Introduction

The Swiss Supreme Court confirmed recently its practice of constructive interpretation of pathological or ambiguous arbitration clauses.1

Facts

A football club (the "Club") and a football agency (the "Agency", together: the "Parties") had entered into an agreement regarding the transfer of a footballer (the "Agreement"). The Parties agreed that the transfer costs would be shared between them. The Agreement contained the following dispute resolution clause: "The competent instance in case of a dispute concerning this Agreement is the FIFA Commission, or the UEFA Commission, which will have to decide the dispute that could arise between the club and the agent." A dispute arose between the Parties in connection with the transfer fee payment, which the Agency deferred to FIFA Players' Status Committee (the "Committee"). On December 10, 2008, the Committee denied its jurisdiction to hear the claim for lack of standing of the Agency. The CAS Appeals Arbitration Division upheld the Committee's jurisdictional decision (CAS Rules in the 2004 version, R-47 et s.) in January 2009. Having tried in vain to bring the case before a judicially appointed sole arbitrator specialist in sport law, who also denied jurisdiction considering that the Parties had meant to refer their disputes relating to the Agreement to an institution specialised in sport law, and not to a sole arbitrator, the Agency filed for arbitration with the Court of Arbitration for Sport (CAS). The CAS, acting this time as the arbitral authority (Ordinary Arbitration Division, CAS Rules in the 2004 version, R-38 et s.), admitted its jurisdiction to hear the case, dismissed the Agency's claims, denied jurisdiction on the Club's counterclaim, and decided on the arbitration costs. The Club challenged the award before the Swiss Supreme Court on the ground of the CAS' lack of jurisdiction. The Club argued in a nutshell that no consent to arbitrate could reasonably be inferred from the clause, and that the dispute resolution clause was by all means invalid because it referred to two institutions which, based on their own internal regulations, had no authority to decide the case (Swiss Code of Obligations (CO) Art. 20(1)).

Supreme Court Decision

The Swiss Supreme Court acknowledged the jurisdiction of the CAS and upheld its award. It pointed out that, whilst the primary written consent to arbitrate (PILA Art. 178(1)) had imperatively to reflect the parties' converging agreement on all key elements (essentialia negotii) of arbitration, it did not necessarily need to include other non essential points. The written consent to arbitrate hence necessarily requires:

  • the parties' unambiguous intent to submit their legal dispute to an arbitral tribunal in lieu of the judicial authorities for a binding determination;
  • the identification or reasonable possibility to identify the dispute to be submitted to arbitration;
  • the identification or reasonable possibility to identify the parties consenting to arbitration.

Conversely, no consent is required on other non-essential elements of arbitration, typically:

  • the type, place and language of arbitration;
  • the number of arbitrator(s);
  • the composition of the arbitral tribunal;
  • the applicable procedural rules.

The lack of parties' agreement on any of these secondary issues would not, in principle, affect the validity of the parties' primary consent to arbitrate (CO Art. 20(1) and Art. 2(1)); rather, in such case the arbitration agreement should be supplemented on the basis of the parties' hypothetical intention (CO Art. 20(2) and Art. 2(2)).

In the case at hand, the Swiss Supreme Court acknowledged the existence of the Parties' converging agreement on all key elements of arbitration. It considered that, although no reference to arbitration was made in the dispute resolution clause, the wording of the clause clearly reflected the Parties' intent to subject their case to an authority specialised in sport disputes other than state courts. The Swiss Supreme Court further considered that the reference to institutions that could not hear the claim, based on their own internal regulations, should not as such affect the validity of the arbitration clause, but should be remedied on the basis of the Parties' hypothetical intention had they been aware of the impossibility of their chosen option. Considering that the clear intention of the Parties was to refer their dispute to an institution specialised in sport, and in particular in football, the Swiss Supreme Court upheld the jurisdiction of the CAS.

Comments

The Court's decision is in line with its general pro-arbitration stance, always subject to clear evidence of the parties' primary consent to arbitrate. The growing number of arbitration rules and institutions makes it even more desirable for the parties to rely on the model arbitration clause proposed by most arbitral institutions or arbitration rules to avoid such situations that could potentially seriously delay the arbitral process, and to leave it to the relevant arbitration rules to fill the gaps.

Footnotes

1. Supreme Court Decision 4A_246/2011 in X v Y Sàrl, of November 7, 2011. The full text of the decision, which will be published in the official reports of the Supreme Court's decisions, is available in German at "www.bger.ch/fr/index/juridiction/jurisdiction-inherit-template/jurisdiction-recht/jurisdiction-recht-urteile2000.htm" . See prior decision in the case 4A_433/2009 of May 26, 2010, ground 2.4, excerpt in ASA Bull. 3/2011, p. 673.

www.taverniertschanz.com

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.