Challenges of Swiss Arbitral Awards Updated and Extended Statistical Data as of 2015

Transcription

1 Challenges of Swiss Arbitral Awards Updated and Extended Statistical Data as of 2015 FELIX DASSER, PIOTR WÓJTOWICZ I. Introduction In 2007, a first empirical study published in the ASA Bulletin covered all challenges of arbitral awards pursuant to Article 190(2) of the Swiss Private International Law Act (PILA). 1 International arbitral awards rendered in Switzerland are only subject to challenge before the Swiss Federal Supreme Court (Federal Court) as the sole instance. That first study covered the years 1989, when the PILA entered into force, to 2005, and included 221 decisions. 2 It was subsequently updated to the end of June 2009, with a tally of 289 decisions and additional statistical analyses. 3 In 2014, a few selected charts were revised covering 435 decisions up to the end of 2013 with the idea of continuing the monitoring and updating on a regular basis in order to provide practitioners with up-to-date guidance. 4 In 2014 and 2015, an impressive additional 69 decisions were rendered, bringing the tally of challenges to 502 decisions. In addition, this paper ventures into new empirical terrain by covering two samples that were in the past too small to provide any meaningful guidance to practitioners, namely (i) requests for revision of international arbitral awards and (ii) challenges of domestic arbitral awards pursuant to Article 389 et seqq. Swiss Code of Civil Procedure (CCP) which entered into force on January 1, We thought that it would be interesting to look at the current track record of these separate proceedings at this point Prof. Dr. iur., LL.M., Attorney-at-Law, Partner of Homburger, Zurich. MLaw, Attorney-at-Law, Research assistant of Felix Dasser, Zurich. Swiss International Law Act of December 18, 1987, SR 291. See for a non-official translation the Swiss Arbitration Association s website: FELIX DASSER, International Arbitration and Setting Aside Proceedings in Switzerland: A Statistical Analysis, 25 ASA Bulletin 3/2007, : DASSER (2007). FELIX DASSER, International Arbitration and Setting Aside Proceedings in Switzerland An Updated Statistical Analysis, 28 ASA Bulletin 1/2010, : DASSER (2010). FELIX DASSER/DAVID ROTH, Challenges of Swiss Arbitral Awards Selected Statistical Data as of 2013, 32 ASA Bulletin 3/2014, : DASSER/ROTH (2014). Swiss Code of Civil Procedure of December 19, 2008, SR

2 This paper thus covers 23 decisions on revision from 1992 through 2015 (see Section III below), and 52 challenges of domestic arbitral awards from 2011 through 2015 (see Section IV below). 6 II. Challenges of International Arbitral Awards A. Number of Decisions on Challenges The year 2015 set a new record regarding the number of decisions, with 39 cases newly decided. Thus for the first time since 1989, the total number of cases decided surpassed the threshold of 500 cases, reaching 502 by the end of These numbers increased mainly due to sports arbitration awards, almost exclusively awards rendered by the very important Court of Arbitration for Sport (CAS). 7 Notably the year 2010 saw a jump of up to 20 sports decisions, compared to just 11 in From 2011 through 2014 there was a noticeable decrease in the number of sports decisions per year, but these numbers rose again in 2015 (16 cases). In the last ten years (2006 through 2015), out of a total of 281 decisions rendered, 123 (44 %) concerned sports arbitration. The number of non-sports cases also increased over the last ten years, although much less impressively. As a consequence, the total yearly number of decisions, and, by implication, of challenges, has remained high since 2010 (see Chart 1) Published in 34 ASA Bulletin 2/2016, In 2012, two awards of the Basketball Arbitral Tribunal (BAT) in Geneva were challenged. Non-sports or other decisions encompass not only challenges of commercial but also of occasional investment arbitration awards. For instance, in 2015, the Federal Court heard (and dismissed) the first challenge of an award rendered under the Energy Charter Treaty (Decision 4A_34/2015 of October 6, 2015). 2

3 Chart 1: Number of decisions per year, The overall total of 502 decisions comprises 385 cases that were decided on the merits (77 %). 66 challenges were dismissed due to lack of admissibility (13 %). 51 challenges were dismissed due to withdrawal (10 %; see Chart 2). Chart 2: Admissibility of challenges, (502 cases) 9 Compared to the previous update, more accurate dataa has become available. Accordingly, a few adjustments had to be made. There is one lesss case in scope in 2011 (33 instead of 34); for 2012 one case was requalified as sports instead of commercial and for 2013 one case was requalified as commercial instead of sports. These adjustments also partly affect the following charts but not in any material way. 3

4 The reasons for inadmissibility are manifold. When we had a look at recent cases (2006 through 2015), we noticed that dismissal was often due to lack of substantiation or non-payment of the advance on costs. Cases that were dismissed due to lack of substantiation (i.e. procedurally insufficient argument on the merits) mostly concerned sports arbitration. B. Success of Challenges On average, the number of successful challenges over last two years remains within recent average, although 2014 set a new record of four awards having been set aside (three commercial, one sports) compensated that record with a below average single success (in sports). Overall, the data still indicate an increase in yearly numbers of successful challenges. There have been 17 successful challenges since 2008 compared to only 13 recorded in the first 20 years of the PILA (see Chart 3). Chart 3: Successful challenges per year, This increase of the absolute number of successful challenges is due to two long-term developments: (1) the number of challenges per year increased significantly and (2) sports arbitration shows a slightly higher incidence of reversals. Of the eighteen successful challenges in the years 2006 through 2015, eight related to non-sports (commercial) and ten to sports cases (see Chart 3). While the success rate for non-sports arbitration cases remains stable at a low 7.09 % (20 out of 282 cases; seee Chart 4.1), 10 sports awards 10 Up to 2005 the rate was 7 %, it then fell to 6.5 % by mid-2009 and rose again to 6.88 % by 2013 (see DASSER (2007), 453; DASSER (2010), 86; DASSER/ROTH (2014), 462 et seq.). 4

5 have been set aside at a slightly higher rate of 9.71 % (10 out of 103 cases; see Chart 4.2). Chart 4.1: Decisions on the merits (non-sports), (282 cases) Chart 4.2: Decisions on the merits (sports), (103 cases) The Magic Seven percent of overall (partial) setting aside of the first analysis of 2007 is thus still valid (7.79 %; see Chart 5). 11 Considering data from the past years and also the current trend, it still seems safe to assume an approx. 7 % chance of success in non-sports arbitration, while in sports cases albeit with a small number of cases one should count with a slightly higher, but still low chance of approx. 10 %. 11 DASSER (2007), 452 et seq. 5

6 Chart 5: Decisions on the merits (non-sports and sports), (385 cases) C. Grounds of Challenge The years 2009 through 2015 saw the first two awards being set aside due to violation of public policy (Article 190(2) )(e) PILA). The chances of a challenge based on this ground remain negligiblee (1.1 %), though. There was an increase of successful challenges on the grounds of Article 190(2)(a) PILA (constitution), (b) (jurisdiction) and (d) (right to equal treatment/right to be heard), whereas the percentage of awards being set aside on the ground of (c) (ultra/infra petita) decreased again (see Chart 6) The previous success rates were 2.2 % for lit. a, 9.4 % for lit. b, 3.2 %, for lit. c, and 5.5 % for lit. d, see DASSER/ROTH (2014),

7 Chart 6: Success of challenges on the grounds of Article 190(2) PILA, (total of 385 decisions on the merits) D. Duration of Proceedings 13 In the past 10 years, the tendency was first towards ever shorter time required between the filing of a challenge and the decision of the Federal Court. By 2009, a decision typically took around four months. 14 Not least due to parties making use of their right to be heard (as defined by the European Court of Human Rights 15 ) by filing a reply and rejoinder, respectively, the median duration 16 of proceedings on the merits (i.e. not counting cases where the Federal Court dismissed the challenge for purely procedural reasons) increased first to roughly five months and seems now to be settling at approx The method used to determine the duration is now the following: the date when a challenge has been received by the Federal Court has been taken as basis. This date has become available for all decisions as of For earlier decisions or where the date of receipt is otherwise not known, the date of filing has been taken as a basis if indicated in the Federal Court s decision. If this date, too, remains unknown, a rough rule of thumb is used by relying on the date of the award, assuming that service of the award takes five days and that the challenge is filed on the last day of the standard 30-day filing period, thus adding 35 days to the date of the award (see DASSER (2007), 456; DASSER (2010), 90 et seq.). DASSER (2010), 82 and See ECHR, Joos vs. Switzerland, Case 43245/07, Judgment of November 15, 2012, and the Federal Court s compliance policy: (in German) or (in French). For an explanation of the median, see DASSER (2007), 449, fn

8 six months. Over the past ten years, the median duration was 150 days (213 decisions on the merits). However, in the past five years the median rose to 185 days (124 decisions on the merits). It remains to be seen whether this trend continues. In view of the one-month period for filing a challenge 17, parties may typically expect an award to be really final within roughly seven months of its issuance, although the variance remains high (see Chart 7). Chart 7: Duration of proceedings on the merits in days, E. Participation of Foreign Parties Notwithstanding the increased competition from other arbitration venues, Switzerland still serves as a prime neutral ground for dispute resolution between non-swiss parties (i.e. parties that at the time of the conclusion of the arbitration agreement had neither their domicile nor their habitual residence in Switzerland). 18 The numbers even indicate a slight rise in the number of non-swiss parties over the past ten years. In 435 out of a total of 502 challenges we could sufficiently identify the nationalities of the parties. Out of that sample, 71 % involved no Swiss party at all (308 cases; see Chart 8) Article 100(1) Swiss Federal Act on the Federal Court of June 17, 2005 (Swiss Federal Court Act), SR Cf. Article 176(1) PILA; see also DASSER (2007), 446 and 460 et seq. This compares to a slightly lower 69 % up to 2005, seee DASSER (2007), 460 et seq. At the time there seemed to have been a trend towards more Swiss involvement, but such trend, if trend it really was, seems to have been reversed over the last 10 years. 8

9 Chart 8: Origin of the parties, F. Conclusion The data continue to evidence a very arbitration-friendly and efficient approach by the Swiss judiciary notwithstandin ng the fact that the number of cases which are brought before the Federal Court per year has constantly been increasing and has peaked at 39 decisions in The percentage of successful challenges in non-sports arbitration remains stable at around 7 %, while the data suggest a slightly higher chance of around 10 % of awards being set aside in sports arbitration. With regard to individual grounds for successful challenges there is a certain shift towards grounds (a) (constitution), (b) (jurisdiction) and (d) (right to be heard) of Article 190(2) PILA. The median duration of the proceduree before the Federal Court is roughly six months. Thus, the median duration from the issuance of an award to the final determination of a challenge is somewhat longer than was the case a few years ago but still impressively short: seven months. In sum, the Federal Court is still keeping Swiss arbitral tribunals on a leash, but on an appropriately loose leash. III. Revision of International Arbitral Awards A. Number of Requests In contrast to challenges pursuant to Article 190(2) PILA, the PILA is silent on whether a request for revision of an arbitral award is admissible. In 20 The first quarter of 2016 has seen a trend towards the numbers of decisions of the first quarter of

10 1992, the Federal Court filled that gap by deciding that requests for revision of international arbitral awards are admissible and declared itself competent for such proceedings. 21 According to the case law of the Federal Court, 22 by analogy with Article 123(1) and (2)(a) Swiss Federal Court Act revision may be requested on two grounds: (i) the award was affected by criminal offence; (ii) preexisting material facts or decisive evidencee have been discovered since the award. The number of requests for revision remains low compared with those for challenges. Since 1992, 23 published decisions have been issued. 23 Sports cases amount to roughly one third of those decisions (see Chart 8.1). In general, and in contrast to challenges, the number of decisions on revision remains rather stable and low (see Chart 8.2). Coincidentally, the number of admissible requests for revision (i.e. requests decided on the merits) is similar to those of challenges, 74 % and 77 %, respectively (see Charts 9 and 2, respectively). It is also worth noting that at the time of this publication there has not been a single case on the revision of an award rendered in a domestic arbitration according to Article 396 et seqq. CCP. Chart 8.1: Number of decisions, (23 cases) Decision BGE 118 (1992) II 199. Decision BGE 134 (2008) III 286. This statistic relies on the publicly made available decisions and might, hence, lack non through 2000). The published decisions rendered prior to the year 2007 (particularly Federal Court started to publish all of its decisions on the internet only from January 1, 2007 onwards, whereas throughout most decisions were published. Conversely, only few decisions rendered before 2000 were published or made accessible to the general public (see DASSER (2007), 448 et seq.). 10

11 Chart 8.2: Number of decisions per year, Chart 9: Admissibility of requests, (23 cases) B. Success of Requests Only two requests for revision have been successful so far, the first one in The second and last one so far followed in 2009 (see Chart 10). 25 Whilst two out of 11 requests in non-sports cases have been successful, no sports-related request has succeeded to date Decision 4P.102/2006 of August 29, Decision 4A_596/2008 of October 6,

12 Chart 10: Successful challenges per year, Overall, the percentage of successful requests for revision amounts to 11.76% (see Chart 11). The number of decisions is still rather too low to allow predictions on the chance of future requests. Nonetheless, one can observe that the Federal Court seems to show similar restraint with regard to setting aside an award based on a request for revision as is the case with a challenge pursuant to Article 190 PILA. Chart 11: Decisions on the merits, (17 cases) C. Grounds for Request As with regard to the two grounds, the ground of a criminal offence saw only one request, but a successful one. Conversely, only one of fourteen requests on the ground of newly discovered facts or evidence was successful (7.1 %; see Chart 12). 12

13 Chart 12: Success of revision, D. Duration of Proceedings The duration of the proceedings on revision before the Federal Court corresponds to the duration of challenges. The median for 17 decisions on the merits is 160 days. However, the duration may vary considerably (see Chart 13). Chart 13: Duration of proceedings on the merits over time,

14 E. Conclusion The number of requests for revision of international arbitration awards remains low. Predictions are, hence, fraught with considerable insecurity. As for some data, the Federal Court's decisions on requests for revision correspond to those on challenges, namely the rate of procedural admissibility and the duration of proceedings. IV. Challenges of Domestic Arbitral Awards A. General Principles and Number of Challenges On January 1, 2011, the Swiss Code of Civil Procedure, the first federal Swiss code of civil procedure, came into force replacing the previous cantonal codes of civil procedure. In its Third Part, the CCP also contains provisions on domestic arbitration (Article 353 et seqq. CCP). The Third Part of the CCP replaced the former cantonal Concordat on Arbitration, which used to govern domestic arbitration and was uniformly applicable across Switzerland. Whilst under the regime of the Concordat the challenge proceedings were two-tiered, an award may now only be challenged before the Federal Court, as in international arbitration (Article 389 CCP). According to Article 390 CCP, however, the parties may agree by express declaration in the arbitration agreement or in a subsequent agreement that the arbitral award may be contested by way of challenge to the competent cantonal court of the canton where the arbitral tribunal has its seat. However, there are no indications that parties make use of this option to any significant extent. This cantonal court would have exclusive jurisdiction with no further possibility of a challenge before the Federal Court. The present analysis does not cover decisions, if any, of such cantonal courts. Compared to international arbitration, the number of decisions in domestic arbitration is significantly lower. Whilst throughout decisions were rendered under Article 190(2) PILA, only 52 were rendered under Article CCP. Of the 52 decisions, 40 were decided on the merits (see Chart 14). 14

15 Chart 14: Admissibility of challenges, (52 cases) Accordingly, the average number per year in domestic arbitration is significantly lower than in international arbitration, roughly one third (see Charts 15 and 1, respectively). Still, some trends and tendencies may be discerned albeit with all the caution that predictions about future court decisions require. While in domestic arbitration, sports-relaterare with only 3 out of the 52 decisions concerning sports there is a challenges are rather third category of cases, which is all but absent in international arbitration: About 20 % of the decisions concerned employment matters (see Chart 15). All of these employment cases stem from disputes on the basis of Collective Employment Contracts (see Article 356 et seqq. Swiss Code of Obligations 26 ) and vividly manifest the importance of arbitration in Swiss employment law Swiss Code of Obligations of March 30, 1911, SR 220. See PIOTR WÓJTOWICZ, Labour Law and ADR in Switzerland Selected Topics. Mediation, Arbitration and Collective Employment Contracts, Arbitrability of Labour Law Claims, in: Themis Polska Nova 2015 / nr 1 (8), , 214 et seqq. 15

16 Chart 15: Number of decisions per year, B. Success of Challenges Out of 40 challenges that were decided were successful (see Chart 16), including the decided on the merits (see Chart 17). on the merits, eight (20 %) only sports case that was Chart 16: Decisions on the merits, (40 cases) 16

17 Chart 17: Successful challenges per year, The available, very limited data suggest a comparable chance of success of a challenge of approx. 18 % and 17 % in commercial and employment matters, respectively (see Charts 18.1 and 18.2). No prediction can be made for sports arbitration due to the low number of cases (one successful out of one challenge on the merits). Reasonably, the low number of cases does not allow any more precise prediction than to say that the success rate of challenges in domestic arbitration might be about double the rate in international arbitration (see Chart 16). The reasons for the higher numbers of reversals in domestic arbitration compared to international arbitration may lie in Articles 393(b) and (e) CCP. Successful challenges based on the grounds of (b) jurisdiction and (e) arbitrariness of award provide for these higher numbers (see infra). Another, rather anecdotal reason, seems to be that domestic arbitrators are not always as experienced as arbitrators sitting in international cases. 17

18 Chart 18.1: Decisions on the merits (commercial), (33 cases) Chart 18.2: Decisions on the merits (employment), (6 cases) C. Grounds of Challenge Pursuant to Article 393(a)-(f) CCP, a domestic arbitral award may be challenged on the following grounds: (a) the single arbitrator was appointed or the arbitral tribunal composed in an irregular manner; (b) the arbitral tribunal wrongly declared itself to have or not to have jurisdiction; (c) the arbitral tribunal decided issues that were not submitted to it or failed to decide on a prayer for relief; (d) the principles of equal treatment of the parties or the right to be heard were violated; (e) the award is arbitrary in its result because it is based on findings that are obviously contrary to the facts as stated in the case files or because it constitutess an obvious violation of law or equity; (f) the costs and compensation fixed by the arbitral tribunal are obviously excessive. Not a single challenge on grounds (a), (c), (d) or (f) has been successful as of the date of this publication. In fact, ground (f) (excessive fees and costs) has never been invoked. This suggests that the setting of arbitration fees and costs by the arbitrators might not be perceived by users as a major problem in need of redress. Conversely, the chances of a challenge based on ground (b) (jurisdiction) and (e) (arbitrariness) have been high (two out of four cases, 50 %, and six out of twenty-five cases, 24 %, respectively; see Chart 19). 18

19 Chart 19: Success of challenges on the grounds of Article 393(a)-(f) CCP, Whilst regarding ground (b) (jurisdiction) the high percentage of annulled decisions might not be a reliable prediction for future challenges due to the low number of decisions, the dataa on ground (e) (arbitrariness) might provide a decent indicator of the chances of future challenges. It is thus particularly interesting to compare the data on the two respective grounds that allow a review of the merits: (international) public policy in case of an international arbitral award (Article 190(2)e PILA) on the one hand and arbitrariness in case of a domestic arbitral award (Article 393(e) CCP) on the other. The difference is striking: As indicated above, the chance of a challenge based on Article 190(2)( (e) PILA is a negligible 1.1 % (see Chart 6); conversely, the chance of a challenge based on Article 393(e) CCP is a respectable 24 % (see Chart 19). D. Duration of Proceedings The median duration of challenge proceedings before the Federal Court in domestic arbitration is 140 days (40 decisions on the merits) and thus lower than in international arbitration. Thus, taking into account the usual 30-day period for the filing of a challenge, parties may typically expect a domestic award to be really final in less than six months after its issuance, although the variance remains high (see Chart 20). 19

20 Chart 20: Duration of Proceedings on the merits in days, E. Conclusion In Switzerland, domestic arbitration is more regulated than international arbitration. This also impacts challenge proceedings. There are wider grounds for challenge: arbitrariness instead of just violation of (international) public policy and excessive arbitration fees and costs. While the latter has not yet been invoked, the formerr has been used widely and rather successfully, leading to an overall chance of success that is about double if not more than in international cases. 20

21 Felix DASSER, Piotr WÓJTOWICZ, Challenges of Swiss Arbitral Awards Updated and Extended Statistical Data as of 2015 Summary This article updates and extends previously published statistical data of challenges of international arbitral awards according to Article 190(2) PILA (current database: 1989 through 2015). Additionally, it covers for the first time requests for revision of international arbitral awards (1989 through 2015) and challenges of domestic arbitral awards pursuant to Article 389 et seqq. CCP (2011 through 2015). Based on Article 190(2) PILA, 69 decisions have been rendered in 2014 and 2015 since the last update. The tally of challenges is now 502 decisions. The percentage of successful challenges in non-sports (mainly commercial) arbitration remains at around 7 %, while the data suggest a slightly higher chance of approx. 10 % of awards being set aside in sports arbitration. The median duration of the procedure before the Federal Court is roughly six months. Since 1992, 23 published decisions on requests for revisions have been issued. Only two requests have been successful so far. The duration corresponds to the duration of challenges. Finally, 52 decisions in domestic arbitration based on Article 393(a)-(f) CCP have been issued. About 20 % of all decisions concerned employment matters. The chance of success of a challenge is about 20 %. That comparatively high number stems mainly from successful challenges based on arbitrariness, a ground for challenge that is only available in domestic arbitration proceedings. The median duration is roughly five months. 21