Swiss court: newly constituted arbitral tribunal does not need to repeat proceedings

Out-Law News | 28 May 2021 | 8:09 am | 1 min. read

The Swiss Supreme Court has ruled that an arbitral tribunal which was reconstituted after the resignation of one of its original members does not need to repeat all the proceedings which happened prior to that resignation.

The court said the new tribunal was able to make its own decisions about whether any steps should be repeated, and the parties’ rights to be heard and to fair treatment were not infringed.

Arbitration expert Karah Howard of Pinsent Masons, the law firm behind Out-Law, said: “This case considers the delicate balance between upholding a party’s rights to due process - in other words, to have their case heard - against the potentially significant cost and time impact of repeated arbitral proceedings in circumstances of an arbitrator’s dismissal or resignation.”

“The Swiss Supreme Court’s pragmatic decision, upholding the tribunal’s decision not to repeat the arbitration, is an encouraging development for international arbitration practitioners and their clients who value certainty on time and costs,” Howard said.

The original arbitration concerned the termination of a framework agreement between two parties, which was brought under Swiss Rules of International Arbitration before the Swiss Chambers’ Arbitration Institution (SCAI).

The tribunal heard submissions from both sides, held a full hearing, and made an award in September 2019. Soon after the award was made, the defendants – three German companies – filed a petition against the arbitrator chosen by the plaintiffs in the case, alleging bias. The arbitrator concerned resigned, rejecting all allegations against him.

The court of the SCAI appointed a substitute arbitrator, and the companies requested the proceedings should be repeated.

After meeting, the newly constituted tribunal said that it had decided to continue the proceedings without repeating any steps, and in May 2020 it issued an award in the plaintiffs’ favour, saying the framework agreement was still in effect.

The companies appealed to the Supreme Court, asking for the award to be set aside and for the matter to be referred back to the tribunal. They said the reconstituted tribunal should have repeated the steps involving the arbitrator who resigned, and the fact it had not meant it was irregularly constituted.

The court rejected these arguments, according to an automatic translation of the judgment. It said the Swiss rules gave the tribunal the discretion to decide whether it should repeat procedural steps after the replacement of an arbitrator, and the decisive factor was whether the newly appointed arbitrator is able to form an opinion on the relevant points in an appropriate and fair manner.

In this case, minutes of witnesses’ evidence was complete, and the companies had had the opportunity to put questions to the witnesses at the original hearing. Therefore the proceedings did not need to be repeated, and the companies’ right to be heard had been fulfilled.