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( Source of the document: ICC Digital Library )
Counsel and Arbitrator at White & Case, International Arbitration Practice, Geneva.
In July 2017, the Swiss Federal Tribunal held that a challenge against an interim award dismissing three of the five jurisdictional objections was inadmissible as two objections had not yet been considered by the arbitral tribunal. A party should await the final outcome of the jurisdictional decision before challenging an interim award on jurisdiction.
On 20 July 2017, the Swiss Federal Tribunal rendered the decision Russian Federation v. Yukos Capital Sàrl1 and clarified when a challenge against an interim award could be filed on the ground of an incorrect decision on jurisdiction pursuant to Article 190(2)(b) of the Swiss Private International Law Act (‘PILA’).
In 2013, Yukos Capital Sàrl, a company established in Luxemburg, initiated arbitration proceedings against the Russian Federation. A three-member tribunal seated in Geneva, Switzerland, was constituted pursuant to the UNCITRAL Arbitration Rules. In April 2014, the Russian Federation objected to the jurisdiction of the arbitral tribunal on the basis of five alternative grounds. By procedural order, the arbitral tribunal decided to preliminarily examine three of the five grounds and to postpone the decision on the two remaining grounds to the stage of the merits of the case.
On 18 January 2017, the arbitral tribunal rendered an ‘Interim Award on Jurisdiction’ pursuant to which it dismissed the first three jurisdictional grounds.
On 17 February 2017, the Russian Federation challenged the interim award, but expressed doubts regarding the admissibility of the challenge (‘elle s'en remet à justice quant à la recevabilité dudit recours’).
On 20 July 2017, the Swiss Federal Tribunal declared the challenge inadmissible stating that the arbitral tribunal had not yet rendered a final decision on its jurisdiction. The grounds raised by the appellant were not examined by the Tribunal which declared that a challenge on jurisdictional grounds, including those already dismissed in the interim award, should await a final decision on jurisdiction.
A challenge against international awards rendered in Switzerland is governed by the Swiss Federal Supreme Court Act (‘FSCA’) and the Swiss Federal Private International Law Act (‘PILA’)2. An international award may be challenged when the arbitral tribunal wrongly confirms or declines jurisdiction under Swiss law pursuant to Article 190(2)(b) PILA. Jurisdictional decisions can usually be issued by way of a partial award, which decides on some issues only and is final as to those issues, an interim (or preliminary) award, which rules on preliminary questions linked to the merits or the procedure, or a final award, which brings the proceedings to an end.
In principle, an arbitral tribunal sitting in Switzerland should decide on its jurisdiction as a preliminary question3, but there is no sanction in the case the arbitral tribunal decides not to proceed that way. Where jurisdictional objections are closely related to the facts, the arbitral tribunal may find it more appropriate to rule on these objections at the same time as the merits.
When a tribunal declines jurisdiction, it renders a final award. When it dismisses jurisdictional objections as a preliminary question, it renders an interim award, which has to be challenged immediately if the arbitral tribunal was wrongly constituted or lacked jurisdiction (Articles 190(3) and 190(2)(a) and (b) PILA). The decision presently commented confirmed these key points, which were set in prior case law.
The present case had one additional particularity that required further clarification by the Swiss Federal Tribunal. Here, the arbitral tribunal ruled on some jurisdictional objections only, postponing its decision on remaining objections to its decision on the merits.
The Swiss Federal Tribunal provided two reasons in support of its decision that the challenge was inadmissible.
The first reason related to the efficiency of the proceedings. Unless an immediate challenge is required, the Federal Tribunal, which is the highest judicial instance in Switzerland, should, in principle, only review cases once, at the end of the proceedings.4 Exceptions to this principle cover partial and interim awards, but only in cases where the tribunal was irregularly constituted or wrongly accepted jurisdiction. Here, although the arbitral tribunal’s dismissal of the three jurisdictional objections was final, and such objections could not be argued again before it, it still had to rule on the remaining two objections. The Swiss Federal Tribunal stated that if one were to allow Respondents to challenge such a decision immediately, this could be seen as an invitation to strategically divide the proceedings in separate jurisdictional objection phases prior to any discussion on the merits, allowing Respondents to challenge successive decisions for each jurisdictional objection (referred to as the ‘Salamitaktik’ by the Swiss Federal Tribunal). Rightly, the Swiss Federal Tribunal stated this solution would not be desirable as it could lead to delaying tactics.
Secondly and foremost, the Swiss Federal Tribunal declared that an interim award ruling on part of the jurisdictional objections was not a final decision on jurisdiction. The tribunal had not yet finally confirmed nor declined jurisdiction. The arbitral tribunal could still decline jurisdiction in a subsequent decision on the basis of any of the two remaining objections.
As no decision had yet been made, the substantial requirement in Article 190(2)(b) PILA, i.e. that ‘the arbitral tribunal has wrongly accepted or declined jurisdiction’, was not met. The challenge was therefore premature and consequently inadmissible.
This decision is welcomed as it brings further clarity as to when a challenge against an interim award on jurisdiction can be filed.
From a tactical perspective, in a case where several jurisdiction objections are raised, the bifurcation of some of them may remain a valid option, since only one successful jurisdictional objection would bring an end to the arbitration (and would allow the unsuccessful party to challenge the award immediately).
Swiss Federal Tribunal, 4A_98/2017.
Chapter 12 of PILA governing international arbitration is currently undergoing minor revisions which would not impact any of the relevant provisions to this case.
Article 186(3) PILA.
ATF 133 III 629 consid. 2.1 p. 631.