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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Third Party Funding | SAA Papers Volume 5

SAA Papers

Janis Matthys* has written a research paper on “How to Balance Third Party Funding and Confidentiality in International Arbitration?” for Volume 5 of the Selected Papers on International Arbitration series. Here it is a brief summary of his paper:

The last few years have seen a remarkable increase in Third Party Funding (TPF), initially focused on investment arbitration, but now spreading to international commercial arbitration as well. While the great TPF debate appears to focus on the issues of conflicts of interest, security of costs and legal privilege, the possible conflicts of TPF and confidentiality have so far received comparatively little attention. Perhaps not rightly so, as the following example illustrates:

The parties to an arbitration have agreed to arbitrate a dispute with the applicable arbitration rules providing for confidentiality regarding both the arbitration’s existence and the documents submitted throughout the arbitral proceedings. Nevertheless, due to financial difficulties, the claimant submits the case to a funder for monitoring purposes. Subsequently, a funding agreement is reached, and the claimant discusses the details of the case with the funder. Did the claimant violate its confidentiality obligations?

Under the assumption that the parties are bound by wide-reaching confidentiality obligations, sharing detailed information about the case with a funder appears to be outright contradictory. There is a very real concern that the funder might not only disseminate confidential information, but also use information about the opponent itself for the purposes of financing subsequent disputes involving or affecting the opponent, or otherwise profit from this information to the detriment of the latter.

On the other hand, parties seeking funding likewise have a legitimate interest in disclosing information to funders. A funder will require comprehensive information to conduct a thorough assessment of the case. Without disclosing at least some (probably sensitive) information a party will not be able to access funding. As a result, interpreting confidentiality obligations rigorously may lead to essentially excluding TPF and thereby access to justice. These conflicting interests can be difficult to weigh and even more difficult to reconcile.

This paper aims to examine what approach is best suited to strike a balance between confidentiality concerns on one side and the demand for TPF on the other side.

*Janis Matthys graduated from the University of Zurich in 2018 with a Master‘s degree. During his studies, he worked in business law firms in Zurich and Munich and was an Intern at CIETAC Arbitration Center in Hong Kong. Also, Janis Matthys was a team member of the University of Zurich at the 23rd Willem C. Vis Moot Court. Currently, Janis Matthys pursues a PhD in international arbitration at the University of Zurich and is coaching the Willem C. Vis Moot Team of the University of Zurich. He received the CAS in Arbitration from the Swiss Arbitration Academy in 2018.

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