Unreasoned awards under Swiss Law | SAA Papers Volume 5

SAA Papers

Hannes Latzel* has written a research paper on “Unreasoned awards under Swiss Law?” for Volume 5 of the Selected Papers on International Arbitration series. Here it is a brief summary of his paper:

Today, it is a universal principle in international arbitration that arbitral awards must state reasons, unless otherwise agreed by the parties. The same rule also applies under Swiss law. While in jurisdictions like the USA unreasoned awards are even referred to as “standard awards”, awards without reasons still remain a rare sight in Swiss arbitrations. This article examines the concept of the unreasoned award from a Swiss perspective and provides a comparative overview of selected foreign leges arbitri in view of this topic.

Furthermore, the Article focuses on the circumstances under which it makes sense for parties to opt for an unreasoned award. As there are advantages and drawbacks to both unreasoned and reasoned awards, it is crucial for parties considering a waiver of a reasoned award to be well aware of what they are signing up for. While an award without reasons can under very limited circumstances be beneficial for the proceedings in terms of costs, efficiency and confidentiality, it might also lead to a de facto waiver of the right to challenge such an award before the Swiss Supreme Court, if the existence of a ground of appeal cannot be ascertained from the operative part of the award.

Finally, the article discusses the scenario in which an arbitrator refrains from giving reasons without the authorization of the parties. A challenge of an unreasoned award solely on the ground that it lacks reasons is not possible under the Swiss Supreme Court’s current case law because an unauthorized unreasoned award constitutes neither a violation of the parties’ right to be heard nor an infringement of public policy. As the absence of reasons indicates that the tribunal has not considered all of the parties‘ arguments and allegations, the concerned party can, however, attempt to challenge the award on the ground that the tribunal has not considered one of its arguments.

Alternatively, a party might request the Supreme Court to order the arbitral tribunal to render an additional award that contains reasons. An action for damages against an arbitrator who issues an unauthorized unreasoned award has only little chance of success as the arbitrator’s liability is dependent on a successful challenge of his award. Yet, a concerned party has the possibility to demand a reduction of the arbitrator’s remuneration and, if need be, to force the arbitrator to give reasons by bringing an action for specific performance before a competent state court.

*Hannes Latzel studied law at the Universities of Lucerne and Bern where he participated in several national and international moot court competitions. After his studies, Hannes Latzel worked at a Cantonal High Court and subsequently in a major business law firm in Zurich. He is currently a Legal Counsel at the Swiss Chambers’ Arbitration Institution (SCAI) in Zurich.

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How to Join Third Parties to Arbitration Proceedings | SAA Papers Volume 5

SAA Papers

Jonas Pust* has written a research paper on “How to Join Third Parties to Arbitration Proceedings?” for Volume 5 of the Selected Papers on International Arbitration series. Here it is a brief summary of his paper:

The ever growing complexity of business relationships oftentimes leads to intertwined legal relationships between several parties. Conflicts arising in this context are no longer mere bipolar disputes between two parties, but involve a larger number of parties, some of which pursue different interests. Thus, disputes resolved by arbitration need procedural mechanisms to cope with the different interests while safeguarding the essential procedural rights of all parties.

Historically, procedural rules were developed for bipolar disputes. At the same time, multi-party arbitrations offer the advantage to be more efficient. Conducting just one arbitration is (at best) in the interest of the procedural economy and avoids inconsistent decisions. Nevertheless, the general principles of arbitration must be safeguarded, which institutional rules increasingly reflect. At the same time, an overload of only one arbitration can also lead to procedural difficulties, which as a result only allow for slow and complicated dispute resolutions.

Procedural rules must take note of the consensual nature of arbitration. However, if the parties have validly subjected themselves to an arbitration agreement, procedural decisions – such as joining third parties – might also be permissible against their will. Furthermore, the benefit of confidentiality should be taken into account as including third parties might disclose confidential information. The biggest concern, however, is the equal treatment of the parties; especially if during the constitution of the tribunal an imbalance of influence is apparent. While the French view taken in the well-known Dutco Case pertains to the rule of equal treatment as absolute, other jurisdictions allow for more flexible solutions.

Besides the statutory requirement, institutional rules have also adopted rules on how to join third parties to arbitration proceedings. The article focuses on a comparison of the approaches taken by the institutional rules of the ICC, SCAI and DIS. The solutions vary from the wide discretion for maximizing procedural efficiency to strictly consent-centred approaches. While having flexible rules enables customized solutions for individual cases, it also entails the risk of setting aside procedures as, for example, an improper constitution of the tribunal would impair the enforcement of the award. Therefore, institutions, arbitral tribunals and parties shall cautiously weigh the potential advantages of joining third parties to pending proceedings in order not to endanger the procedural efficiency or even the enforceability of the award.

*Dr. Jonas Pust studied law at the University of Münster, Germany, where he also received his doctorate with a thesis about Multi-Tiered Dispute Resolution Clauses. Before and during his legal clerkship he worked inter alia at the litigation departments of White & Case, Berlin, and Freshfields Bruckhaus Deringer, Hamburg. He currently works in the Arbitration and Litigation Department at the German law firm Heuking Kühn Lüer Wojtek, based in Hamburg.

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