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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
1. Summary of Respondent's position
88. Respondent does not dispute that "there is an arbitration agreement between the Claimant and the Respondent in terms of Article 19.2 of the [Agreement]",1 [as affirmed in a letter to the ICC].
89. Nor does Respondent dispute the existence of a valid choice of law provision in favour of Swiss substantive law:
The Claimant has asserted that the entire Agreement is governed by Swiss law both in terms of the express statement of the [...] Agreement and by the relevant provisions of Swiss statutes. While the Respondent does not dispute this fact, we wish to emphasize features of the present dispute which make recourse to Nigerian law inevitable. [Claimant exhibit 29]
90. One of the provisions which, according to Respondent, should also be considered - both as a matter of public policy and in view of the future enforcement of an award in Nigeria - appears to be section 6(2)(r) NOTAP Act:
One such mandatory provision of Nigerian law is section 6(2)(r) of the National Office for Technology Acquisition and Promotion Act (Cap N62 Laws of the Federation of Nigeria 2004) which stipulates in unequivocal terms that an agreement involving the transfer of technology to Nigeria [...] is not to be approved by the relevant Nigerian authorities "where the transferee is obliged to submit to foreign jurisdiction in any controversy arising for decision concerning the interpretation or enforcement in Nigeria of any such contract or agreement or provision thereof". [Claimant exhibit 28]
[...], Nigeria is a potential forum for the enforcement of any arbitral award. Therefore Nigerian law cannot be disregarded. As a party to the New York Convention [...], Nigeria through its courts recognises and enforces arbitral awards given outside its shores. There are however circumstances which are capable of frustrating the disposition of the Nigerian courts to enforce foreign awards. One of such situations is where the award was made in disregard of proceedings pending before a Nigerian court and therefore pre-empts the Nigerian Court. The New York Convention, as a matter of fact, recognises that the recognition and enforcement of a foreign award may be refused where the enforcement of the award would be contrary to Nigerian public policy (...).[Claimant exhibit 29]
91. In summary, Respondent seems to conclude that the agreement to arbitrate contained in Section 19.2 of the Agreement is "illegal, void and incapable of forming the basis of the arbitral proceedings which Claimant requests" because it is contrary to the provision of section 6(2)(r) NOTAP Act ([Claimant exhibit] 29, p. 1). According to Respondent, this should deprive the Arbitral Tribunal of any jurisdiction over the dispute brought before it, including the issue of the alleged illegality and nullity of the arbitration clause. Following Respondent's view, such issue should exclusively be decided by the state courts of Nigeria.
2. Summary of Claimant's position
92. Claimant submits that the only issue in dispute concerning the Arbitral Tribunal's jurisdiction is the requirement of objective arbitrability. According to Claimant, this is so because Respondent appears to be contending (i) that the subject matter governed by the arbitration clause in Section 19.2 of the Agreement (disputes concerning a contract involving the transfer of technology to Nigeria) is not capable of settlement by foreign arbitration under Nigerian law, and (ii) that the arbitration clause is therefore illegal and void under Nigerian law.
93. In that context, Claimant maintains that the requirement of objective arbitrability is exclusively governed by Article 177 para. 1 PILS which states that "[a]ny dispute of financial interest may be the subject of an arbitration". In other words, according to Claimant, an arbitral tribunal with its seat in Switzerland has to examine the arbitrability of the dispute without regard to any considerations of foreign law, whether mandatory or not.
94. In summary and in view of the above, Claimant concludes that the pecuniary nature of the dispute brought before this Arbitral Tribunal is undisputed, that Respondent has not invoked any ground of lack of arbitrability under Swiss law, and that the Arbitral Tribunal should therefore decide to accept jurisdiction over its claims which arise from the Agreement.
3. Analysis and findings
95. As a matter of principle, the first anchor to determine the validity of an arbitration agreement is the arbitration law (lex arbitri) that applies to the relevant arbitration proceeding.2 According to the prevailing "territorialist" conception, the applicable lex arbitri is always the arbitration law of the state (or jurisdiction) in which the arbitration has its locus, i.e. where the arbitral tribunal has its seat.3
96. The parties to an arbitration are free to agree on the place (or seat) of the arbitration (cf. Article 14 para. 1 ICC Rules, Art. 176 para. 3 PILS). In the present case, Claimant and Respondent have agreed that "[t]he arbitration shall take place in Geneva, Switzerland" ... Therefore, the "place of arbitration" within the meaning of Article 14 para. 1 ICC Rules is in Geneva, Switzerland ...
97. Against that background, the Arbitral Tribunal is bound to apply Chapter 12 of the PILS as the procedural framework (lex arbitri) of this arbitration given that, at the time when the parties entered into the Agreement, neither Claimant nor Respondent had their domicile or habitual residence in Switzerland (cf. Article 176 para. 1 PILS).
98. Under Swiss arbitration law, the formal validity of an arbitration agreement is governed by Article 178 para. 1 PILS which reads:
The arbitration agreement must be made in writing, by telegram, telex, telecopier or any other means of communication which permits it to be evidenced by a text.
99. Article 178 para. 1 PILS belongs to the mandatory provisions of the Swiss lex arbitri.4 The formal requirements described in this provision are intended to serve as a "form of conclusion" ("Abschlussform") and not as a mere "form of evidence" ("Beweisform").5 In other words, it is deemed that the contracting parties are not bound to the contemplated arbitration agreement prior to such form requirement being fulfilled.
100. The Arbitral Tribunal notes that Respondent has not raised any allegation to the effect that the agreement to arbitrate contained in Section 19.2 of the Agreement would not satisfy the requirements of form of Article 178 para. 1 PILS. On the contrary: Respondent has expressly admitted that "there is an arbitration agreement between the Claimant and the Respondent in terms of Article 19.2 of the [Agreement]" ...
101. However, even assuming, arguendo, that Respondent had raised any defence on the basis of formal invalidity, the Arbitral Tribunal notes that such defence would be without merits. The copy of the Agreement in the evidentiary record ... shows that it has been duly signed and initialled by both parties. Hence, the Arbitral Tribunal is satisfied that the Agreement, which in its Section 19.2 contains the arbitration clause, has been duly made "in writing" as provided for in Article 178 para. 1 PILS.
102. As a result, the Arbitral Tribunal concludes that the arbitration clause in the Agreement satisfies the requirements of form and thus is formally valid in the meaning of Article 178 para. 1 PILS.
103. Chapter 12 of the PILS deals with the substantive validity of an arbitration agreement only by establishing a conflict-of-law rule. Article 178 para. 2 PILS reads:
Furthermore, an arbitration agreement is valid if it conforms either to the law chosen by the parties, or to the law governing the subject matter of the dispute, in particular the main contract, or to Swiss law.
104. It is worth emphasizing that this conflict-of-law provision does not govern the question of objective arbitrability, which - theoretically - could also be considered as an aspect of the substantive validity of the agreement to arbitrate. Rather, the Swiss legislature has chosen to deal with objective arbitrability in a special provision, namely Article 177 para. 1 PILS, which the Arbitral Tribunal will address below (para. 119 et seq.).
105. Consequently, the conflict-of-law rule of Article 178 para. 2 PILS applies to all matters (except arbitrability and requirements of form) which may have an impact on the validity of the arbitration agreement.
106. Article 178 para. 2 PILS provides for three alternative connecting factors. It is therefore said to incorporate the principle of in favorem validitatis, meaning that - in support of the parties' choice of arbitration as their favoured method of dispute resolution - Swiss arbitration law makes sure that the substantive validity of the arbitration agreement can be upheld to the best extent possible.6
107. It is not on record that the parties have separately chosen a law to govern their agreement to arbitrate. Therefore, the first alternative identified in Article 178 para. 2 PILS is not applicable to the case at hand.
108. As to the law governing the subject matter of the dispute, Section 19.1 of the Agreement reads as follows:
This Agreement is solely governed by and construed in accordance with Swiss substantive law to the exclusion of the United Nations Convention on Contracts for the International Sale of Goods and the principles of international private law.
109. The Arbitral Tribunal notes that Respondent has not contested the validity of this choice of Swiss law as the law to govern the parties' rights and obligations arising from the Agreement (cf. above, para. 89). Therefore, the Arbitral Tribunal concludes that the second alternative provided for in Art. 178 para. 2 PILS is applicable to the instant case, meaning that the substantive validity of the agreement to arbitrate is subject to Swiss law (which coincides, by the way, with the third alternative under Article 178 para. 2 PILS).
110. The Arbitral Tribunal further notes that Respondent has not raised any allegation to the effect that the agreement to arbitrate contained in Section 19.2 of the Agreement would suffer from any defect in terms of substance within the meaning of Article 178 para. 2 PILS. On the contrary: Respondent has expressly admitted that "there is an arbitration agreement between the Claimant and the Respondent in terms of Article 19.2 of the [Agreement]" ...
111. However, even assuming, arguendo, that Respondent had raised any defence on the basis of substantive invalidity within the meaning of Article 178 para. 2 PILS, the Arbitral Tribunal notes that the evidentiary record would not provide any support to such allegation:
112. The law which, according to Article 178 para. 2 PILS, governs the substantive validity of an arbitration agreement, determines in particular all consensual aspects of its validity.7 In the instant case, the question whether the parties reached consent on the arbitration clause in the Agreement would therefore be governed by the CO, in particular its First Section (Articles 1-40 CO) on the formation of contracts. Article 1 para. 1 CO reads as follows:
The contract is concluded when the parties have mutually and in a concordant way manifested (or declared) their corresponding intention.
113. In the instant case, the wording of the arbitration clause ... leaves no room for any doubts that the parties have indeed (i.e. as a matter of fact) exchanged mutual and concordant intentions to refer any disputes arising from the Agreement to final settlement by arbitration.
114. Against that background, the Arbitral Tribunal concludes that the parties have reached consent to arbitrate, for which reason the arbitration clause contained in Section 19.2 of the Agreement is valid also in terms of substance.
115. [The ICC International Court of Arbitration] decided that this arbitration shall proceed in accordance with Article 6 para. 2 ICC Rules8 ... In other words, the Court held that it is "prima facie satisfied that an arbitration agreement under the Rules may exist".
116. The Arbitral Tribunal notes that Respondent has not raised any defence to the effect that the arbitration clause would not refer to arbitration under the ICC Rules.
117. However, even assuming, arguendo, that such defence had been raised, it would be without merits. The arbitration clause contained in Section 19.2 of the Agreement refers in unequivocal terms to settlement by arbitration "under the Rules of Arbitration of the International Chamber of Commerce" ... This wording cannot be reasonably interpreted other than as a clear-cut reference to arbitration under the ICC Rules.
118. In view of the above, the Tribunal therefore concludes that the parties have reached a valid agreement to arbitrate under the ICC Rules.
119. The issue remaining to be addressed is that of objective arbitrability of the dispute pending before this Arbitral Tribunal. In this respect, Respondent is arguing that, according to section 6(2)(r) NOTAP Act, an agreement involving the transfer of technology to Nigeria "is not to be approved by the relevant Nigerian authorities" if such agreement provides for the settlement of disputes before a "foreign jurisdiction" (cf. above, para. 90). Accordingly, Respondent appears to be contending that the disputes arising from the Agreement are not capable of settlement by arbitration as a matter of Nigerian law, rendering the arbitration clause illegal and void under Nigerian law.
120. Arbitrability of the subject matter in dispute is a prerequisite for the (substantive) validity of the arbitration agreement and therefore, at the same time, a condition for the jurisdiction of the arbitral tribunal.9
121. If a dispute is brought before an arbitral tribunal and one of the parties alleges that such dispute is not capable of settlement by arbitration, the question arises, among others, which law should determine the issue of arbitrability.
122. According to the prevailing view, the rules on arbitrability are always considered to be among the mandatory provisions of the applicable lex arbitri.10 An international arbitral tribunal with its seat in Switzerland must therefore decide on the issue of arbitrability based upon Article 177 para. 1 PILS.11 This provision defines the notion of objective arbitrability in the following terms:
Any dispute of financial interest may be the subject of an arbitration.
123. By definition, Article 177 para. 1 PILS sets forth a substantive provision of the Swiss private international law.12 With its open, far-reaching definition of arbitrability, the Swiss legislature wanted to "broadly open access to international arbitration".13
124. According to the case law of the Swiss Federal Tribunal, an arbitral tribunal with its seat in Switzerland must exclusively apply Swiss law to determine what is meant by a "dispute of financial interest". With this, the legislature wanted to "exclude all difficulties that would arise in connection with a conflict-of-laws approach (...), in particular the necessity to find out the applicable law when determining whether the dispute is capable of settlement by arbitration".14 In other words, …
… arbitrability is governed by the lex arbitri, without regard to the possible stricter rules of the lex causae or of the national laws of the parties, which can have consequences for the recognition and enforcement of an award rendered in Switzerland abroad.15
125. Before an international arbitral tribunal with its seat in Switzerland, arbitrability is therefore determined exclusively according to whether the claims put forward are of a financial nature in terms of Swiss law (the lex arbitri), without regard, as the case may be, to the stricter rules of the (possible) lex loci executionis or of the lex causae.16 Or, as the Swiss Federal Tribunal puts it:
Arbitrability of a dispute does not depend on the substantive existence of the disputed claim. Therefore, arbitrability cannot be denied for the only reason that mandatory provisions or a certain substantive public policy imply the nullity of the disputed claim or make it impossible to request its execution.17
By adopting the substantive approach to the problem of arbitrability, the federal legislature has chosen a solution which, without doubt, does not exclude that awards rendered in Switzerland may not be recognized and enforced in certain other countries. However, the federal legislature did so being fully aware of the problem, thus leaving it up to the parties to assess the risks that they might suffer from the potential lack of recognition and enforcement of the award (...), so that it is not possible to justify a restrictive approach to arbitrability by the existence of such a risk.18
126. In view of the foregoing, the Arbitral Tribunal concludes that any defence against arbitrability raised by Respondent in relying on mandatory provisions of Nigerian law is without merits. Within the scope of application of Article 177 para. 1 PILS, such objections cannot be considered and must be disregarded.
127. However, even assuming, arguendo, that Nigerian law should be considered in the case at hand, it would appear that section 6(2)(r) NOTAP Act is of no support to Respondent's argument. First, it is not alleged, let alone substantiated and proved, that the Agreement involves a "transfer" or "acquisition" of technology within the meaning of the NOTAP Act. In addition, it is not substantiated, let alone proved, that such transfer or acquisition took place "to Nigeria" as Respondent contends (cf. above, para. 90). Moreover, it is only alleged by Respondent that section 6(2)(r) NOTAP Act would apply where a contract involving a transfer of technology to Nigeria provides for the settlement of disputes before a "foreign jurisdiction" (cf. above, para. 90). However, it is not at all self-explanatory that an arbitral tribunal, even with its seat abroad, can be considered as a foreign jurisdiction. An arbitral tribunal is not a state court, but rather a private authority deriving its powers exclusively from the agreement to arbitrate between the parties. An arbitral tribunal therefore has no forum. As a result, there would appear to be nothing in support of Respondent's defence even if Nigerian law were to be applied in order to determine the arbitrability of the dispute.
128. The Arbitral Tribunal wishes to stress that Respondent has not raised any defence to the effect that the dispute brought before it by Claimant is not of "financial interest" within the meaning of Swiss law (i.e. Article 177 para. 1 PILS). Notwithstanding that fact, the Arbitral Tribunal will, on the evidence before it, also address this issue.
129. In BGE 118 II 353 the Swiss Federal Tribunal provides a concise description of the term "financial interest":
Indeed, are governed by this provision all disputes which have a monetary value for the parties, whether they are part of their assets or liabilities, in other words all claims that represent, at least for one of the parties, an interest which is measurable in monetary terms (...).19
130. Thus, it comes down to whether the claim, in its broadest sense, is one of economic interests.20
131. In the instant case, Claimant is requesting the Arbitral Tribunal to issue an award on the merits by21 ...
3. Declaring that the Manufacturing, Distribution, Technology and Trade Mark License Agreement ... has been validly terminated;
4. Ordering [Respondent] to pay to [Claimant] the Aggregate outstanding debit notices for the years 2007 and 2008, including the outstanding notice for the fourth quarters of 2007 and 2008 with default interest, subject to adjustment;
5. Ordering [Respondent] to pay to [Claimant] damages in an amount to be assessed in the arbitration proceedings;
6. Ordering [Respondent] to refrain immediately and permanently from using any [Claimant]'s trademarks and names which are identical or similar to [Claimant]'s trademarks;
7. Ordering [Respondent] to cease immediately to present itself, in any way, related to [Claimant] and, in general, to refrain from any conduct or activity which could generate, in third parties, a false impression of continuance of the Manufacturing, Distribution, Technology and Trade Mark License Agreement ...
8. Ordering [Respondent] to pay all arbitration costs, including the fees and expenses of the Arbitration Tribunal, the ICC administrative expenses, and Claimant's attorney's fees and expenses, on a full indemnity basis.
132. Having regard to the very broad notion of "financial interest" within the meaning of Article 177 para. 1 PILS, the Arbitral Tribunal has no reason to doubt, and thus is fully satisfied, that all of Claimant's claims are indeed of an economic interest, and a pecuniary nature respectively.
4. Conclusion
133. In view of the above considerations and the totality of the evidence before it, the Arbitral Tribunal finds that the parties have entered into an arbitration agreement which complies with the requirements of form (Art. 178 para. 1 PILS), is valid in terms of substance (Art. 178 para. 2 PILS), and provides for arbitration under the ICC Rules. Furthermore, the Arbitral Tribunal finds that the claims put forward by Claimant are arbitrable claims within the meaning of Article 177 para. 1 PILS. Consequently, the Arbitral Tribunal concludes that it has jurisdiction to hear the dispute arising from the Agreement brought before it by Claimant.'
1 Editor's note: Article 19.2 contained a dispute resolution clause in the following terms:'All disputes, claim or controversy arising out of or in connection with this Agreement shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by three arbitrators appointed in accordance with the Rules of the International Chamber of Commerce.The arbitrators nominated by the Parties shall agree on the third arbitrator within thirty (30) days. The proceedings shall be held in the English language. The arbitration shall take place in Geneva, Switzerland.'
2 Poudret/Besson, Comparative Law of International Arbitration, 2007, N 112.
3 Poudret/Besson, op. cit., N 113.
4 BSK PILS-Wenger/Müller, Article 178 N 6.
5 BSK PILS-Wenger/Müller, Article 178 N 7.
6 Cf. Berger/Kellerhals, [Internationale und interne Schiedsgerichtsbarkeit in der Schweiz, 2006], N 367-373.
7 Berger/Kellerhals, op. cit., N 373.
8 Editor's note: References are to the 1998 ICC Rules of Arbitration.
9 BGE 118 II 353 consid. 3a.
10 Poudret/Besson, op. cit., N 332.
11 See in particular BGE 118 II 193 c. 5c/aa.
12 BGE 118 II 193 consid. 5c/aa.
13 BGE 118 II 353 consid. 3a.
14 BGE 118 II 353 consid. 3a.
15 BGE 118 II 193 c. 5c/aa.
16 See BGE 118 II 353 c. 3c-d.
17 BGE 118 II 353 consid. 3c.
18 BGE 118 II 353 consid. 3d.
19 BGE 118 II 353 consid. 3b.
20 Berger/Kellerhals, op. cit., N 196.
21 Cf. Claimant's prayers for relief put forward in the Request for Arbitration ... and confirmed in the Terms of Reference ...