Swiss Court considers whether tribunal retains jurisdiction following annulment of award

Earlier this year, the Swiss court considered, amongst other interesting points, the doctrine of functus officio (namely, the determination of whether a tribunal has fulfilled its mandate and no longer has jurisdiction) in the context of the annulment of an arbitral award.   

A tribunal seated in Geneva determining a contractual dispute under Swiss law found in favour of the claimant (Y). The respondent (V) successfully challenged the final award on the basis that one of V's arguments had not been addressed in the award.  The Swiss court found that the award was in violation of the right to be heard and must be annulled (even if subsequent proceedings may lead to the same decision on the merits).

The tribunal issued a second final award on the merits, again in favour of Y. V sought to have the second final award annulled on a number of grounds, including the tribunal's lack of independence and impartiality and its lack of jurisdiction.  

The Swiss court determined that, unless the annulment rested on the composition of the tribunal, there is no objection to the same tribunal deciding the issues again.  As a matter of Swiss law, the tribunal retained jurisdiction to address the same issues again after the final award was annulled.

In its opinion, the Swiss court also drew attention to the distinction between ad hoc arbitration and institutional arbitration as a consequence of the Swiss Federal Statute on International Private Law (the PILA).  In institutional arbitration, Swiss law permits a decision of a private body (e.g. the ICC Court) on the impartiality or independence of the tribunal to be reviewed in the context of a challenge to the final award of that tribunal.  On the contrary, in ad hoc arbitration, when a challenge to the impartiality or independence of the tribunal is rejected by the Cantonal Court with supervisory jurisdiction, the same argument cannot be raised to challenge the award. 

The background to the case concerned a warranty dispute under a Swiss law governed contract for the delivery of machinery for the production of materials for medical use. The contract provided for ad hoc arbitration in Geneva and a three member tribunal (Laurent Aynès; Werner Wenger; and Pierre Tercier) delivered an award thereunder in December 2010. The award partially granted Y's claim ordering that V pay €3,250,000 with interest and supply spare parts against payment until 31 December 2015. V sought annulment of the award on various grounds under the PILA.

In May 2011, the First Civil Law Court of the Swiss Federal Tribunal (the Federal Tribunal) annulled the award on one ground only: that the tribunal did not deal with V's argument that the claim was time-barred by virtue of the terms of the warranty clause.  The tribunal observed, in the context of those proceedings, that it had dealt with the argument implicitly in the award by answering that Y had answered the defence in a convincing manner. However, the Federal Tribunal found that there was no rejection, even implicitly, of V's arguments as to the time limit.  It held that, even if the obligation to give reasons is not one of the aspects of the guarantee of the right to be heard under the PILA, relying on a mere allegation of the tribunal that it dealt with the issues in dispute would deprive the guarantee of the minimum duty of the tribunal to deal with the pertinent issues (which duty had been established by case law). The Federal Tribunal addressed and rejected all other grievances raised in the annulment appeal.

V challenged the jurisdiction of the tribunal to issue a new award on the basis that it was no longer independent and impartial because it had already expressed its opinion on the time limit point. The Geneva Cantonal Court rejected V's challenge to the tribunal and the tribunal went on to issue an award in November 2011, finding that it had jurisdiction and rejecting (explicitly) V's arguments about the limitation period. 

V filed a civil law appeal, including on the basis that the tribunal had no jurisdiction after the May 2011 annulment, and sought annulment of the November 2011 award. The tribunal took no position as to the appeal.

The Federal Tribunal issued a lengthy and carefully considered opinion and found (amongst other points):

• The finality of the decision of the Cantonal Court (as opposed to a private body such as the ICC Court) as to a challenge under the PILA means that a subsequent review of the decision within the framework of an appeal to the Federal Tribunal against the final award is excluded.  Swiss legal order requires oversight of the decisions of private arbitral bodies as to independence and impartiality, whilst the decision can be entrusted to the State Court. There is, therefore, a difference between institutional and ad hoc arbitration.   
• Once a final award is issued, the tribunal's jurisdiction disappears and it is functus officio, subject to some exceptions.  However, procedural res judicata[1] created by the communication of the award and giving it substantive res judicata ceases if the award is annulled. The legal situation is then tantamount to that existing before the award was issued. As a consequence of the annulment, the parties are then in expectation of a final award which will decide their dispute and end the proceedings.  In those circumstances, the tribunal's mission is not finished and, either the tribunal was never functus officio or was so only between communication of the award and its annulment.  There is, in principle, no objection to the same tribunal deciding the matter after the annulment, unless the annulment was attributable to the tribunal's composition (or they are precluded from doing so by the law of the seat, the procedural rules or clear intent of all parties). 

In particular, this second point is of interest.  The issue of whether and when a tribunal is functus officio impacts on arbitral proceedings in different jurisdictions but has received little or no attention from the courts in most of them. 

[1] Res judicata  is a term used to indicate that a matter is already judged.