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Arbitration and Groups of Companies – the Swiss Practice

  • Philipp Habegger (a1)

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1 See Blessing, , “Introduction to Arbitration – Swiss and International Perspectives”, in: International Arbitration in Switzerland – An Introduction to and Commentary on Articles 176-194 of the Swiss Private International Law Statute (hereafter “Commentary”) (Stephen V. Berti [ed.]) (Basel 2000) nn. 8 et seq.

2 See Poudret, , “L'extension de la clause d'arbitrage: approches française et suisse” (hereafter “Extension”), Journal du Droit International (Clunet) (1995) 893. For a very detailed and thorough analysis of the manifold issues and problems involved see Hanotiau, , “Problems Raised by Complex Arbitrations Involving Multiple Contracts – Parties – Issues”, 18(3) Journal of International Arbitration (2001) pp. 251360.

3 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 10 June 1958, 330 UNTS 3, 21 UST 2511, TIAS No. 6997.

4 See Poudret, “Extension”, supra n. 2, p. 895; Blessing, , “The Arbitration Agreement – Its Multifold Critical Aspects”, ASA Special Series No. 8 (1994) p. 21 (hereafter “Arbitration Agreement”).

5 Sandrock, , “Arbitration Agreements and Groups of Companies”, in: Etudes de droit international en l'honneurde Pierre Lalive (Basle 1993) 625 (hereafter Etudes en l'honneur); id., “Arbitration Agreements and Groups of Companies”, 27 The International Lawyer (1993) 951 (hereafter “Group of Companies”); id., “Extending the Scope of Arbitration Agreements to Non-Signatories”, ASA Special Series No. 8 (1994) 169 (hereafter “Extending”); Schlosser, , Das Recht der internationalen privaten Schiedsgerichtsbarkeit, 2nd ed. (1989) N 426.

6 Blessing, “Arbitration Agreement”, supra n. 4, p. 21. Reference is made for instance to the Rules on Estoppel, the alter ego doctrine, notions pertaining to the doctrine of piercing the corporate veil, to apparent and ostensible authority etc.

7 This is in line with French court practice, notably of the Cour d'appel de Paris (see Poudret, “Extension”, supra n. 2, p. 895).

8 Blessing, , “Extension of the Scope of an Arbitration Clause to Non-Signatories”, ASA Special Series No. 8 (1994), p. 151 et seq. (hereafter “Extension”); Bucher, /Tschanz, , International Arbitration in Switzerland (Basle 1988) N. 84.

9 For an (unofficial) English translation of the full PIL Act see Karrer, /Arnold, /Patocchi, , Switzerland's Private International Law, 2nd Ed. (Zurich 1994). For an (unofficial) English translation of Chapter 12 on international arbitration, see the translation by the Swiss Arbitration Association in ASA Bulletin (1988) p. 184 (also reproduced in Bucher/Tschanz, supra n. 8, pp. 223 et seq.).

10 Hecht decision of the Court de Cassation, Revue de l'arbitrage (1974) 89.

11 Poudret, Le droit applicable à la convention d'arbitrage, ASA Special Series No. 8 (1994), 24 et seq. (hereafter “Droit applicable”). As regards the substance of the arbitration agreement, see below para. 8 et seq.

12 Lalive, /Poudret, /Reymond, , Le droit de l'arbitrage interne et internationale en Suisse (Lausanne 1989) N 10 ad Art. 178 PIL; Berger, , Internationale Wirtschaftsschiedsgerichtsbarkeit (Berlin 1992) 101; Wenger, Commentary, supra n. 1, N. 12 ad Art. 178 PIL.

13 In judging the validity of a jurisdiction agreement pursuant to Art. 5 PIL, a provision which at the parliamentary stage was adapted to harmonize with Art. 178(1) PIL, the Swiss Federal Tribunal said obiter that such a requirement can be fulfilled “also by an exchange of letters, and by contrast to Art. 13 Code of Obligations also by an exchange of writing using modern communication techniques” (DTF 119 II 391 et seq., 394, emphasis added). The Federal Tribunal, however, departed from this view in a decision concerning an arbitration clause (in casu the New York Convention was applicable, but the Court referred to the formal requirements under the Convention and those of the PIL as being the same); instead of differentiating between the modernness of the means of communication used, the Court, in conformity with doctrine and case law developed under the New York Convention, differentiated between the situation where the agreement to arbitrate is contained in a contractual document (when a signature is necessary) and where it results from an exchange of written declarations (in which case a signature is not required). See DTF 121 III 38 et seq., 45. Some writers neither differentiate according to the modernness of the means of communication, nor the type of document evidencing the agreement to arbitrate (be it a contractual document or communicated declarations) but generally submit that Art. 178(1) PIL does not require signatures (Blessing, “Arbitration Agreement”, supra n. 4, pp. 12 et seq.; Lalive/Poudret/Reymond, supra n. 12, N 10 ad Art. 178 PIL; Walter, /Bosch, /Brönnimann, , Internationale Schiedsgerichtsbarkeit in der Schweiz (Berne 1991) 78). Others submit that the question of what written form means in the context of subsection 1 must be determined according to the criterion of what is usual in practice stating that there remains in numerous segments of commerce the fixed custom of concluding transactions by letters sent by mail or telefax, or confirming such transactions in signed letters or drawing up contractual documents and signing them reciprocally and that to the extent this is the case, communication of signatures – be they in the original or sent by telefax – remains indispensable (Wenger, Commentary, supra n. 12, N. 14 ad Art. 178 PIL). Some writers even argue that it is sufficient that one party adhere to the formal requirements and that the mere oral or tacit acceptance by the other party is sufficient (Blessing, “The Arbitration Agreement”, pp. 9 et seq.; Lalive/Poudret/Reymond, supra n. 12, N 6 ad Art. 178 PIL; Berger, supra n. 12, p. 106, “taking good faith into due consideration”). Depending on the circumstances of the case, invoking non-compliance with the formal requirement might be deemed an abuse of right (DTF 121 III 38).

14 The Intercantonal Concordat may still apply to international arbitration in Switzerland where the parties have agreed in writing that the provisions of chapter 12 of the PIL Act are excluded and that the cantonal provisions on arbitration (thus the Intercantonal Concordat) shall apply exclusively. This includes cumulatively an express exclusion of chapter 12, an express declaration as to the exclusive application of Cantonal law, and the written form as per Art. 178(1) PIL of the agreement to this effect (Ehrat, Commentary, supra n. 1, N 41 ad Art. 176 PIL; Lalive/Poudret/Reymond, supra n. 12, N16 ad Art. 176 PIL; Bucher/Tschanz, supra n. 8, p. 34).

15 Arbitral and court practice shall be discussed in section 5 hereafter.

16 Decision Hecht of the Cour de Cassation, Revue de l'arbitrage (1974) 89.

17 Bucher/Tschanz, supra n. 8, N 78; Poudret, “Droit applicable” supra n. 11, pp. 30-31; id., “Extension”, supra n. 2, p. 896.

18 Decision of the Federal Supreme Court DTF 117 II 94; Lalive/Poudret/Reymond, supra n. 12, N 14 ad Art. 178 PIL; Poudret, “Extension”, supra n. 2, p. 906; Lalive, /Gaillard, , “Le nouveau droit de l'arbitrage en Suisse”, Journal de droit international (Clunet) (1989) pp. 927928; Walter/Bosch/Brönnimann, supra n. 13, p. 83; Volken, , in: IPRG Kommentar (Zurich 1993) N 19 ad Art. 178 PIL.

19 Decision of the Swiss Federal Supreme Court of 22 December 1992 in the matter of L. SA (Spain) v. M. AG (Switzerland), published in ASA Bull. (1996) 646; Wenger, supra n. 12, N 23 ad Art. 178 PIL.

20 Volken, supra n. 18, N 17 ad Art. 178 PIL; Wenger, supra n. 12, N 24 ad Art. 178 PIL.

21 Poudret, “Extension”, supra n. 2, p. 907.

22 In contrast French law allows for the parties' choice of “rules of law” to govern the formal and the substantive validity of the arbitration clause. See the Menicucci decision of the French Cour de Cassation, Revue de l'arbitrage 1977, p. 147.

23 Walter/Bosch/Brönnimann, supra n. 13, p. 81 et seq.; Berger, supra n. 12, pp.118 et seq.; Wenger, supra n. 12, N 24 ad Art. 178 PIL.

24 Poudret, Droit applicable, supra n. 11, p. 30; id., “Extension”, supra n. 2, p. 906; Bucher/Tschanz, supra n. 8, N 80; Lalive/Poudret/Reymond, supra n. 12, N15 ad Art. 178 PIL and apparently Volken, supra n. 18, N 18 ad Art. 178 PIL.

25 See also Lalive/Poudret/Reymond, supra n. 12, N 5 ad Art. 187 PEL; Poudret, “Extension”, supra n. 2, p. 906.

26 As to Swiss substantive law see Decisions of the Federal Supreme Court DTF 90 II 101, 91 II 359, 94 II 159; Gauch, /Schluep, /Rey, /Schmid, , Schweizerisches Obligationenrecht, 7th ed. (Zurich 1998) N 1219. On a transnational level compare as well Art. 9(2) of the UN Convention on the International Sale of Goods (hereafter “CISG”); UNIDROIT Principles of International Commercial Contracts (Rome 1994) Art. 1.8 and comment No. 4 thereto.

27 See e.g. Art. 33(1) and (3) UNCITRAL Arbitration Rules, according to which “the arbitral tribunal shall apply the law designated by the parties as applicable to the substance of the dispute”, absent such designation it shall “apply the law determined by the conflict of laws rules which it considers applicable”, but in all cases “shall take into account the usages of the trade applicable to the transaction” (emphasis added); Art. 17(1) and (2) of the 1998 ICC Rules providing that “the parties shall be free to agree upon the rules of law to be applied by the Arbitral Tribunal to the merits of the dispute” and that in the absence of any such agreement, the Arbitral Tribunal shall apply the rules of law which it determines appropriate, but in all cases “shall take account of the provisions of the contract and the relevant trade usages” (emphasis added); Art. 28 of the AAA International Arbitration Rules referring to the “substantive law(s) or rules of law designated by the parties as applicable to the dispute” and providing for the arbitral tribunal to “take into account usages of the trade applicable to the contract” (emphasis added). Similarly, section 23 of the German Institution of Arbitration DIS Rules and Art. 4 of the International Arbitration Rules of the Zurich Chamber of Commerce, only refer to the law or rules of law applicable to the merits of the dispute.

28 See above para 5.

29 UNIDROIT Principles of International Commercial Contracts, supra n. 26, Art. 1.8 and comment No. 4 thereto. See also Art. 9(2) CISG

30 See e.g. Bowden, , “L'interdiction de se contredire au detriment d'autrui (estoppel)”, in: Transnational Rules in International Arbitration, ICC Publication No. 480/4 (Paris 1995) 125.

31 Walter/Bosch/Brönnimann, supra n. 13, p. 81 et seq.; Berger, supra n. 12, pp. 118 et seq.; Wenger, supra n. 12, N 24 ad Art. 178 PIL.

32 Sandrock, “Group of Companies”, supra n. 5, 951 et seq.; id., “Extending”, supra n. 5, p. 169.

33 Sandrock, “Group of Companies”, supra n. 5, p. 951 et seq.; id., “Extending”, supra n. 5, p. 169; Hanotiau, supra n. 2, pp. 261 et seq.

34 Sandrock, “Group of Companies”, supra n. 5, p. 952-954; id., “Extending”, supra n. 5, p. 170.

35 Wenger, supra n. 12, N 56 ad Art. 178 PIL.

36 Wenger, ibid., N 23 in fine ad Art. 178 PIL.

37 Sandrock, “Group of Companies”, supra n. 5, p. 954-960; id., “Extending”, supra n. 5, pp. 170-172.

38 See hereto Hanotiau, supra n. 2, pp. 264 et seq.

39 Sandrock, “Extending”, supra n. 2, pp. 172 et seq.

40 See Sandrock, “Extending”, footnote 12 at pp. 173-174 for references to Swiss, Austrian, Italian, French, English, US and German law.

41 Wenger, supra n. 12, N 56 ad Art. 178 PIL.

42 Sandrock, “Extending”, supra n. 5, pp. 174 et seq.

43 Sandrock, “Extending”, supra n. 5, pp. 174-175; Blessing, supra n. 8, “Extension”, pp. 154-155.

44 See Sandrock, “Extending”, supra n. 5, p. 175 for references.

45 See below sub para. 51.

46 Sandrock, “Extending”, supra n. 5, pp. 176-177; Blessing, supra n. 8, “Extension”, p. 154.

47 See Decision of the District Court of Horgen published in SJZ (1958) 21. See also Sandrock, “Extending”, supra n. 5, pp. 178-179 referring to a number of cases in Germany after the two world wars where creditors of the former Reich had attached the assets of companies owned by the Reich, based on the doctrine of the piercing (in the reverse) of the corporate veil.

48 Blessing, supra n. 8, “Extension”, pp. 161 et seq.

49 See Blessing, , “The Law Applicable to the Arbitration Clause and Arbitrability”, in: ICCA Congress Series No. 9, Improving the Efficiency of Arbitration Agreements and Awards (The Hague 1999) 171 (hereafter “Law Applicable”).

50 Derains, , “L'extension de la clause d'arbitrage aux non-signatories – La doctrine des groupes de sociétés”, ASA Special Series No. 8 (1994) 243; Blessing, “Law Applicable”, supra n. 49, p. 172.

51 See above para. 18 et seq.

52 Blessing, “Arbitration Agreement”, supra n. 49, p. 22.

53 Bernardini, , “Arbitration Clauses: Achieving Effectiveness in the Law Applicable to the Arbitration Clause”, in: ICCA Congress Series No. 9, Improving the Efficiency of Arbitration Agreements and Awards, supra n. 49, p. 203; see also the arbitral award discussed in para. 43 below.

54 Poudret, “Extension”, supra n. 2, 894.

55 Blessing, “Law Applicable”, supra n. 49, p. 181.

56 Blessing, “Law Applicable”, ibid., p. 182.

57 See below para. 34 for a Decision of the Swiss Federal Supreme Court which has been harshly critized and to some extent may have paved the way for Art. 177(2) PIL.

58 Translation from ASA Special Series No. 12, p. 27.

59 Journal de droit international (Clunet) (1975) 978; Jarvin, /Derains, , Collection of ICC Arbitral Awards 1974-1985, Vol. I, 262.

60 Hanotiau, supra n. 2, p. 261, notes correctly that this decision is made with reference to the theory of apparent mandate or ostensible authority.

61 DTF 102 Ia 574 et seq.

62 Discussed in: Dutoit, /Knoepfler, /Lalive, /Mercier, , Répertoire de droit international privé Suisse, Vol. I (Berne 1982) p. 259 N 74; Jolidon, , Commentaire du Concordat Suisse sur l'arbitrage (Berne 1984) p. 121 N 34; Sandrock, in: Etudes en l'honneur, supra n. 5, p. 630.

63 Original in French.

64 Semaine Judiciaire (1980) 443.

65 DFT 110 II 54.

66 Jarvin, /Derains, , Collection of ICC Arbitral Awards, supra n. 59, Vol. I, 153; Yearbook Commercial Arbitration 1984, Vol. IX, 138.

67 See above para. 35.

68 This award is in clear contrast with French practice, in particular the decision of the Cour d'Appel de Pau of 26 November 1986 in the matter Sponsor v. Lestrade (Revue de l'arbitrage (1988) p. 153). In Sponsor the Swedish group Sponsor, with a view to take over two companies of the French group Lestrade, incorporated a subsidiary in France. The incorporation of the French subsidiary for that very purpose was well known to the counterparty under the contract, because the contract expressly provided for it. Only the French subsidiary was in contact with French authorities and entered into the share purchase agreement which contained the arbitration clause. Nevertheless, the decision approved an extension of the arbitration clause to the Swedish mother company by stating that the latter had established its French subsidiary for the sole purpose of acquiring the companies of the Lestrade group, that the mother company had played an important role in concluding the share purchase agreement and that it had been “the inspirer and the mastermind of the contracting party” (See also Poudret, “Extension”, supra n. 2, pp. 899-900 and 911).

69 Poudret, ibid., p. 910.

70 Original text in French.

71 Journal de droit international (Clunet) (1986) p. 1118; Collection of ICC Arbitral Awards 1986-1990, Vol. II, p. 279 et seq.

72 Original in French.

73 Revue de l'arbitrage (1989) 514.

74 Revue de l'arbitrage (1989) 525.

75 See para. 38 above and Decision of the Cour d'appel de Paris of 12 July 1984 in the matter of R.A.E. and Southern Pacific Properties (Journal de droit international (Clunet) (1985) 130).

76 ASA Bull. (1989) 313.

77 For the sake of completeness, it may be added that jurisdiction over E was as well denied as a consequence of him not having signed an arbitration agreement or a written declaration whereby he agreed to adhere to the by-laws of AA Corp and expressly referring to the arbitration clause in the by-laws of AA Corp (Art. 6 of the Concordat).

78 Extracts from ICC Awards on Groups of Companies (Paris 1991/1992) p. 27.

79 In contrast, as regards an award on the merits of the dispute, such an award can only be set aside if it is contrary to public policy (Art. 190(2) lit. e PIL) and the Federal Supreme Court's scope of review is limited accordingly.

80 Art. 190(2) lit. d in conjunction with Art. 182(3) PIL.

81 Art. 190(2) lit. e PIL. See Decisions of the Federal Supreme Court DTF 120 II 155, 119 II 380, decision of 29 January 1996 published in ASA Bull. (1996) 496.

82 ASA Bull. (1990) 271.

83 See para. 10 above.

84 Journal de droit international (1990) 1019; Jarvin, /Derains, /Arnaldez, , Collection of ICC Arbitral Awards 1986-1990, Vol. II, 401.

85 Original of the text in French.

86 ASA Bull. (1992) 202.

87 See above para. 42.

88 See, e.g., Decisions of the Swiss Federal Tribunal DTF 72 II 275 et seq., 97 II 289 et seq., 98 II 96 et seq., 102 III 165 et seq., 108 II 213 et seq., 112 II 1 et seq., and Decision of 16 April 1998 published in ASA Bull. (1998) 691.

89 ASA Bull. (1996) 623.

90 ASA Bull. (1996) 667, in particular p. 669.

91 ASA Bull. (1996) 496, 505.

92 See above para. 49.

93 See above paras. 34 et seq.

94 Blessing, “Extension”, supra n. 8, 151; Wenger, supra n. 12, N 57 ad Art. 178 PIL.

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Arbitration and Groups of Companies – the Swiss Practice

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