Switzerland: Swiss Supreme Court Guides Anew On Interpretation Of Flawed Arbitration Clauses

In a decision of January 24, 2017, the Swiss Supreme Court rendered once more guidance on the interpretation of flawed arbitration clauses. At dispute was an arbitration clause concluded in May 2013 in the context of an international sales agreement saying that the "International Chamber of Commerce of Geneva" would be competent to render an award under the "Rules of Conciliation and Arbitration of the International Chamber of Commerce".

In August 2014, one party to the international sales agreement requested an international arbitration procedure under ICC in Paris which resulted in an arbitral award of October 2016 under the ICC Rules of Arbitration.

Upon appeal of the party losing the arbitration procedure in October 2016, the Swiss Supreme Court decided in January of this year that the ICC arbitral tribunal had been competent to take the case, thereby following well established contract interpretation principles which apply to the interpretation of arbitration clauses as well. The Swiss Supreme Court was thereby bound by the facts established in the arbitrational award, what means that a consensus could not be found on what the future arbitration parties wanted in substance when concluding the sales agreement of May 2013.

In the absence of the parties' contractual will, the highest court in Switzerland interpreted the flawed arbitration clause by applying "good faith" interpretation principles, i.e. the Swiss Supreme Court established a constructive consensus on what the parties might have wanted if they had realized that pathological arbitration clause. Whilst it was clear for the court that the parties wanted private arbitration instead of state jurisdiction, it was unclear whether they opted in favor of an ICC-arbitration under the ICC Rules of Arbitration.

The issue under dispute was that an "International Chamber of Commerce of Geneva" never existed by this name, as it was the "Geneva Chamber of Commerce , Industry and Services" which was competent to handle international arbitration matters until the enactement of the Swiss Rules International Arbitration in June 2012. The court also referred the parties to their consensus on the "Rules of Conciliation and Arbitration of the International Chamber of Commerce", what could only reasonably mean that by using the term "International Chamber of Commerce of Geneva" the parties concluded on an ICC-arbitration having its arbitration seat in Geneva.

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