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Com­men­tary by Simon Gabriel on Swiss Fed­er­al Tri­bunal deci­sion 4A_338/2018 on Novem­ber 28, 2018

The Swiss Fed­er­al Tri­bunal reject­ed FIFA​’s 59 set­ting aside argu­ments against an arbi­tral award as inad­mis­si­ble after hav­ing scru­ti­nized them. The deci­sion is a force­ful reminder on how strict­ly the Swiss Fed­er­al Tri­bunal con­strues the onus of the set­ting aside appli­cant to clear­ly spec­i­fy and specif­i­cal­ly explain the rel­e­vant set­ting aside grounds against an arbi­tral award. While the present case is a domes­tic case, the same stan­dard applies for set­ting aside appli­ca­tions in inter­na­tion­al cas­es (Arti­cle 77 para­graph 3 Fed­er­al Tri­bunal Act).

I. Back­ground

[1] The Fédéra­tion Inter­na­tionale de Foot­ball Asso­ci­a­tion («FIFA») was sued in Swiss arbi­tra­tion pro­ceed­ings by the Swiss com­pa­ny C.

[2] C alleged that FIFA had infringed C’s rights to pur­chase World Cup tick­ets pur­suant to an agree­ment cap­tioned «Agree­ment regard­ing sale and pur­chase for the FIFA World Cup 2010, 2014, 2018 and to 2022 only if the US Soc­cer Fed­er­a­tion will host the FIFA World Cup» («2010 Agree­ment»; sec. A) as well as var­i­ous fur­ther undertakings.

[3] C request­ed to receive dam­ages in an amount of rough­ly USD 16 mil­lion for the World Cup 2014 and deliv­ery of tick­ets to spec­i­fied con­di­tions for the World Cup 2018.

[4] FIFA dis­put­ed C’s claims and alleged, inter alia, that the rela­tion­ship with C had changed from the ini­tial reseller rela­tion­ship to an agency rela­tion­ship through an agency agree­ment between C and the FIFA part­ner com­pa­ny B in 2014 («Agency Agree­ment»). Accord­ing to FIFA, the Agency Agree­ment should have gov­erned the sale of the tick­ets instead of the 2010 Agree­ment and oth­er dis­put­ed under­tak­ings (sec. 3.1).

[5] It appears that the arbi­tral tri­bunal came to the con­clu­sion that FIFA had giv­en rel­e­vant assur­ances to C in addi­tion to the terms of the Agency Agree­ment which – in the arbi­tral tribunal’s view – jus­ti­fied C’s requests for relief (sec. 4.1.2).

[6] By arbi­tral award dat­ed 2 May 2018 («Award») the arbi­tral tri­bunal thus ren­dered a deci­sion in C’s favour. FIFA ini­ti­at­ed set­ting aside pro­ceed­ings before the Swiss Fed­er­al Tri­bunal and request­ed set­ting aside of the Award pur­suant to the Swiss arbi­tra­tion law for domes­tic arbi­tra­tions. FIFA sub­mit­ted numer­ous argu­ments for its appli­ca­tion, includ­ing arbi­trari­ness as a result of incom­pat­i­bil­i­ty of the Award with the record and clear mis­ap­pli­ca­tion of the law as well as infringe­ment of the right to be heard (sec. C). Accord­ing to the count of the Fed­er­al Tri­bunal, FIFA sub­mit­ted some 59 argu­ments why the Award should be set aside.

[7] C request­ed that FIFA​’s set­ting aside appli­ca­tion should be dis­missed or, as sub­sidiary posi­tion, only para­graph 7 of the Award (oper­a­tive part) should be set aside.

[8] Upon ex parte appli­ca­tion of FIFA, the Fed­er­al Tri­bunal pro­vi­sion­al­ly grant­ed sus­pen­sive effect regard­ing para­graphs 1, 4, 6 and 8 of the Award (oper­a­tive part). How­ev­er, in the fol­low­ing the Fed­er­al Tri­bunal revoked its ini­tial ex parte deci­sion and dis­missed the request­ed sus­pen­sive effect for the Award (sec. C).

[9] Final­ly, it is worth not­ing that the Fed­er­al Tri­bunal high­light­ed the fact that FIFA had sub­mit­ted its own exten­sive sum­ma­ry of the facts of the case up to page 45 of its sub­mis­sion with an excla­ma­tion mark (in the Ger­man orig­i­nal: «bis Seite 45!»; sec. C). The deci­sion of the Fed­er­al Tri­bunal will show that the high­est Swiss judi­cial body dis­ap­proved of what it had under­stood to be main­ly an undue re-plead­ing of the mer­its of the case.

II. Deci­sion

[10] The Fed­er­al Tri­bunal start­ed by not­ing that the present case was legal­ly speak­ing a domes­tic case as FIFA and C had their respec­tive seats in Switzer­land and had not agreed on an appli­ca­tion of the Swiss inter­na­tion­al arbi­tra­tion law. There­fore, the Swiss Code of Civ­il Pro­ce­dure («CCP») applied which pro­vides for some addi­tion­al set­ting aside grounds (e.g. arbi­trari­ness in Arti­cle 393 lit. e CCP) com­pared to the Swiss Pri­vate Inter­na­tion­al Law Act («PILA» which only applies, if one of the par­ties has its seat out­side of Switzer­land; sec. 1.1).

[11] It was then explained that the Fed­er­al Tri­bunal required the appli­cant to pre­cise­ly name and specif­i­cal­ly explain the grounds for the request­ed set­ting aside of the award and that it was not the duty of the court to inves­ti­gate the said grounds in any way (Arti­cle 77 para­graph 3 Fed­er­al Tri­bunal Act; sec. 1.2). Any expla­na­tions of the appli­cant must refer to the con­sid­er­a­tions of the arbi­tral tri­bunal as start­ing point (and not to its own dif­fer­ent under­stand­ing of the facts; sec. 1.2 and 1.3).

[12] More­over, the Fed­er­al Tri­bunal clar­i­fied that the appli­ca­tion defen­dant (here C) was not enti­tled to sub­mit requests against the chal­lenged award in its response to the set­ting aside appli­ca­tion (sec. 1.4).

[13] FIFA sub­mit­ted that 26 state­ments in the Award were con­trary to the record and thus arbi­trary (Arti­cle 393 lit. e CCP).

[14] The Fed­er­al Tri­bunal clar­i­fied that only inad­ver­tent mis­quo­ta­tions or over­sights of parts of the record by the arbi­tral tri­bunal were cov­ered by the rel­e­vant set­ting aside ground. How­ev­er, wrong or even arbi­trary con­sid­er­a­tions result­ing from cor­rect­ly quot­ed parts of the record were not cov­ered by the rel­e­vant Arti­cle 393 lit. e CCP (sec. 2). In appli­ca­tion of this inter­pre­ta­tion, the Fed­er­al Tri­bunal came to the con­clu­sion that all of FIFA​’s sub­mis­sions in this legal cat­e­go­ry were inad­mis­si­ble as they all crit­i­cized in one or the oth­er way the con­clu­sions of the arbi­tral tri­bunal instead of demon­strat­ing mis­quo­ta­tions or over­sights regard­ing the record (sec. 3.2).

[15] FIFA fur­ther sub­mit­ted that 13 alleged mis­ap­pli­ca­tions of the law exist­ed in the Award which was thus arbi­trary (Arti­cle 393 lit. e CCP).

[16] In the view of the Fed­er­al Tri­bunal, FIFA part­ly undu­ly crit­i­cized the mer­its of the Award and part­ly failed to suf­fi­cient­ly address the con­sid­er­a­tions in the Award (sec. 4.1 to 4.4). There­fore, all of FIFA​’s respec­tive sub­mis­sions were also reject­ed as inadmissible.

[17] More­over, FIFA sub­mit­ted 19 alleged infringe­ments of its right to be heard (Arti­cle 393 lit. d CCP).

[18] The Fed­er­al Tri­bunal reject­ed 18 out of the 19 alleged infringe­ments based on the fact that they were sub­mit­ted by using stan­dard­ized phras­ing. Such stan­dard­ized phras­ing did not meet the strict require­ment of pre­cise­ly nam­ing and specif­i­cal­ly explain­ing the grounds for the request­ed set­ting aside of the Award and FIFA​’s respec­tive sub­mis­sions were thus reject­ed as inad­mis­si­ble (sec. 5.1).
[19] In one instance, FIFA alleged that it was undu­ly sur­prised by the appli­ca­tion of the law by the arbi­tral tri­bunal. The Fed­er­al Tri­bunal referred to the prin­ci­ple of iura novit arbiter and found that FIFA had failed to suf­fi­cient­ly explain why the appli­ca­tion of the law was impos­si­ble to antic­i­pate as it would be required accord­ing to BGE 130 III 35 (sec. 5). Hence, also this last sub­mis­sion of FIFA was con­sid­ered as inadmissible.

[20] Final­ly, FIFA crit­i­cised the cost deci­sion in the Award as arbi­trary (Arti­cle 393 lit. e CCP).

[21] The Fed­er­al Tri­bunal clar­i­fied that the set­ting aside ground of clear mis­ap­pli­ca­tion of the law exclu­sive­ly referred to the mis­ap­pli­ca­tion of sub­stan­tive law (but not to pro­ce­dur­al law; sec. 2). Infringe­ments of pro­ce­dur­al law were only rel­e­vant to the extent that they either formed part of pro­ce­dur­al pub­lic pol­i­cy or were cov­ered by the fun­da­men­tal pro­ce­dur­al guar­an­tees specif­i­cal­ly named in Arti­cle 393 CCP (or Arti­cle 190 para­graph 2 PILA in inter­na­tion­al arbi­tra­tions; sec. 2).

[22] In appli­ca­tion of these prin­ci­ples, the Fed­er­al Tri­bunal found that cost issues were issues of pro­ce­dur­al law and that FIFA had failed to allege an infringe­ment of pro­ce­dur­al pub­lic pol­i­cy. There­fore, also this last sub­mis­sion was reject­ed as inad­mis­si­ble (sec. 6).

III. Com­ments

[23] The deci­sion of the Swiss Fed­er­al Tri­bunal is remark­able, indeed: The Fed­er­al Tri­bunal decid­ed to entire­ly reject FIFA​’s appli­ca­tion as inad­mis­si­ble – which means that it did not for­mal­ly enter into a dis­cus­sion on the sub­stance of even 1 out of FIFA​’s 59 set­ting aside argu­ments (in Ger­man legal lan­guage: «nicht ein­treten»).

[24] First, the deci­sion is a force­ful reminder for all prac­ti­tion­ers on how strict­ly the Swiss Fed­er­al Tri­bunal con­strues the onus of the set­ting aside appli­cant to clear­ly spec­i­fy and specif­i­cal­ly explain the rel­e­vant set­ting aside grounds. It also shows, at least between the lines, that the Swiss Fed­er­al Tri­bunal can be quite annoyed with undu­ly mer­its-focused, lengthy, or repet­i­tive set­ting aside applications.

[25] Coun­sel who rep­re­sent clients in Swiss set­ting aside pro­ceed­ings regard­ing arbi­tral awards may thus want to con­sid­er the following:

[26] (i) The Swiss Fed­er­al Tri­bunal is not inter­est­ed in the gen­er­al mer­its of an arbi­tra­tion case. Rather, it is inter­est­ed in the ques­tion of whether or not the arbi­tral tri­bunal made a seri­ous­ly enough mis­take to jus­ti­fy the set­ting aside and send­ing back of the award to the arbi­tral tri­bunal. It goes from the present deci­sion that the focus of any set­ting aside sub­mis­sion should thus be on the metic­u­lous expla­na­tion of how pre­cise­ly a spe­cif­ic part of the award infringes one of the spec­i­fied set­ting aside grounds of the applic­a­ble arbi­tra­tion law (domes­tic or inter­na­tion­al). This is a com­plete­ly dif­fer­ent per­sua­sion exer­cise than in arbi­tra­tion pro­ceed­ings and com­pre­hen­sive sto­ry telling in par­tic­u­lar appears not to be effec­tive in set­ting aside cases.

[27] (ii) The best one to three argu­ments may be more con­vinc­ing than dozens of them. The present deci­sion demon­strates in par­tic­u­lar that the Fed­er­al Tri­bunal is not pre­pared to hear any kind of mer­its plead­ings or stan­dard­ized arguments.

[28] (iii) Expec­ta­tion man­age­ment vis-à-vis the client appears to be cru­cial as well: It is rec­om­mend­ed to (a) inform the client on the rel­e­vant sta­tis­tics (over 90% of the set­ting aside appli­ca­tions are unsuc­cess­ful; see Felix Dass­er / Piotr Woj­tow­icz, Chal­lenges of Swiss Arbi­tral Awards Updat­ed Sta­tis­ti­cal Data as of 2017, ASA Bull. 2/2018, p. 394) and (b) antic­i­pate poten­tial straight­for­ward lan­guage of the Fed­er­al Tri­bunal regard­ing its view on an application’s qual­i­ty. Expe­ri­ence shows that this can hap­pen to the most dili­gent lawyers.

[29] Sec­ond, from a legal per­spec­tive, the present deci­sion con­firms that the set­ting aside ground of Arti­cle 393 lit. e CCP is not a full-fledged appeal against any arbi­trary deci­sions of arbi­tral tri­bunals. Rather, it is mere­ly a means to chal­lenge two nar­row cat­e­gories where an award is arbi­trary in its result based on (i) mis­quo­ta­tions or over­sights of parts of the record or (ii) clear mis­ap­pli­ca­tion of the law. Arbi­trary assess­ment of the evi­dence is not suf­fi­cient to request set­ting aside of an arbi­tral award (see also Simon Gabriel, Akten­widrige Fest­stel­lung ver­sus willkür­liche Beweiswürdi­gung, in: dRSK, pub­lished on 9. Sep­tem­ber 2016).

[30] Arbi­tra­tors who sit in domes­tic arbi­tra­tions may want to note that the Fed­er­al Tri­bunal will not set aside any award based on (poten­tial­ly wrong) con­clu­sions from any doc­u­ments, but rather mere­ly from mis­quo­ta­tions and over­sights of the record. It thus appears that the parts of the award where pro­ce­dur­al his­to­ry, par­ties’ posi­tions and con­tent of doc­u­ments is reflect­ed are far more sen­si­tive in terms of set­ting aside pro­ceed­ings than the mer­its parts where the evi­dence is con­sid­ered and con­clu­sions from doc­u­ments are explained.

[31] Final­ly, the fol­low­ing three side take­aways should also be noted:

[32] (i) The Swiss Fed­er­al Tri­bunal accepts ex parte appli­ca­tion for inter­im mea­sures in set­ting aside pro­ceed­ings (Arti­cle 104 Fed­er­al Tri­bunal Act).

[33] (ii) The defen­dant in set­ting aside pro­ceed­ings is not enti­tled to sub­mit appli­ca­tions against the rel­e­vant award. Such appli­ca­tions would need to be sub­mit­ted with­in the ordi­nary 30-days time lim­it from the (for­mal) receipt of the award for set­ting aside appli­ca­tions (for the def­i­n­i­tion of for­mal receipt, see Deci­sion of Fed­er­al Tri­bunal 4A_40/2018 of 10 Octo­ber 2018, sec. 2.2).

[34] (iii) While the cost deci­sion is a pro­ce­dur­al issue, any deci­sion on the arbi­tra­tors’ fees and expens­es is a sub­stan­tive deci­sion which can be sep­a­rate­ly chal­lenged in domes­tic arbi­tra­tion pro­ceed­ings (Arti­cle 393 lit. f CCP; but not in inter­na­tion­al arbi­tra­tions). In this respect, it should not be omit­ted that these two issues base on dif­fer­ent agree­ments: (a) The cost deci­sion between the par­ties is based on the arbi­tra­tion agree­ment. (b) The deci­sion on the arbi­tra­tors’ fees and expens­es is based on the arbi­tra­tor agree­ment (recep­tum arbitri).

Zitier­vorschlag:
Simon Gabriel, 59 Set­ting Aside Argu­ments Reject­ed as Inad­mis­si­ble, in: dRSK, pub­liziert am 14. Jan­u­ar 2019