid companies after the agreement was executed did not extinguish the Appellant’s debt up to the set-off amount. There is no need to review any further the reality of the alleged contradiction. Even if such a contradiction existed, the outcome of the case would not change. It must indeed be recalled that the argument of inbuilt incoherence in the reasons of an award does not fall within the definition of substantive public policy (judgment 4A_150/20125 of July 12, 2012, at 5.2.1).
The second argument is therefore also doomed to fail.
The Appellant loses and shall pay the costs of the federal proceedings (Art. 66(1) LTF) and compensate the Respondents (Art. 68(1) and (2) LTF).
Therefore, the Federal Tribunal pronounces:
The appeal is rejected insofar as the matter is capable of appeal.
The judicial costs set at CHF 16’000 shall be borne by the Appellant.
The Appellant shall pay to the Respondents CHF 18’000 for the federal judicial proceedings.
This judgment shall be notified to the representatives of the parties and to the Sole Arbitrator.
Lausanne, December 2, 2016
In the name of the First Civil Law Court of the Swiss Federal Tribunal
Presiding Judge: Clerk:
Kiss (Mrs.) Carruzzo
- 1. Translator’s Note: Quote as X.________ v. A.Z.________ et. al., 4A_522/2016. 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: In the French original text, “Geneva lawyer” is in the feminine.
- 3. 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.
- 4. Translator’s Note: LTF is the French abbreviation of the Federal Statute of June 17, 2005, organizing the Federal Tribunal, RS 173. 110.
- 5. Translator’s Note: The English translation of this decision is available here: http://www.swissarbitrationdecisions.com/federal-tribunal-reiterates-pri...