By Mr Pierre-Yves Tschanz and Mr Sébastien Roy
Facts: Construction contract terminated by both parties. Contractor files its claim in court in Panama, where the work was carried out. Employer objects to the state court's jurisdiction on the basis of the arbitration clause in the construction contract. Employer's arbitration defense is dismissed by the state court as untimely. Employer appeals and starts ICC arbitration in Geneva. Employer's appeal is successful, so that the decision of the first court is overruled. The Geneva arbitral tribunal finds it has jurisdiction. Soon thereafter, the appellate court's decision is reversed by the supreme court of Panama, holding the employer's arbitration defense untimely. Contractor challenges the Geneva jurisdictional award before the Swiss supreme court.
Held: The jurisdictional award is set aside by the Swiss supreme court (the "Court"). The Court held that the arbitral tribunal should have stayed its proceedings pending a decision by the Panama courts. The arbitral tribunal could have resumed its proceedings if the foreign courts' decision was unlikely to be rendered within a reasonable time or would not be recognized in Switzerland.
The Court reasoned that the foreign state courts should be allowed to decide first a plea already pending before them that the arbitration clause is void or that the parties have waived it, in accordance with the principle of lis pendens. According to the Court, the foreign state courts are also in a better position than the arbitral tribunal to decide, under their own law, whether an objection to their jurisdiction was timely made or not. The decision also elaborates on the conditions for a waiver to be recognized in the context of a state court action.
The above decision of 14 May 2001 is published on the website of the Swiss Supreme Court, http://www.bger.ch (using the French language version, select "jurisprudence," then "arrêts dès 2000," and enter "4P.37/2001.")
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