A referral to the “International Chamber of Commerce, Zürich, Switzerland and subsidiary by the laws of Germany” is not a valid arbitration agreement.
In a decision published on July 29, 2015, the Swiss Federal Supreme Court rejected a petition to set aside an award rendered by an arbitral tribunal in Switzerland who had declined its jurisdiction on the ground that there was no valid arbitration agreement (decision 4A_676/2014 of July 29, 2015). A Dutch foundation, a U.S. corporation and its CEO had in 2009 entered into a settlement agreement under which the U.S. corporation and the CEO agreed to pay USD 659 million to the Dutch foundation. When they did not pay, the Dutch foundation initiated arbitral proceedings in Zurich under the auspices of the Swiss Chambers’ Arbitration Institution. The U.S. corporation and its CEO did not take part in the arbitration. The arbitral tribunal nevertheless declined its jurisdiction.
The arbitration clause contained in the Settlement Agreement stated that the “Agreement” “shall be interpreted in accordance with, and governed in all respect by the provisions and statute of the International Chamber of Commerce in Zürich, Switzerland and subsidiary by the laws of Germany“. The arbitral tribunal held that pursuant to Art. 178 para. 2 of the Private International Law Act, the substantive validity of the arbitration clause had to be examined either under German law (the law applicable to the subject matter of the dispute) or Swiss law. However, under both laws, a true and common intent to arbitrate is required and the arbitration clause could, in the view of the arbitral tribunal, not be interpreted in this way; rather, a reasonable party would likely read it as a choice-of-law clause addressing the applicable law only.
The Swiss Federal Supreme Court upheld this decision. It recalled its practice that unclear, incomplete or contradictory arbitration clauses are not necessarily invalid, provided that the pathological elements of such a clause do not affect the core requirements for a valid arbitration agreement; this is, in particular, the true and common intent of the parties to submit the dispute to arbitration. However, in the present case the arbitration clause did not contain any reference whatsoever to a “dispute” to be settled “by arbitration”. The Swiss Federal Supreme Court held that the referral in the arbitration clause to the “International Chamber of Commerce in Zurich” was not sufficient to conclude that the parties had known that arbitration was one of the various services offered by this institution. Given that the clause made a link between the provisions and statutes of the International Chamber of Commerce and the subsidiary application of the laws of Germany, it was rather deemed to be a choice-of-law clause.