Introduction

In many quarters, the very concept of lis alibi pendens is considered as a logical impossibility in international commercial arbitration. Put simply, lis alibi pendens is the situation in which the same action between the same parties is brought before two different national courts. This presupposes that the two courts have equal jurisdiction. In arbitration, on the other hand, there can be no question of two equally competent bodies: the jurisdiction of an arbitral tribunal requires a valid arbitration agreement, and one of the main legal consequences of such an agreement is precisely that it evicts the jurisdiction of national courts. 1 Moreover, it is commonly held that whenever the validity or the scope of an agreement to arbitrate is in dispute, national courts should defer initially to the arbitral tribunal, whose jurisdiction to decide the issue is said to have priority (subject of course to later judicial examination in setting-aside or enforcement proceedings).

These views, especially the opinion that lis alibi pendens is an oxymoron in the field of arbitration, have been increasingly challenged. In the landmark decision in Fomento de Construcciónes y Contratas S.A. v. Colón Container Terminal S.A., the Swiss Federal Tribunal unhesitatingly cast aside doubts on the applicability and advisability of lis alibi pendens in international arbitration and stated forcefully that the rules regarding competing jurisdiction of national courts are applicable, by analogy, to competing jurisdiction between a national court and an arbitral tribunal. 2

There have been mixed reactions to the Fomento ruling, ranging from approval to sharp (and sometimes misdirected) criticism. In view of the facts of the case, the outcome cannot be criticized. The debate over Fomento therefore relates to the very principle of lis alibi pendens in international commercial arbitration and the Swiss Federal Tribunal's decision has the undeniable merit of addressing that issue squarely. 3[Page54:]

The purpose of this article is not to foray into the debate between 'pro-Fomentos' and 'anti-Fomentos'. 4 Nor will it delve into the definitions, conditions and purposes of lis alibi pendens in general. 5 Rather, we shall try to put the Fomento ruling into a more general perspective, and then make some comments regarding certain aspects of lis alibi pendens in arbitration that Fomento left undecided. We shall consider the matter from an arbitrator's standpoint, in situations where an action is brought in a national court - or other adjudicative body - before the arbitration begins. This article will not cover situations in which court proceedings are commenced after the arbitration has begun, as such situations raise far fewer problems. 6

A. A comparative overview and some comments regarding Fomento

1. lis alibi pendens in international commercial arbitration: was it really so unheard of prior to Fomento ?

Article II(3) of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards ('New York Convention') and Article 8(1) of the UNCITRAL Model Law on International Commercial Arbitration ('UNCITRAL Model Law') reflect the almost universal rule that, when presented with an arbitration agreement, a national court should not proceed with the case but 'refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed'. This includes cases in which the validity or the scope of the arbitration agreement itself is at issue.

Starting from this principle, some commentators go a step further to consider that the national courts should refuse to 'refer the parties to arbitration' only in 'manifest cases' where there is no doubt that the arbitration agreement is invalid or inoperative. 7 This approach is not limited to legal writings and has been enacted in certain national laws. For instance, Article 1458 NCPC provides that, when an action is brought before a French court despite an agreement between the parties to arbitrate and prior to the commencement of any arbitral proceedings, the court must decline jurisdiction 'unless the arbitration agreement is patently void'. Not surprisingly perhaps, French authors are the main proponents of the germane proposition that the arbitral tribunal has priority to decide on its own jurisdiction, such priority being the negative effect of arbitrators' Kompetenz-Kompetenz.8[Page55:]

Other legal commentators, however, have expressed the opinion that Article II(3) of the New York Convention does not limit the examination of the arbitration agreement to 'manifest' cases, 9 and the idea that arbitral tribunals should have any form of priority to rule on their own jurisdiction is not accepted in several legal systems. 10 This second perspective tends to put national courts and arbitral tribunals on an equal footing. 11

There can be little doubt that the belief that arbitral tribunals and national courts rank equally with each other laid the foundations for Fomento. From that starting point, there is a natural path - some might say a slippery slope - to the application to international arbitration of the rules governing competing jurisdiction between national courts. If arbitration is the ordinary dispute resolution method in international commercial contracts and arbitral tribunals rank equally with national courts, is it not natural to treat instances of competing jurisdiction alike, whether they involve an arbitral tribunal and a national court or two national courts?

Turning to Swiss law, the path needed some further paving. Since the purpose of lis alibi pendens is to avoid situations in which two equally final and enforceable decisions exist within the same legal system, the first step was to rule that arbitrators can be bound by decisions of national courts regarding their jurisdiction. The Swiss Federal Tribunal took that step in the well known Westland Helicopters case of 1994. In Westland, the Federal Tribunal stated in an obiter dictum that if a national court decides that it has jurisdiction notwithstanding an agreement to arbitrate and despite a jurisdictional defence based on that agreement, its ruling on jurisdiction is binding upon an arbitral tribunal before which proceedings are brought subsequent to the commencement of judicial proceedings, provided that the parties and the subject matter in both proceedings are the same. 12 Whilst disagreeing with this reasoning, Professor François Perret observes that it is a key link in the chain of thought leading to the recognition of lis alibi pendens in international arbitration: if arbitrators were not bound by a court judgment denying the validity of an agreement to arbitrate, they would be free to proceed without regard to any judgment that a national court seized of the same matter might render. 13[Page56:]

Although the Federal Tribunal does not explicitly qualify its decision, the context indicates that the court to which the Federal Tribunal refers in Westland is a Swiss court. The result reached by the Federal Tribunal in such circumstances is unsurprising: given that the courts at the seat of the arbitration have the last word regarding the arbitral tribunal's jurisdiction (by way of setting-aside proceedings), it appears economical and reasonable that an arbitral tribunal seated in the same country as that in which the judicial proceedings are initiated should be bound by a court ruling on that issue. 14 The Federal Tribunal's obiter dictum in Westland does not, however, directly address the question of whether the same principle applies also to an arbitral tribunal seated in Switzerland faced with a judgment in which a foreign national court affirms its own jurisdiction notwithstanding the arbitration agreement.

In the Condesa/Buenaventura decision rendered three and a half years later, the Swiss Federal Tribunal stated that the principle set out in Westland was applicable also to foreign judgments on jurisdiction, provided that such judgments are capable of recognition in Switzerland. In Condesa/Buenaventura, the Federal Tribunal added - and this is capital for the proper understanding of Fomento - that the foreign judgment is not capable of recognition in Switzerland if the court affirmed jurisdiction despite the existence of a valid agreement to arbitrate, as this would be a breach of the foreign country's treaty obligations resulting from Article II(3) of the New York Convention. 15

The Condesa/Buenaventura case is highly significant, for it explicitly raises the issue of whether the Swiss statutory provision regarding lis alibi pendens in international matters is applicable to arbitration. In the event, the question was left unanswered, because the conditions for the application of lis alibi pendens were not met. However, the fact that the Federal Tribunal had raised the question in such clear terms could only be interpreted as a very strong hint. This was all the more true as the possible application of the lis alibi pendens rule to international arbitration had been contemplated incidentally and without any compelling reason in a G.F. TAS decision rendered in 1995. 16

Finally, during the same period and in the lead-up to Fomento, a significant number of Swiss (or Swiss-based) legal writers clearly contemplated the application of lis alibi pendens in international commercial arbitration, some favourably (or with Swiss neutrality), 17 others with hostility. 18 Commentators from other jurisdictions also broached the subject without rejecting outright the application of lis alibi pendens to international commercial arbitration. 19

The Swiss Federal Tribunal's decision in Fomento has to be considered against this background. From a comparative law stance, there was a nascent but clear trend towards placing arbitral tribunals and national courts on an equal footing. This trend, combined with the longstanding recognition of arbitration as the [Page57:] 'normal' dispute resolution method in international trade, favoured the application to arbitration of certain mechanisms, such as lis alibi pendens, which had hitherto been reserved for competing jurisdiction between national courts. At a more local level, several major Swiss commentators had already accepted the application of Swiss rules on lis alibi pendens to competing jurisdiction between arbitral tribunals and national courts. The G.F. TAS and Condesa/Buenaventura cases were unmistakable signs that the Federal Tribunal was waiting for an opportunity to follow this lead.

2. The Swiss Federal Tribunal's ruling in Fomento

The Swiss Federal Tribunal's Fomento ruling has been summarized and commented on in a number of articles. 20 Not wishing to repeat what has already been written, we shall focus on a few key issues.

2.1 The facts of the case and the swiss federal tribunal's reasons

The facts of Fomento are relatively straightforward. Fomento de Construcciónes y Contratas S.A. ('FCC') was the Spanish contractor for a port terminal project in Panama. Colón Container Terminal S.A. ('CCT') was the Panamanian owner. The project was subject to the fourth edition of the FIDIC Conditions of Contract, with its well known clause 67 that provides for a decision by the Engineer and then ICC arbitration. The arbitral clause stated that the seat of the arbitration was in Switzerland.

Differences having arisen between the parties, FCC brought an action against CCT in the courts of Panama in March 1998. In its defence, CCT disputed the jurisdiction of the courts of its own home country on the ground that the parties' contract contained an arbitration agreement. In June 1998, the Panamanian court ruled that this jurisdictional defence was late, as a consequence of which CCT was deemed to have waived the right to arbitration. In September 1998, CCT filed an arbitration request with ICC. FCC disputed the arbitral tribunal's jurisdiction, inter alia on the ground that CCT had waived the right to arbitrate in the Panamanian proceedings. It is noteworthy that FCC did not raise the lis alibi pendens issue outright before the arbitral tribunal. During the arbitration, the first Panamanian judgment was overturned by an appeal court, which ruled that CCT's jurisdictional objection based on the arbitration agreement had been raised in time. The decision of the appeal court was in turn challenged in the Panamanian Supreme Court. The arbitral tribunal was aware of these proceedings.

In a preliminary award on jurisdiction rendered in November 2000, the arbitral tribunal held that it had jurisdiction. In particular, the arbitral tribunal identified the lis alibi pendens question (although it had not been raised as such) but refused to stay the arbitral proceedings, mainly on the ground that the last Panamanian judgment to date had ruled that CCT had not waived its right to arbitrate and that, in any event, the arbitral tribunal was not bound by any Panamanian court decision. Before the time limit allowed for filing an application to set aside the award had expired, the Panamanian Supreme Court reversed the appeal court's decision and sent the case back to the initial court to proceed on the merits, on the ground that CCT's defence based on the arbitration agreement was late under Panamanian law. [Page58:]

When the case came before the Swiss Federal Tribunal, FCC argued inter alia that by refusing to stay the proceedings through an analogical application of Article 9 of the Swiss Act on Private International Law ('PIL'), 21 which is the rule governing lis alibi pendens between national courts, the arbitral tribunal had violated Swiss law and therefore wrongly decided in favour of its jurisdiction. 22

The Federal Tribunal agreed and set aside the award for the following reasons. To begin with, the Federal Tribunal ruled that the question of whether the arbitral proceedings should be stayed on the ground of lis alibi pendens is a jurisdictional issue and not a matter of procedural discretion. 23 Having identified the matter as one of jurisdiction, the Federal Tribunal then stated (a) that it would be contrary to Swiss public policy to have two equally enforceable decisions circulating in Switzerland and (b) that the lis alibi pendens mechanism contained in Article 9 PIL is precisely aimed at avoiding that risk. To properly understand this perspective, it must be emphasized that, in international matters, awards rendered by arbitral tribunals seated in Switzerland are enforceable as soon as they are notified to the parties, without any need of prior judicial sanction (Article 190(1) PIL). They are thus capable of immediate enforcement in Switzerland just like final Swiss court judgments. Moreover, in view of the Federal Tribunal's decisions in the Westland and Condesa/Buenaventura cases, arbitral tribunals seated in Switzerland are bound by court judgments denying their jurisdiction (be they Swiss or foreign judgments, provided in the latter case that the judgment is capable of recognition in Switzerland). On this basis, the Federal Tribunal found that Article 9 PIL should apply by analogy to international arbitration when the seat of the arbitration is in Switzerland.

In coming to its decision, the Federal Tribunal examined and dismissed one by one the arguments that could be raised against applying Article 9 PIL to international commercial arbitration by analogy. Two of these arguments deserve attention. First, the Federal Tribunal dismissed the fear that a party could paralyse arbitration in Switzerland by racing to the courts of an arbitration-hostile jurisdiction: on the basis of the Condesa/Buenaventura decision, a judgment rendered under such circumstances would not be capable of recognition in Switzerland, and thus one of the main conditions of Article 9(1) PIL would not be met. Second, the Federal Tribunal rejected the argument that the arbitral tribunal had priority to rule on its own jurisdiction, stating that this view has no legal basis in Swiss law. On the contrary, the Federal Tribunal considered that, in cases - such as Fomento - in which one party argues before an arbitral tribunal that the parties are bound by a valid agreement to arbitrate and in which the other party alleges in a national court that there has been a waiver of that same arbitration clause, the arbitral tribunal and the national court have an 'equal vocation' to decide the issue. Therefore, there was no reason to depart from the chronological rule of priority set out at Article 9 PIL.

Based on the above and in view of the facts of the case, the Federal Tribunal decided that the arbitral tribunal should have examined whether the conditions of Article 9(1) PIL were met before affirming its own jurisdiction. It stressed that the question of whether CCT's jurisdictional defence had been raised in time according to Panamanian law was best decided by the courts of Panama - a fact that the arbitral tribunal itself had acknowledged in the award. Using unusually harsh language, the Federal Tribunal censored the arbitrators for not waiting for the Panamanian Supreme Court to decide that issue definitively. Since the arbitral tribunal had not carried out the examination required by Article 9(1) PIL, its decision to take jurisdiction was wrongly made and the award was set aside. [Page59:]

2.2 The main criticisms of Fomento

Fomento has prompted a number of criticisms. We shall address those which we consider to be the most important (if not necessarily the most persuasive). The first two reflect general concerns, while the second brace of criticisms is more directly related to Swiss international arbitration law.

(i) Recognition of lis alibi pendens between national courts and arbitral tribunals enables bad-faith litigants to stymie the arbitral process

A common reaction to Fomento has been to state that arbitration in Switzerland can henceforth be stymied by bad-faith litigants who need only initiate even frivolous court proceedings in an arbitration-hostile jurisdiction before the arbitration begins. This reaction calls for at least two responses. First, it takes for granted that the party bringing court proceedings is acting in bad faith, which will not necessarily be the case. Second, it ignores the fact that the Swiss Federal Tribunal clearly recognized this risk, and addressed it by emphasizing that the judgment rendered by the foreign court in such circumstances would not be capable of enforcement in Switzerland. As one of the key conditions of lis alibi pendens would therefore not be met, the arbitration would be able to proceed. 24 In other words, lis alibi pendens is conceivable only if there is an issue regarding the jurisdiction of the arbitral tribunal. 25 This question remains governed by Swiss international arbitration law and, more importantly, will have to be examined by the arbitral tribunal itself. 26

The requirement that the foreign judgment must be capable of recognition in Switzerland also means that a litigant cannot bring an action before the courts of a country having no connection with the case. Indeed, Swiss rules on the recognition of foreign judgments provide that a foreign court has jurisdiction for the purpose of enforcement (compétence indirecte) only if there is a connecting factor between the facts of the case and the country where the judgment was rendered. 27 Failing any such connection, the foreign judgment will not be capable of recognition in Switzerland, even in the absence of an arbitration agreement.

Despite these reassuring words, there is, however, a caveat to be made. In another decision of 2001, the Swiss Federal Tribunal held that a judgment rendered in a member state of the Lugano Convention, notwithstanding the existence of an arbitration agreement, may be recognized and enforced in Switzerland under the terms of the Lugano Convention. 28 This is due to the fact that there is no verification of jurisdiction for the purpose of recognition (compétence indirecte) under the Lugano Convention. In this decision, the Federal Tribunal did not examine whether Switzerland's obligations under the Lugano Convention conflict with those arising from the New York Convention. It would therefore appear that the principle stated in the Condesa/Buenaventura and Fomento cases, according to which a foreign judgment rendered in breach of an agreement to arbitrate would in any event not be capable of recognition in Switzerland, would be of no avail to an arbitral tribunal seated in Switzerland faced with parallel proceedings previously initiated in a Lugano Convention member state.

This is a most unsatisfactory situation and no comfort should be drawn from the fact that this is the law not only in Switzerland but in all countries subject to EC[Page60:] Council Regulation 44/2001 and the Lugano Convention. The only answer is to interpret these instruments 'creatively' (i.e. contra legem) or to change their wording. 29

(ii) Recognition of lis alibi pendens between national courts and arbitral tribunals will cause delays and even encourage dilatory tactics

Certain commentators and practitioners have also voiced the concern that, by importing lis alibi pendens into the field of international arbitration, Fomento will inevitably result in delays and even provide bad-faith litigants with a pretext for procrastination. We believe that this fear should not be exaggerated.

Firstly, as stated immediately above, lis alibi pendens will arise only if there is a genuine issue regarding the jurisdiction of the arbitral tribunal. Again, it cannot be simply assumed that the parallel court proceedings were initiated in bad faith. Furthermore, the party that has brought the action before the national court will certainly raise a jurisdictional defence before the arbitral tribunal at an early stage of the arbitration (this is precisely what happened in Fomento). 30 Therefore, the arbitral tribunal will have to deal with jurisdictional questions in any event. A debate on jurisdiction may cause delays, but this is a general fact of life in international arbitration, whether or not the arbitrators apply the lis alibi pendens doctrine. 31

Secondly, by characterizing lis alibi pendens as a jurisdictional issue, the Swiss Federal Tribunal makes the arbitral tribunal's ruling on that question open to immediate review, pursuant to Articles 190(2)(b) and 190(3) PIL. 32 There is therefore no reason why a lis alibi pendens issue should in itself cause greater delays than any other jurisdictional defence. It could even be claimed that the application of the lis alibi pendens principle is actually a imple and efficient solutions, as has been forcefully and persuasively argued by Professor Jean-François Poudret in his annotation on Fomento. 33

This possibility of immediate judicial review brings us to our last consideration: it is preferable to deal with the issue of parallel and competing proceedings at an early stage, rather than running the risk of being faced later with conflicting decisions. If arbitrators ignore competing court proceedings, they may be doing a disservice to the parties, for any time gained by disregarding parallel proceedings will be outweighed by the real - and potentially unsolvable - problems that will arise if the national court subsequently renders a conflicting judgment. If the national court is in the same country as the seat of the arbitration, the existence of conflicting decisions can raise delicate questions of coordination, both within that country and abroad. If the national court is located in a foreign country, matters could become even more complicated if the judgment and the award are enforced in parallel, possibly in different jurisdictions.

(iii) Recognition of lis alibi pendens between national courts and arbitral tribunals could bring foreign restrictions on arbitration into Swiss arbitration law

Certain authors writing before Fomento expressed the concern that recognition of lis alibi pendens would 'pave the way to the reception in an arbitration-friendly country such as Switzerland, of limitations and restrictions contained in the laws of foreign countries which are less friendly to arbitration'. 34 This concern, which [Page61:] related mainly to foreign restrictions on arbitrability, has been echoed in criticisms of Fomento. 35

Article 9 PIL applies only to arbitral tribunals seated in Switzerland, which means that the provisions of Chapter 12 PIL apply and therefore the validity of the arbitration agreement remains governed by Articles 177 and 178 PIL. Nothing in Fomento contradicts this conclusion. On the contrary, in the passage relating to the abrogation of arbitration agreements by acta contraria, the Federal Tribunal refers only to Swiss international arbitration law. 36 Therefore, the application of Article 9 PIL does not import foreign provisions relating to the validity of the arbitration agreement, especially those restricting arbitrability, into arbitrations seated in Switzerland. 37 In fact, quite the opposite would appear to be true. For instance, if the foreign national court accepts jurisdiction on the ground that the dispute is not arbitrable under the laws of that forum, whereas the dispute is arbitrable under Article 177 PIL, on the basis of Condesa/Buenaventura and Fomento there is no real prospect of the foreign judgment being recognized in Switzerland. As a result, one of the key conditions of Article 9 PIL would not be met and there would be no stay of the arbitral proceedings. 38

The fact that the Federal Tribunal subjected the question of whether CCT's jurisdictional defence in Panama had been raised in time to the laws of the Panamanian forum does not alter this conclusion. In so doing, it was merely applying a specific law to a specific preliminary issue, which is by no means uncommon. For instance, even when the validity of an arbitration agreement is governed by Articles 177 and 178 PIL, the question of whether an officer of a corporation has the powers to bind the corporation in question is governed by the lex societatis. 39

(iv) Illogicality of applying the 'capable of recognition in Switzerland' test

One commentator has taken Fomento to task on the ground that the examination by the arbitral tribunal of whether the foreign judgment is capable of enforcement in Switzerland leads to a 'paradox', since the answer to this question depends on whether the arbitration agreement is valid under Swiss law. Therefore, by examining what is supposedly a preliminary issue, the arbitral tribunal is actually making a definitive ruling on its own jurisdiction. 40

This particular criticism is akin to the view, mentioned earlier, that lis alibi pendens between national courts and arbitral tribunals is a logical impossibility. The arbitration agreement is either valid or it is not. Once that issue has been decided, either the national court or the arbitral tribunal has jurisdiction, so there is no reason for a stay.

Others disagree with this view. For instance, Professor Jean-François Poudret argues that the purpose of lis alibi pendens is not only to avoid conflicting decisions, but also to avoid the duplication of proceedings on the same issue. Therefore, arbitrators' forecasts regarding the compétence indirecte of foreign courts should not result in a full examination of the arbitral tribunal's own jurisdiction, for this would be precisely the type of duplication that lis alibi pendens aims to avoid. Rather, the arbitral tribunal should stay the arbitral proceedings unless it can predict from the outset that there is no reasonable prospect of a judgment rendered by the foreign court being recognized in Switzerland. 41[Page62:]

Here the debate touches on questions left open in Fomento. It is these questions that we shall attempt to elucidate in the second part of our study.

B. Questions left unanswered by Fomento

1. Questions of Swiss law

In Fomento, the award was set aside not because the arbitral tribunal had applied Article 9 PIL wrongly; the problem was rather that it had not applied this provision at all.42 The Federal Tribunal was therefore able to vacate the award and remand the case to the arbitral tribunal, without having to examine how the arbitral tribunal should have applied this provision, let alone the potential consequences of such application. It is to such questions that we shall now turn, by examining (1) the scope of the arbitral tribunal's examination of the validity of the arbitration agreement and (2) the duration of the stay.

1.1 The arbitral tribunal's examination of the validity of the arbitration agreement: full review or prima facie test?

As seen above, opinions differ as to the scope of the arbitral tribunal's examination of a foreign court's compétence indirecte and, thus, the validity of the arbitration agreement. Should the arbitral tribunal carry out a detailed examination of the validity of the arbitration agreement or simply verify whether there is no reasonable prospect of the judgment eventually rendered by the foreign court being recognized in Switzerland? This highlights the limits of the analogy drawn by the Swiss Federal Tribunal in Fomento between competing jurisdiction of national courts on the one hand and parallel proceedings between national courts and arbitral tribunals on the other.

The opinion that the arbitral tribunal should merely conduct a prima facie verification of whether the foreign court's compétence indirecte can be ruled out from the outset reflects the practice adopted in respect of competing jurisdiction between state courts. In that situation, the jurisdiction of the first court does not rule out the jurisdiction of the second and, assuming that the second court also has jurisdiction, the aim of lis alibi pendens is to determine which of these two equally competent courts should decide the matter. Since neither forum has a better right per se, the criterion is simply chronological. When applied to two equally competent state courts, lis alibi pendens can even be seen as an application of the prior tempore potior jure maxim. It is not surprising, therefore, that the examination of the foreign court's compétence indirecte should be somewhat cursory.

We consider that it would be mistaken simply to transpose this reasoning to arbitration. Moreover, from a practical perspective, restricting arbitrators' powers of review to a prima facie examination regarding a negative forecast of the foreign court's compétence indirecte could lead to the undesirable results that Fomento's critics fear: a litigant knowing that the arbitration agreement is valid could bring an action in a national court by relying on specious, but cleverly cloaked, grounds. This would suffice for a stay of the arbitral proceedings initiated subsequently and lead to unnecessary delay. [Page63:]

Given that the validity of the arbitration agreement normally rules out the jurisdiction of national courts, arbitrators' powers of review should not be determined according to the standards applicable to competing courts that are equally competent. 43 When examining the prospect of a foreign judgment being recognized - and thus whether the national court or the arbitral tribunal has jurisdiction - arbitrators should not be limited to a prima facie examination restricted to a negative forecast. On the contrary, arbitral tribunals seated in Switzerland should have full power and latitude to examine the validity of the arbitration agreement under Swiss law.

There is admittedly a risk of duplicating proceedings, which lis alibi pendens aims to avoid. Whether this risk actually materializes will depend on the facts of each case. In Fomento, it was clear from the outset that there was a serious issue before the courts of Panama: even before CCT launched the arbitration, a Panamanian court had ruled that CCT's jurisdictional objection based on the arbitral clause had been raised late. Since the arbitrators themselves had given considerable weight to Panamanian decisions on that issue, and in view of the fact that the pace of justice in Panama was perfectly honourable (from the bringing of the action until the final Supreme Court ruling, the proceedings lasted only a few months more than the arbitral proceedings on jurisdiction), the decision to stay those arbitral proceedings would not have required extensive investigation or briefing. To take another example, if a state brings an action before its courts alleging that it may not arbitrate - and therefore that the agreement to arbitrate is invalid - an arbitral tribunal seated in Switzerland would lose little time in ruling that the conditions for a stay are not met, in light of Article 177(2) PIL. As for the more complicated cases, the risk of duplicative proceedings is a small price to pay for a clear rule that pre-empts bad-faith dilatory actions before national courts.

1.2 The duration of the stay

In the setting aside proceedings, FCC had argued that the arbitral tribunal should have stayed the arbitral proceedings until the courts of Panama had decided definitively whether CCT's jurisdictional defence had been raised in time and until all rights of appeal on that issue were exhausted in Panama. Although similar to the solution adopted in Article 27 of EC Council Regulation 44/2001 and Article 21 of the Lugano Convention, which provide for a stay until the first court rules on jurisdiction, FCC's position was different from a strict application of Article 9 PIL, which provides for a stay until the first court issues a judgment on the merits that is capable of enforcement in Switzerland (Article 9(3) PIL).

In our view, a stay limited to the duration of the court proceedings on jurisdiction is the better solution, given the fundamental difference between the competing jurisdiction of two national courts on the one hand and parallel proceedings before a national court and an arbitral tribunal on the other. If a foreign national court decides that it has jurisdiction and this decision is capable of recognition in Switzerland, the arbitral tribunal is bound by the decision and has no choice but to decline jurisdiction, thereby becoming functus officio. In such circumstances, there is no reason for the arbitrators to remain in office until the proceedings abroad result in a decision on the merits. 44

There is, however, a further consideration that could lead to the opposite solution. Article 9 PIL mentions as a condition for staying the proceedings the expectation that the foreign court will render a judgment within a reasonable period of time. If after the arbitral tribunal has declined jurisdiction the court proceedings fail to [Page64:] make headway, it would be preferable to allow the parties to revert to arbitration. This reservation relating to the duration of the foreign proceedings presupposes that the two competing courts have equal jurisdiction and that their jurisdiction is of a permanent nature. Although applicable to courts, neither of these presuppositions is applicable in arbitration.

We therefore consider that, if the conditions for a stay are met, such stay should last, as a rule, only until the national courts reach a final decision on jurisdiction. Given that Article 9(1) PIL explicitly conditions the stay upon the expectation that the foreign proceedings will be completed within a reasonable time, this should not lead to unwarranted delay. Indeed, this additional condition enables arbitrators either to refuse the stay if there is little prospect of a speedy solution to the dispute, or to resume the arbitral proceedings if, after a stay has been ordered, the duration of foreign court proceedings on jurisdiction becomes unreasonable. 45 That being said, the arbitrators should have the possibility of staying the proceedings for a different period of time if appropriate under the circumstances. This could be the case, for instance, where the foreign courts' ruling on jurisdiction can be appealed only with the judgment on the merits, or where the foreign lex fori provides that courts rule on their jurisdiction at the same time as on the merits (it being understood that such circumstances could also justify a refusal to stay the arbitration if it is foreseeable that the proceedings on the merits will take an unreasonably long time).

2. General questions regarding the potential scope of lis alibi pendens in international commercial arbitration

2.1 Competing jurisdiction between national courts and arbitral tribunals: what issues genuinely give rise to lis alibi pendens?

We have stated above that the application of lis alibi pendens along the lines of Fomento will be restricted to cases in which there is a 'genuine' issue regarding the arbitral tribunal's jurisdiction. This begs the question of what would be 'genuine'.

As mentioned in the introduction, the outcome of Fomento is not surprising in view of the facts of the case - and it is significant that none of the decision's critics has taken the Swiss Federal Tribunal to task from that viewpoint. Actually, Fomento had all of the trappings of the textbook example of lis alibi pendens. There was no question of forum shopping, since the Panamanian courts in which the action was brought were those of the defendant's domicile. This very same defendant was a commercial company represented by competent Panamanian counsel, yet it failed to invoke the arbitration agreement within the time limits prescribed by Panamanian law. As a result, it was deemed to have waived its right to arbitrate by a Panamanian judgment rendered before the arbitration had even begun.

What of other, less obvious, cases? We believe that bona fide instances of lis alibi pendens in international commercial arbitration will probably be confined to a limited spectrum of cases.

One potential situation is that in which the parties clearly agreed to arbitrate, but subsequent factors cast doubt on the continuing validity of the arbitral clause. For [Page65:] instance, it occurs in practice that parties enter into a contract containing an arbitration agreement, but then either vary or terminate that contract with a different instrument containing a choice-of-forum clause 46 (or vice versa). In this type of situation, which resembles the facts in Fomento, the arbitral tribunal could legitimately stay the proceedings if the action was first brought before the national court designated by the choice-of-forum clause (provided, of course, that all the conditions of lis alibi pendens are met).

Similarly, an agreement to arbitrate may set out time limits within which a party wishing to initiate arbitration must act. Failure to do so within the prescribed period may cause the arbitration clause to lapse. 47 A party may thus have a bona fide case to bring in a national court, in which case there would be no reason to object to the application of lis alibi pendens by the arbitral tribunal.

The same could be said of cases in which the scope of the arbitration agreement is delimited, and the question arises as to whether it covers a particular dispute. 48 A variation on that theme can occur - and the authors have seen this in practice - when one contract contains an arbitration clause for certain types of disputes and a choice-of-forum clause for others. In this situation, there may well be genuine doubts as to whether the dispute comes within the ambit of the agreement to arbitrate. lis alibi pendens could also apply in cases such as these.

Finally, lis alibi pendens could be a genuine issue in cases involving parties that are not signatories to the arbitration agreement. There is often no reason for such parties to take account of the arbitration clause prior to the start of the arbitration. Such a party may initiate court proceedings and then subsequently find that it has been named as a defendant in arbitration proceedings relating to the same dispute. This type of case pertains to the subjective scope of the arbitration agreement - which parties does it bind? - and can also give rise to genuine lis alibi pendens issues.

The common denominator of these various situations is that they do not relate to straightforward matters in which two parties agree to arbitrate and one of them brings an action in a national court in clear disregard of that agreement. In such matters, an arbitral tribunal will be able to apply the lis alibi pendens test, make a negative forecast on the foreign judgment's chances of recognition in the country where the tribunal has its seat, reject lis alibi pendens and proceed with the case - all without more delay than would result from any other frivolous objection to the arbitral tribunal's jurisdiction.

2.2 Competing jurisdiction between arbitral tribunals?

A final issue that Fomento did not need to address - and which is not often mentioned in legal writings - is the question whether lis alibi pendens could arise between two competing arbitral tribunals.

At first sight, this could appear unlikely in practice. However, the authors have seen contracts providing for different forms of arbitration according to the types of issues to be decided. The authors have also seen interconnected contracts between the same parties, signed the same day and regarding the same commercial operation, with conflicting arbitration clauses. Conflicts between dispute resolution clauses can also arise in connection with characterization, for instance where a dispute may be characterized as arising from a contract or from company law and where the contract and the company's by-laws contain conflicting arbitral clauses. [Page66:]

The potential application of lis alibi pendens between two arbitral tribunals is illustrated in the Swiss decision Arthur Andersen v. Andersen Consulting. Here, a jurisdictional dispute arose from the fact that the various standard form contracts between Andersen firms contained successive and conflicting arbitration agreements. 49 The quasi-totality of the Andersen Consulting member firms initiated an ICC arbitration against Andersen Worldwide Société Coopérative and against the quasi-totality of the Arthur Andersen member firms. This first arbitration was based on what was then the latest agreement to arbitrate (ICC, with seat in Switzerland), which had not yet been signed by all parties. A few months later, one Arthur Andersen member firm initiated ad hoc arbitral proceedings against one Andersen Consulting member firm, based on an earlier signed version of the arbitral clause (ad hoc, with seat in Switzerland).

In the second arbitration, the respondent refused to appoint an arbitrator, on the ground that the same dispute was already pending before the arbitrator appointed in the ICC proceedings. In the judicial appointment proceedings brought in a Geneva court, the same respondent relied on lis alibi pendens to argue that, in any event, the arbitrator in the existing ICC case had priority to rule on his own jurisdiction. 50 The Geneva court dismissed the petition for the appointment of an arbitrator, on the ground that the 'arbitrator [in the ICC proceedings] will have to decide, as a preliminary issue, on the effect of the arbitration agreement, so that the fate of the clause, 1989 or 1994 version, will be definitively sealed by the ICC arbitrator, with the possibility of a challenge before the [Swiss] Federal Tribunal. [T]he present petition is therefore premature and may possibly be filed again only after the ICC arbitrator sitting in Geneva has decided which of the two arbitral clauses in fact binds the parties.' 51

Although the Geneva court does not refer to lis alibi pendens, let alone to the application of Article 9 PIL, its approach is clearly, albeit implicitly, based on a lis alibi pendens-type reasoning. It may be argued that the court misapplied Swiss rules on the judicial appointment of arbitrators, under which appointment is the rule and refusal to appoint a very narrow exception subject to very restrictive conditions. If it had adhered strictly to those rules, the Geneva court would have left the lis alibi pendens question to the arbitrator instead of pre-empting the second proceedings. 52 In that event, the arbitrator in the second proceedings would have been faced with a potential case of lis alibi pendens.

The question to be asked is whether arbitrators would resort to the lis alibi pendens mechanism when there are two competing arbitral tribunals, even though this mechanism is intended to deal with competing jurisdiction between national courts. The proposition may seem surprising, but is by no means far-fetched. To take the Arthur Andersen case, there is a plausible case to be made that, if the Geneva court had appointed an arbitrator in the ad hoc proceedings, that arbitrator could have stayed the subsequent proceedings pending a definitive ruling on the applicable arbitration agreement in the ICC proceedings (provided of course that all the other conditions of lis alibi pendens were met). This is all the more arguable as both arbitrations had their seat in the same country. Therefore, the arbitrator in the second proceedings would have been bound, practically, by the award on jurisdiction in the ICC arbitration and, legally, by the Swiss Federal Tribunal's decision confirming that award.

The debate becomes more complicated if the two competing arbitral tribunals have their seats in different countries. In that case, the application of lis alibi pendens as described above would require the arbitrator in the second proceedings to [Page67:] make a forecast on the chances of recognition of the award rendered in the first proceedings. This raises the question of the law under which that forecast should be made. If the reason for the competing proceedings is that there are two equally valid arbitration agreements differing in their scope, the second arbitral tribunal could make this forecast based on Article V(1)(c) of the New York Convention, whilst at the same time verifying its own jurisdiction in accordance with the law of the seat of the second arbitration.

Matters become much more complicated if there can be only one valid arbitration agreement (as, for instance, in the Arthur Andersen case). Under Article V(1)(a) of the New York Convention, recognition of an award rendered abroad may be refused for lack of jurisdiction under the law chosen by the parties or pursuant to the law under which the award was made (i.e., in most cases, the law of the seat of the first arbitration). 53 In practice, it is far from unlikely that the law governing the jurisdiction of the second arbitral tribunal is different from that of the first arbitral tribunal. This could have the following consequences:

- the second arbitral tribunal finds that it has jurisdiction pursuant to the laws of the country where it has its seat, and

- the second arbitral tribunal also finds that, by applying a different law pursuant to Article V(1)(a) of the New York Convention, the award rendered by the first arbitral tribunal would also be capable of recognition and enforcement in the country where the second tribunal has its seat.

There are at least three possible solutions to this problem, none of which is entirely satisfactory. If the second arbitral tribunal follows the approach of the Swiss Federal Tribunal, according to which the avoidance of conflicting and equally enforceable decisions is a public policy consideration, it will likely place emphasis on the prospects of enforcement of the award rendered by the first arbitral tribunal in the country where the second tribunal is seated. This would lead the second arbitral tribunal to examine whether the first arbitral tribunal has jurisdiction under the law designated by Article V(1)(a) of the New York Convention and, if so, to stay the second arbitration until a final decision has been obtained on the issue of jurisdiction in the first country. The major drawback of this approach is that it would result in the duplication of proceedings, for both the first and the second tribunal would be examining the jurisdiction of the first tribunal, under the same law.

The second arbitral tribunal could also consider that, when there are two competing arbitral proceedings, the parties' choice of arbitration as the proper dispute resolution method will be upheld in any event. This view, which is based on a form of comitas between arbitrators, could lead the second tribunal to disregard the recognition test and to verify only the identity of the actions and the chronological criterion. The disadvantage of this approach is that it could potentially give excessive deference to the first proceedings. However, this might be the least of evils. 54

The third option is, in our view, not an option at all: the second arbitrator could simply disregard the first proceedings. In that case, the first claimant to obtain an award would 'win the prize'. In practice, this is likely to lead to a profusion of delaying tactics in both proceedings. It could also result in a Hilmarton-like situation, in which there would be two conflicting awards, rendered this time by tribunals seated in different countries. Actually, the situation would be worse than Hilmarton, since there would be no possibility of arguing that one award has [Page68:] legally superseded the other. Consequently, inextricable difficulties are likely to arise at the enforcement stage and recent experiences, such as the Lauder case, have shown that these difficulties should by no means be underestimated. This third 'option' demonstrates that lis alibi pendens - or a similar mechanism properly adapted to arbitration - is a necessary tool for resolving cases of competing jurisdiction between two arbitral tribunals.

Conclusion

Competing and parallel proceedings raise some of the most complicated issues in international civil procedure. lis alibi pendens is one of them. Arbitration is the ordinary dispute resolution method in international commerce, and it is not surprising that it should be confronted with this issue as well. Far from being a threat to the development of international commercial arbitration, the recognition of lis alibi pendens in arbitration is a normal development, which merely highlights the maturity of that field of law.

Granted, lis alibi pendens does not offer perfect solutions. This fact merely reflects the legal and practical difficulties that inevitably arise when the same action involving the same parties is brought before two different adjudicative bodies. In such inextricably complicated situations, there may be no perfect remedy. Nonetheless, lis alibi pendens principles may be usefully applied in arbitration and could even prove to be the seed of more sophisticated solutions that arbitration practitioners will devise in the future.

Appendix

Provisions of the Swiss Act on Private International Law (PIL) relating to <i>lis alibi pendens</i> and the recognition of foreign judgments

(Translated from the French)

Art. 9

VIII. Lis alibi pendens

1. If an action on the same matter between the same parties is already pending abroad, the Swiss court shall stay the proceedings if it is to be expected that the foreign court will, within a reasonable time, render a judgment that is capable of recognition in Switzerland.

2. An action becomes pending in Switzerland when the first act necessary to commence the lawsuit is carried out. To commence the action, it is sufficient to initiate judicial conciliation proceedings.

3. The Swiss court shall decline jurisdiction upon presentation of a foreign judgment that is capable of recognition in Switzerland.

Art. 25

I. Recognition

1. General rule

A foreign decision is recognized in Switzerland:

(a) if jurisdiction lay with the judicial or administrative authorities of the country in which the decision was rendered;

(b) if there is no more ordinary judicial remedy against the decision or if the decision is final; and

(c) if there is no ground for refusing recognition under Article 27.

Art. 26

2. Jurisdiction of foreign authorities

Jurisdiction lies with a foreign authority:

(a) if a provision of this statute so provides or, if there is no such provision, if the defendant had its domicile in the country where the decision was rendered;

(b) if, in patrimonial disputes, the parties agreed to submit to the jurisdiction of the authority having rendered the decision by a valid agreement under this statute;

(c) if, in a patrimonial dispute, the defendant entered an unconditional appearance on the merits; or

(d) if, in the case of a counterclaim, the authority that rendered the decision had jurisdiction over the main claim and if the two claims are connected.

Art. 108

III. Foreign decisions

1. Foreign decisions on real rights on immovable property are recognized in Switzerland if they were rendered in the country where the property is situate or are recognized in that country.

2. Foreign decisions on real rights on chattels are recognized in Switzerland:

(a) if they were rendered in the country where the defendant had its domicile;

(b) if they were rendered in the country where the chattels are situate, provided that the defendant had its place of habitual residence in that country; or

(c) if they were rendered in the country of the forum chosen by the parties.

Art. 111

III. Foreign decisions

1. Foreign decisions on infringement of intellectual property rights are recognized in Switzerland:

(a) if they were rendered in the country where the defendant had its domicile; or

(b) if they were rendered in the country for which the protection of those rights is sought and the defendant did not have its domicile in Switzerland.

2. Foreign decisions on the existence, validity or registration of intellectual property rights are recognized only if they were rendered in the country for which the protection of those rights is sought, or are recognized in that country.

Art. 149

1. Foreign decisions concerning claims relating to the law of obligations are recognized in Switzerland:

(a) if they were rendered in the country where the defendant had its domicile;

(b) if they were rendered in the country of the defendant's place of habitual residence, provided that the claims are connected with an activity exercised in that country.

2. They are also recognized:

(a) in case of a decision relating to a contractual obligation, if it was rendered in the country where the obligation was to be performed and if the defendant did not have its domicile in Switzerland;

(b) in case of a decision relating to a claim based on a consumer contract, if it was rendered at the domicile or the place of habitual residence of the consumer and if the conditions of Article 120(1) are met;

(c) in case of a decision relating to claim based on an employment contract, if it was rendered either at the place where the employer's operations are situated, or at the place where the employee's work was performed, and if the employee did not have his or her domicile in Switzerland;

(d) in case of a decision relating to a claim arising from the operation of a branch office or other non-incorporated representative office, if it was rendered at the place where that office was located;

(e) in case of a decision relating to unjust enrichment, if it was rendered at the place of the act or of the resulting effect and if the defendant did not have its domicile in Switzerland;

(f) in case of a decision relating to tort, if it was rendered at the place of the act or of the resulting effect and if the defendant did not have its domicile in Switzerland.

Art. 165

VIII. Foreign decisions

1. Foreign decisions on claims relating to company law are recognized in Switzerland:

(a) if they were rendered or are recognized in the country where the company has its registered head office and if the defendant did not have its domicile in Switzerland; or

(b) if they were rendered in the country where the defendant had its domicile or place of habitual residence.

2. Foreign decisions on claims related to public issuance of shares or bonds by means of a prospectus, circular letter or similar publication are recognized in Switzerland if they were rendered in the country where the issuance took place and if the defendant did not have its domicile in Switzerland.

1
See e.g. the reasoning of the Italian Corte di cassazione in the decision Società Montedison e altre v. Società Enichem, 8 July 1996, [2000] ASA Bulletin 384 at 388. See also award rendered in 1988 in ICC case 5103, in S. Jarvin, Y. Derains & J.-J. Arnaldez, Collection of ICC Arbitral Awards (1986-1990) (ICC Publishing/Kluwer, 1994) 361 at 365 and references. For this very reason, Philippe Schweizer and Olivier Guillod opened their prescient study on lis alibi pendens in international arbitration, published in 1988, with the remark that their subject could be viewed as a 'non-sujet par excellence'; P. Schweizer & O. Guillod, 'L'exception de litispendance et l'arbitrage international' in Le juriste suisse face au droit et aux jugements étrangers: ouverture ou repli? (Fribourg: Editions universitaires de Fribourg, 1988) 71.

2
Fomento de Construcciónes y Contratas S.A. v. Colón Container Terminal S.A., Swiss Federal Tribunal, 14 May 2001, ATF 127 III 279, [2001] ASA Bulletin 544 (with an English translation). The decision is also available in the original French on the Swiss Federal Tribunal's web site: www.bger.ch (Go to Rechtsprechung, then Leitentscheide ab 1954, then Index 80-129, then 2001 (127) III, click on 279. The same search method can be used for all officially reported Swiss Federal Tribunal decisions cited in this article.)

3
On lis alibi pendens in international commercial arbitration, see M. Liatowitsch, Schweizer Schiedsgerichte und Parallelverfahren vor Staatsgerichten im In- und Ausland (Basel: Helbing & Lichtenhahn, 2002); C. Oetiker, Eintritt und Wirkungen der Rechtshängigkeit in der internationalen Schiedsgerichtsbarkeit (St.-Gallen: Dike, 2003). The second of these titles appeared just as this article was being completed, too late for full use to be made of it.

4
Having acted as counsel of record for Fomento before the Swiss Federal Tribunal and argued the applicability of lis alibi pendens, the authors of the present article are moreover bound by a certain duty of reserve.

5
These will be assumed to be known to readers. However, we shall expand on certain fundamentals of lis alibi pendens to the extent necessary for the better understanding of certain issues.

6
The usual lis alibi pendens test favours the adjudicative body before which the case is brought first (see e.g. Article 27 of the Council Regulation (EC) No. 44/2001, 22 December 2000, on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters, OJ L12/1, 16 January 2001 ('EC Council Regulation 44/2001'), which replaced the Brussels/San Sebastian Convention; Article 21 of the Lugano Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters ('Lugano Convention'); Article 9 of the Swiss Act on Private International Law ('PIL')). Application of the lis alibi pendens mechanism thus enables arbitral tribunals to proceed notwithstanding parallel court proceedings. Some national laws provide that when arbitration is commenced before court proceedings, the arbitral tribunal has absolute priority over the national judge (see e.g. Article 1458 of the French Nouveau Code de procédure civile ('NCPC')). Other instruments provide for a stay of the court proceedings brought after the commencement of the arbitration (see e.g. Article VI(3) of the 1961 European Convention on International Commercial Arbitration, which however reserves cases in which the court has 'good and substantial reasons' to refuse a stay). Without recognizing the lis alibi pendens mechanism, such provisions lead to a similar result.

7
See especially A.J. van den Berg, The New York Convention of 1958 (Deventer: Kluwer, 1981) at 155.

8
See E. Gaillard, 'L'effet négatif de la compétence-compétence' in Etudes de procédure et d'arbitrage en l'honneur de Jean-François Poudret (Lausanne: University of Lausanne Press, 1999) 387, with extensive references; E. Gaillard & J. Savage, eds., Fouchard, Gaillard, Goldman on International Commercial Arbitration (The Hague: Kluwer, 1999) [hereinafter Fouchard, Gaillard, Goldman] at 401. It should however be emphasized that French law is not alone in this approach. Courts in the United States of America have also relied on the New York Convention's 'pro-enforcement bias' to hold that the exceptions mentioned in its Article II(3) must be interpreted narrowly; see A.J. van den Berg, 'The New York Convention: Summary of Court Decisions' in The New York Convention, ASA Special Series No. 9, Zurich 1996, 46 at 67-68. See also examples from Italian law in J.F. Poudret & S. Besson, Le droit comparé de l'arbitrage international (Brussels: Bruylant, 2002) at 463ff. Prior to Fomento, Swiss commentators also defended the view that arbitral tribunals have priority to rule on their own jurisdiction and that, consequently, national courts may proceed with a case only if it is obvious that the arbitration agreement is invalid or inoperative; see A. Bucher, Le nouvel arbitrage international en Suisse (Basel: Helbing & Lichtenhahn, 1988) at 55; G. Walter, W. Bosch & J. Brönnimann, Internationale Schiedsgerichtsbarkeit in der Schweiz (Bern: Stämpfli, 1991) 95.

9
E.g. K.P. Berger, International Economic Arbitration (Deventer: Kluwer, 1993) at 329-30; A. Dimolitsa, 'Separability and Kompetenz-Kompetenz' in Improving the Efficiency of Arbitration Agreements and Awards: 40 Years of Application of the New York Convention, ICCA Congress Series No. 9 (The Hague: Kluwer, 1999) 217 at 234-235 and 244; P. Schlosser, Das Recht der internationalen privaten Schiedsgerichtsbarkeit, 2d ed. (Tübingen: Mohr, 1989) at 189 and 304.

10
See the examples given in Fouchard, Gaillard, Goldman, supra note 8 at 408, and J.-F. Poudret & S. Besson, supra note 8, at 445-451. For Swiss commentators, see especially P. Lalive, J.-F. Poudret & C. Reymond, Le droit suisse de l'arbitrage interne et international (Lausanne: Payot, 1989) at 288; W. Wenger, 'Article 186' in S. Berti, ed., International Arbitration in Switzerland, an Introduction to and a Commentary on Articles 176-194 of the Swiss Private International Law Statute (Basel: Helbing & Lichtenhahn, 2000) 464 (this is an English translation of a commentary published in 1996, hence Mr Wenger's views largely pre-date the cases described below that led to Fomento). It should however be noted that, although the two points of view (examination of the arbitral clause restricted to manifest or obvious cases and the arbitrators' priority to decide on their own jurisdiction) may be related, they do not necessarily go hand in hand. For instance, the Swiss Federal Tribunal does not consider that arbitral tribunals have priority when it comes to deciding on their jurisdiction, yet it restricts the powers of Swiss courts when examining arbitration agreements providing for a seat in Switzerland to a prima facie standard; see Compagnie de Navigation et Transports S.A. v. MSC Mediterranean Shipping Company S.A., Swiss Federal Tribunal, 16 January 1995, ATF 121 III 38 at 41-43; Fondation M. v. Banque X., Swiss Federal Tribunal, 29 April 1996, ATF 122 III 139 at 142-143. That being said, when an action is brought before a Swiss national court notwithstanding an arbitration agreement providing that the seat of the arbitration is abroad, the Swiss court's examination under Article II(3) of the New York Convention is not restricted to a prima facie standard; see aforementioned Compagnie de Navigation et Transports, ATF 121 III 38 at 42. (The distinction is based on the fact that, if the arbitral tribunal has its seat abroad, the only Swiss judicial control of the arbitral tribunal's jurisdiction is under the limited angle of Article V(1)(a) of the New York Convention.)

11
It could be submitted that, even in countries that take the view that arbitrators have priority to examine their own jurisdiction, certain provisions contain the seeds of a lis alibi pendens reasoning. For instance, it is noteworthy that even the French NCPC distinguishes between (a) cases in which an action is brought in a national court notwithstanding an arbitration agreement and where arbitration proceedings have not been commenced (regulated by the second sentence of Article 1458 NCPC, described above) and (b) cases in which the court action is brought after arbitration proceedings have been initiated. The first sentence of Article 1458 NCPC governs this second situation and provides that the French court must decline jurisdiction. Although this article vests a form of absolute priority in the arbitral tribunal by leaving no room for the court to examine the validity of the arbitration agreement (see J.-F. Poudret & S. Besson, supra note 8 at 460), the very fact that it makes a distinction based simply on chronology - before which body was the action brought first? - is a tip of the hat towards a lis alibi pendens-type reasoning.

12
Emirats Arabes Unis et consorts v. Westland Helicopters et Tribunal arbitral, Swiss Federal Tribunal, 19 April 1994, ATF 120 II 155 at 164.

13
F. Perret, 'Parallel Actions pending before an Arbitral Tribunal and a State Court: the Solution Under Swiss Law' in Arbitral Tribunals or State Courts: Who must Defer to Whom?, ASA Special Series No. 15 (Swiss Arbitration Association, 2001) 65 at 68 and 76-78.

14
See e.g. K.P. Berger, supra note 9 at 330.

15
Compañia Minera Condesa S.A. et Compañia de Minas Buenaventura S.A. v. BRGM-Pérou S.A.S., Swiss Federal Tribunal, 19 December 1997, ATF 124 III 83 at 86-87. In Condesa/Buenaventura, the Swiss Federal Tribunal did not clearly state under which law the validity of the arbitration agreement was to be determined. Taken in conjunction with the statement that a foreign country would be in breach of its treaty obligations if its courts ignored a valid agreement to arbitrate and bearing in mind that this statement was made with specific reference to Article II(3) of the New York Convention, several commentators understandably took Condesa/Buenaventura to mean that the validity of the arbitration agreement would be determined by applying the law of the foreign forum; on that basis, they voiced strong - and largely justified - criticism of the decision (see e.g. F. Perret, supra note 13 at 73-75; regarding Buenaventura more generally, see also J.-M. Vulliemin, 'Compétence et pouvoir d'examen du juge sur exception d'arbitrabilité au regard de l'article 9 LDIP' [1998] ASA Bulletin 372). For arbitrations seated in Switzerland, Fomento lifted this ambiguity: Swiss law governs the validity of the arbitration agreement.

16
G.F. TAS v. G.T. A.G. et Tribunal arbitral, Swiss Federal Tribunal, 20 December 1995, ATF 121 III 495 at 502.

17
See the ground-breaking studies of P. Schweizer & O. Guillod, supra note 1, and D. Reichert, 'Problems with Parallel and Duplicate Proceedings: the Litispendence Principle and International Arbitration' (1992) 8 Arbitration International 137, especially at 252-255. See also P.A. Karrer, 'Article 187' in S. Berti, ed., International Arbitration in Switzerland, an Introduction to and a Commentary on Articles 176-194 of the Swiss Private International Law Statute (Basel: Helbing & Lichtenhahn, 2000) 492 (this is an English translation of a commentary published in 1996, hence Mr Karrer's views also largely pre-date the cases that led to Fomento); P. Lalive, J.-F. Poudret & C. Reymond, supra note 10 at 288 (who focus on the solution to be adopted by a Swiss judge when the action is brought first before an arbitral tribunal); T. Rüede & R. Hadenfeldt, Schweizerisches Schiedsgerichtsrecht, 2d ed. (Zurich: Schulthess, 1993) at 231; W. Wenger, supra note 10 at 463-464.

18
See F. Perret, supra note 13 at 75 and 77.

19
See e.g. C. Consolo, 'Litispendenza e Connessione fra Arbitrato e Giudizio Ordinario. L'Esperienza Italiana: un Cammino Compiuto a Metà' [2000] ASA Bulletin 246 at 254-255; P. Schlosser, 'Arbitral Tribunals or State Courts: Who must Defer to Whom?' in Arbitral Tribunals or State Courts: Who must Defer to Whom?, ASA Special Series No. 15 (Swiss Arbitration Association, 2001) 15 at 33-34; H. Van Houtte, 'Parallel Proceedings before State Courts and Arbitration Tribunals: Is there a Transnational Lis Pendens-Exception in Arbitration or Jurisdiction Conventions?' in Arbitral Tribunals or State Courts: Who must Defer to Whom?, ASA Special Series No. 15 (Swiss Arbitration Association, 2001) 35 at 39-40. See implicitly, and more recently, C. Ambrose, 'Arbitration and the Free Movement of Judgments' (2003) 19 Arbitration International 3 at 13.

20
See e.g. F. Knoepfler, Annotation of Fomento, (2001) 11 Revue suisse de droit international et droit européen 559; L. Lévy & A.V. Schlaepfer, 'La suspension d'instance dans l'arbitrage international', Gazette du Palais, Les Cahiers de l'arbitrage 2001/2, 1415 November 2001, 18 at 19-20; M. Liatowitsch, supra note 3 at 156-159; M. Liatowitsch, 'Die Anwendung der Litispendenzregel von Art. 9 IPRG durch schweizerische Schiedsgerichte: ein Paradoxon? Überlegungen zu einem Bundesgerichtsentscheid vom 14. Mai 2001 im Lichte von BGE 124 III 83' [2001] ASA Bulletin 422 [hereinafter 'Paradoxon']; C. Oetiker, supra note 3 at 90-97; C. Oetiker, 'The Principle of Lis Pendens in International Arbitration: the Swiss Decision in Fomento v. Colón' (2002) 18 Arbitration International 137; J.-F. Poudret, Annotation of Fomento [2001] Rev. arb. 842; J.-F. Poudret & S. Besson, supra note 8 at 467-470; A. Samuel, 'Fomento - A Tale of "Litispendance", Arbitration and Private International Law', due to be published in 2003 in a collection of studies dedicated to C. Reymond (but currently accessible at www.adamsamuel.com); M. Scherer, 'When Should an Arbitral Tribunal Sitting in Switzerland Confronted with Parallel Litigation Abroad Stay the Arbitration?' [2001] ASA Bulletin 451; J.M. Vulliemin, Litispendance et compétence internationale indirecte du juge étranger (Note sous ATF 127 III 279) [2001] ASA Bulletin 439.

21
An English translation is annexed to this article, see pp. 69-71, below.

22
This was only the first argument among others; the gist of the motion to set aside was that the arbitral tribunal had ruled that disputes of a legal nature did not need to be referred to the Engineer under the FIDIC Conditions of Contract.

23
This is an important factor that should allay certain fears that have been voiced regarding the potential impact of Fomento (see section A.2.2(ii), below).

24
See above and paragraph 2(c)(dd) of the Swiss Federal Tribunal's reasons in Fomento, ATF 127 III 279 at 285. This touches on one of the main conditions of lis alibi pendens under Article 9 PIL: even if Article 9 PIL is simply transposed as is to international arbitration (a question that we shall discuss further below), a stay of the arbitral proceedings can be ruled out from the start if there is no real prospect of the foreign judgment being recognized (see J.-F. Poudret, supra note 20 at 848-849). This rule is not peculiar to Switzerland, but also exists, for instance, in French law; see H. Gaudemet-Tallon, Les conventions de Bruxelles et de Lugano, compétence internationale, reconnaissance et exécution des jugements en Europe, 2d ed. (Paris: L.G.D.J., 1996) at 204205.

25
In Fomento, for instance, FCC had argued before the Panamanian courts that CCT was precluded from relying on the arbitration agreement on the ground that it had failed to comply with essential features of Clause 67 of the FIDIC Conditions of Contract (obviously, the issue of waiver arose only at a later stage, after CCT failed to raise a timely jurisdictional defence).

26
See section B.1.1, below.

27
Swiss rules on jurisdiction for the purpose of enforcement are set out either in international treaties, or in PIL (for the provisions that could be relevant in international commercial matters, see especially Articles 25(a), 26, 108, 111, 149 and 165 PIL, English translations of which are annexed to this article at pp. 69-71, below).

28
X. Ltd. v. Y. S.A. et Cour des poursuites et faillites du Tribunal cantonal du canton de Vaud, Swiss Federal Tribunal, 9 February 2001, ATF 127 III 186 at 188.

29
On these issues, see C. Ambrose, supra note 19 at 14-20; S. Besson, 'Le sort et les effets au sein de l'Espace judiciaire européen d'un jugement écartant une exception d'arbitrage et statuant sur le fond' in Etudes de procédure et d'arbitrage en l'honneur de Jean-François Poudret (Lausanne: University of Lausanne Press, 1999) 329.

30
A party that fails to do so would very likely lose the right to dispute arbitral jurisdiction. See e.g. Article 16(2) of the UNCITRAL Model Law; Section 31(1) of the English Arbitration Act 1996; Article 186(2) PIL; Article 21(3) of the UNCITRAL Arbitration Rules; Article 23.2 LCIA Rules; Article 36(c) WIPO Arbitration Rules.

31
The authors are aware that, in matters relating to competing jurisdiction between national courts, the Swiss Federal Tribunal has ruled that a Swiss judge must apply Article 9 PIL ex officio (Al Bank Al Saudi Al Hollandi v. Ibrahim Abdullatif Al-Issa, Swiss Federal Tribunal, 5 January 2001, ATF 127 III 118). Given the analogy drawn in Fomento, the Federal Tribunal might extend this duty to arbitral tribunals seated in Switzerland (although this would be difficult to reconcile with Article 186(2) PIL and would not be opportune). If so, it would be conceivable that an arbitral tribunal seated in Switzerland would have to deal with the issue even in the absence of a jurisdictional defence. However, this is extremely unlikely for at least two reasons. First, it is difficult to imagine that the parties would provide details on the parallel court proceedings without this being linked, in some way or another, to the jurisdiction of the arbitral tribunal (in Fomento, FCC did not raise lis alibi pendens explicitly, but filed extensive evidence on the Panamanian proceedings to support its argument that CCT had waived the right to arbitrate). Second, the party that has brought the action before the national court has every interest in disputing the arbitrators' jurisdiction, since failure to do so would very likely damage its position in the court proceedings.

32
See paragraph 2(a) of the Swiss Federal Tribunal's reasons in Fomento, ATF 127 III 279 at 283.

33
J.-F. Poudret, supra note 20 at 849-853.

34
F. Perret, supra note 13 at 72-73.

35
F. Knoepfler, supra note 20 at 562-564.

36
See paragraph 2(c)(ee) of the Swiss Federal Tribunal's reasons in Fomento, ATF 127 III 279 at 287.

37
M. Liatowitsch, 'Paradoxon', supra note 20 at 434; J.M. Vulliemin, supra note 20 at 439; M. Scherer, supra note 20 at 448. Contra: J.-F. Poudret, supra note 20 at 849.

38
In our view, this results from the principle stated in Condesa/Buenaventura and the Federal Tribunal's clear reiteration of that principle at paragraph 2(dd) of its reasons in Fomento (ATF 127 III 279 at 285), taken in conjunction with the Federal Tribunal's ruling in Fincantieri, according to which an arbitral tribunal seated in Switzerland should not take into account foreign restrictions on arbitrability that are contrary to Article 177 PIL; see Fincantieri Cantieri Navali Italiana S.p.A. et Oto Melara S.p.A. v. M. et Tribunal arbitral, Swiss Federal Tribunal, 23 June 1992, ATF 118 II 353 at 355-356.

39
See Jugomineral v. Grillo Werke A.G., Swiss Federal Tribunal, 17 March 1975, ATF 101 II 168 at 170. This decision was rendered well before PIL entered into force, but the underlying principle has been reaffirmed since; see S. S.A. v. M. A.G., Swiss Federal Tribunal, 22 December 1992, [1996] ASA Bulletin 646 at 648; C. Corporation v. L. A.G., Swiss Federal Tribunal, 1 September 1993, [1996] ASA Bulletin 623 at 626.

40
M. Liatowitsch, 'Paradoxon', supra note 20 at 436-437, where it is nonetheless considered that the Federal Tribunal arrived at the proper result in view of the facts of the case.

41
J.-F. Poudret, supra note 20 at 849-853.

42
This is correctly pointed out by M. Scherer, supra note 20 at 453.

43
The Court of Justice of the European Communities ('CJEC') has pointed to a similar approach pursuant to EC Council Regulation 44/2001 and the Lugano Convention. On the basis of a rather elliptical CJEC ruling, certain commentators consider that when the jurisdiction of the court before which the action is subsequently brought is based on mandatory provisions, that court may examine the prospect of recognition of the first court's judgment, which is a departure from the normal functioning of lis alibi pendens under these instruments. The reason for this is precisely that, in such cases, the first court's judgment would not be capable of recognition in the second country. See H. Gaudemet-Tallon, supra note 24 at 211; J. Kropholler, Europäisches Zivilprozessrecht, 6th ed. (Heidelberg: Recht und Wirtschaft, 1998) at 298. It should be noted, however, that according to these same instruments the fact that the action was brought before the first court in breach of a choice-of-forum clause is not a ground for refusing to recognize that court's judgment. Consequently, disregard of a choice-of-forum clause does not alter the normal application of lis alibi pendens, even though a valid choice-of-forum clause usually vests exclusive jurisdiction in the selected forum (J. Kropholler, ibid. at 298-299). The same is true under Swiss law; see J.F. Poudret, supra note 20 at 849. However, it should be borne in mind that practice under EC Council Regulation 44/2001 and the Lugano Convention is strongly influenced by the fact that these instruments contain rules on choice-of-forum clauses, which are supposed to receive uniform treatment in each member state. Therefore, a court in the second country does not have a greater right to examine how the first court applied the rules on choice-of-forum clauses than to examine such court's application of any other non-mandatory rules of jurisdiction. As for Swiss practice under PIL, it is highly debatable and should not dictate the solution in arbitration.

44
There are also practical reasons, which, although not determinative, also support this view. Staying the arbitration pending a ruling abroad on the merits could tie down the parties' advances unjustifiably, and keeping the arbitration artificially alive could lead to unnecessary and avoidable conflicts of interest for arbitrators and their firms.

45
The Swiss Federal Tribunal expressly reserved the resumption of the arbitral proceedings in the event that the foreign proceedings take an inordinate length of time. See paragraph 2(d) in fine of the Swiss Federal Tribunal's reasons in Fomento, ATF 127 III 279 at 288.

46
See e.g. Article 8(1) of the UNCITRAL Model Law; for cases relating thereto, see H. Alvarez, N. Kaplan & D. Rivkin, Model Law Decisions, Cases Applying the UNCITRAL Model Law on International Commercial Arbitration (1985-2001) (The Hague: Kluwer, 2003) at 56ff. More generally, see also Fouchard,Gaillard, Goldman, supra note 8 at 405-406. For Swiss cases, see the G.F. TAS decision supra note 16 and Nortrop Speditions- und Schifffahrtgesellschaft mbH v. TransRail AG, Swiss Federal Tribunal, 7 August 2001, [2002] ASA Bulletin 293.

47
See e.g. Transport- en Handelsmaatschappij 'Vekoma' B.V. v. Maran Coal Corporation, Swiss Federal Tribunal, 17 August 1995, [1996] ASA Bulletin 673.

48
See the numerous court decisions on this issue rendered under the UNCITRAL Model Law, summarized in H. Alvarez, N. Kaplan & D. Rivkin, supra note 46 at 56ff.

49
The jurisdictional debate ended with confirmation by the Swiss Federal Tribunal of an arbitral decision stating that the latest clause governed in all cases. See Arthur Andersen Business Unit Member Firms v. Andersen Consulting Business Unit Member Firms, Swiss Federal Tribunal, 8 December 1999, [2000] ASA Bulletin 546.

50
Explicit reference was made to the Swiss Federal Tribunal's decision in G.F. TAS, supra note 16.

51
AA v. AC, Court of First Instance of Geneva, 30 September 1998, (1999) 9 Revue suisse de droit international et droit européen 628 at 629 (Annot. P. Schweizer at 630-631). Quotation translated from the original French.

52
P. Schweizer, ibid. at 630.

53
Under Article V(2)(a) of the New York Convention, arbitrability is governed by the law of the country in which recognition and enforcement are sought (in our example, this would be the law of the country in which the second arbitral tribunal is seated). However, this is a non-issue: if the second arbitral tribunal finds that the award rendered in the first arbitration would not be enforceable in light of Article V(2)(a) of the New York Convention, this could mean that the second arbitral tribunal would not have jurisdiction either, since the law of the country where the second arbitral tribunal is seated would govern arbitrability in respect of both proceedings.

54
Whether this conclusion should also apply in cases where the first arbitration does not result from a voluntary agreement to arbitrate, but is compulsory under the law of the country in which the first tribunal has its seat, or results for instance from a bilateral investment treaty (whereas the parties' contract provides for a different form of arbitration; for an illustration, see the decision of the Supreme Court of Pakistan of 3 July 2002 in Société Générale de Surveillance SA v. Pakistan, through Secretary, Ministry of Finance, commented by M. Lau in (2003) 19 Arbitration International 179), raises a debate that exceeds the scope of this study.