Publications
Consequences of Non-Participation under the Swiss Lex Arbitri
Axel Buhr;
in: dRSK, 24.03.2026
Commentary on Swiss Federal Tribunal decision 4A_359/2025 on January 15, 2026
Non-participation in arbitration proceedings is risky. Typically, the Swiss Federal Tribunal considers itself not only bound by the facts that the Arbitral Tribunal determines in its arbitral award. It also tends to reject any procedural objections that could have been raised in the arbitration proceedings as forfeited. In the case at bar, the Swiss Federal Tribunal dismissed a setting-aside request by Gazprom, who had taken the stance that it was no longer bound by the arbitration agreement due to a material change of circumstances and refused to participate in the arbitration proceedings.
I. Background
[1] In September 2022, Naftogaz of Ukraine initiated arbitration proceedings against PJSC Gazprom (Russia). Naftogaz requested payment of fees which, according to Naftogaz, had accrued pursuant to an Agreement between Naftogaz and Gazprom on the Provision of the Service of Organising Natural Gas Transportation through the Territory of Ukraine, dated 30 December 2019 (the «GTOA»).
[2] The arbitration agreement in the GTOA provided for ICC arbitration with Zurich (Switzerland) as place of arbitration and Swedish law as the law governing the GTOA (see consid. A.b for the arbitration agreement).
[3] Under the GTOA, Naftogaz had undertaken to organize for Gazprom the transportation of natural gas through Ukraine.
[4] Based on news reports, Gazprom had stopped full payment of the fees for Naftogaz’ service in May 2022, following Russia’s invasion of Ukraine in February 2022. Gazprom refused payment on the grounds that Naftogaz had failed to organize the transportation in full. Gazprom argued that, as a consequence, it was not obliged to pay for Naftogaz’ services in full either.
[5] Naftogaz submitted that the GTOA was a ship-or-pay agreement and that Gazprom had accordingly undertaken to pay for Naftogaz’ service in full, regardless of whether Gazprom had actually made use of Naftogaz’ service. Naftogaz also invoked force majeure, asserting that some of the services under the GTOA had been prevented by Russian interference with the operation of the Ukrainian Gas Transmission System on territory occupied by the armed forces of the Russian Federation (as may be seen, among others, from a press release published by Naftogaz on 28 September 2022 at https://www.naftogaz.com/en/news/gazprom-statement-arbitration).
[6] With a letter dated 27 September 2022, Gazprom notified the ICC that it considered itself no longer bound by the arbitration agreement between the Parties. Gazprom rejected Naftogaz’ right to initiate arbitration in accordance with the arbitration agreement in the GTOA and refused to accept jurisdiction of any arbitral tribunal appointed by the ICC in this matter (consid. B.a).
[7] Gazprom did not participate in the arbitration any further (consid. B.b).
[8] With its final award dated 16 June 2025, the Arbitral Tribunal confirmed that it had jurisdiction and ordered Gazprom to pay USD 1.2 billion plus interest (consid. B.c).
[9] Gazprom opposed the final award by requesting the Swiss Federal Tribunal to set it aside (consid. C). In the setting-aside proceedings before the Swiss Federal Tribunal, Gazprom invoked all five grounds that justify the setting-aside of an arbitral award pursuant to Art. 190 para. 2 lit. a – e of the Swiss Private International Law Act («PILA»):
[10] First, Gazprom complained that the Arbitral Tribunal had not been properly constituted (Art. 190 para. 2 lit. a PILA). Gazprom questioned in particular the independence and impartiality of the president of the Arbitral Tribunal, arguing among other things that the president had too close a relationship with one of Naftogaz’ Swiss counsel in the arbitration proceedings (consid. 3).
[12] Second, Gazprom maintained that the Arbitral Tribunal lacked jurisdiction (Art. 190 para. 2 lit. b PILA). According to Gazprom, it was no longer bound by the arbitration agreement between the Parties. Gazprom asserted that Switzerland and Sweden could no longer be considered neutral and that they had been classified as «unfriendly countries» by the Russian Federation. Gazprom also argued that it was prevented from participating in the arbitration proceedings as easily and effectively as Naftogaz. Gazprom maintained that the arbitration agreement between the Parties was invalid due to a material change of circumstances (consid. 4).
[13] Third, Gazprom asserted that the Arbitral Tribunal had failed to adjudicate Naftogaz’ prayers for relief properly (Art. 190 para. 2 lit. c PILA). Gazprom argued that the Arbitral Tribunal had not decided the merits of Naftogaz’ prayers for relief on the basis of Swedish law. According to Gazprom, the Arbitral Tribunal had falsely applied public international law, standards of investment arbitration, and the Vienna Treatise Convention of 1969 instead (consid. 5).
[14] Fourth, Gazprom criticized that the Arbitral Tribunal had disregarded Gazprom’s right to be heard and its right to equal treatment (Art. 190 para. 2 lit. d PILA). According to Gazprom, the Arbitral Tribunal had proceeded with the arbitration despite Gazprom’s lack of opportunity to effectively participate in it. Moreover, Gazprom complained that the Arbitral Tribunal’s procedural timetable had been «structurally unfair» (consid. 6).
[15] Fifth, Gazprom argued that the Final Award was incompatible with substantive public policy (Art. 190 para. 2 lit. e PILA). In Gazprom’s view, the Arbitral Tribunal had falsely attributed actions of the Russian Federation to Gazprom, in violation of fundamental principles of public international law (consid. 7).
[16] The author was part of the team that represented Naftogaz in the arbitration and the setting-aside proceedings.
II. Decision
[17] With its decision dated 16 January 2026, the Swiss Federal Tribunal rejected Gazprom’s setting-aside request entirely (consid. 8).
[18] First, in connection with Gazprom’s complaint pursuant to Art. 190 para. 2 lit. a PILA, the Swiss Federal Tribunal considered that Gazprom had forfeited its right to object to the proper composition of the Arbitral Tribunal pursuant to Art. 182 para. 4 PILA, by failing to raise its concerns in the arbitration proceedings (consid. 3.1 and 3.3).
[19] Second, the Swiss Federal Tribunal also dismissed Gazprom’s complaint that the Arbitral Tribunal lacked jurisdiction (Art. 190 Abs. 2 lit. b PILA; consid. 4.3). The Swiss Federal Tribunal noted that the Arbitral Tribunal had analyzed Gazprom’s objections in detail in its Final Award (consid 4.1). The Swiss Federal Tribunal concluded that it was bound by the Arbitral Tribunal’s factual determinations pursuant to Art. 105 para. 1 FTA and that Gazprom’s new allegations in its setting-aside request had to be disregarded pursuant to Art. 99 para. 1 FTA (consid. 4.2.1 and 4.2.2).
[20] Third, with regard to Gazprom’s complaint pursuant to Art. 190 para. 2 lit. c PILA, the Swiss Federal Tribunal questioned whether Gazprom had a legitimate interest to request that prayers for relief that had been submitted by Naftogaz and allegedly had remained undecided, were adjudicated by the Arbitral Tribunal. Moreover, the Swiss Federal Tribunal found that the Arbitral Tribunal had adjudicated all of Naftogaz’ prayers for relief. Finally, the Arbitral Tribunal noted that Gazprom’s criticism that the Arbitral Tribunal had applied the wrong law was inadmissible and unsuitable to justify the setting aside of an arbitral award based on Art. 190 para. 2 lit. c PILA (consid. 5.3.1).
[21] Fourth, the Swiss Federal Tribunal did not concur with Gazprom’s assertion that its right to be heard or its right to equal treatment had been violated (consid. 6.3). In this respect, the Swiss Federal Tribunal found that Gazprom’s allegation that it had been de facto impossible for Gazprom to appoint Swiss counsel was at odds with the facts that had been determined by the Arbitral Tribunal and were binding for the Swiss Federal Tribunal pursuant to Art. 105 para. 1 FTA (consid. 6.2).
[22] Moreover, the Swiss Federal Tribunal did not see any issue with the Arbitral Tribunal’s procedural timetable. According to the Swiss Federal Tribunal, it was understandable that the procedural timetable had not provided for any further deadlines for the submission of comments by Gazprom, given that Gazprom had notified the ICC Secretariat of its non-participation and not submitted a statement of defense. As noted by the Arbitral Tribunal in its Final Award, Gazprom would have received an opportunity to present its case nonetheless, had it chosen to participate in the later part of the proceedings (consid. 6.3).
[23] Fifth, the Swiss Federal Tribunal rejected Gazprom’s complaint that the Final Award was incompatible with substantive public policy in the sense of Art. 190 para. 2 lit. e PILA (consid. 7.3). In particular, the Swiss Federal Tribunal did not agree with Gazprom’s interpretation that the Arbitral Tribunal had attributed actions of the Russian Federation to Gazprom. In the view of the Swiss Federal Tribunal, the Arbitral Tribunal had rather analyzed how the Parties had allocated the risk of a potential non-performance under the GTOA (consid 7.3).
[24] The Swiss Federal Tribunal dismissed Gazprom’s setting-aside request. It ordered Gazprom to pay court fees in the maximum amount of CHF 200’000 and to compensate Naftogaz for its costs in the corresponding amount of CHF 250’000.
III. Comments
[25] The main takeaways from the present decision are not about the application of the causula rebus sic stantibus principle, which is known as a concept of Swiss substantive law, to arbitration agreements. The court’s decision does not elaborate in detail on the requirements that must be fulfilled from a Swiss legal perspective to invalidate an arbitration agreement in the event of changed circumstances.
[26] The decision cites, as usual, numerous decisions that the Swiss Federal Tribunal has rendered in the past (including on topics that were not strictly relevant in the present case). But it does not recapitulate any earlier jurisprudence of the Swiss Federal Tribunal on the application of the causula. The decision addresses the applicability of the clausula on arbitration agreements and her requirements in consid. 4.2.2 only in passing, finding that:
«There has been no significant change in circumstances that could lead to a subsequent loss of jurisdiction under the principle of ‹clausula rebus sic stantibus›. In view of the insignificance of the changed circumstances cited, there is no need to consider whether these were foreseeable or attributable to the sphere of influence of the appellant.»
[27] According to legal doctrine, the reader must rely on jurisprudence from 1958 (BGE 84 I 39) to find a case where the Swiss Federal Tribunal «held (obiter) that an arbitration agreement could no longer be relied upon due to political upheaval» (Berger, International and Domestic Arbitration in Switzerland, 5th ed. Berne 2025, para. 632 fn. 539).
[28] Evidently, the Swiss Federal Tribunal was not keen to use its decision for a lecture. It missed an excellent opportunity to shed light on the standards that govern the validity of an arbitration agreement in changed circumstances.
[29] In the author’s view, the main takeaways of the decision do not concern the application of the clausula to arbitration agreements. They are rather about the following two questions:
- If a party considers itself not bound by an arbitration agreement, is it still required to participate in the arbitration proceedings and explain why the arbitral tribunal lacks jurisdiction?
- If a party considers itself not bound by an arbitration agreement and refuses to participate in the arbitration proceedings, may it request that the arbitral award be set aside for defects that could have been raised during the arbitration proceedings?
[30] The decision of the Swiss Federal Tribunal shows that it is highly risky even for parties that are arguably not bound by an arbitration agreement to remain absent from the arbitration proceedings. As may be seen from the decision, the Swiss Federal Tribunal noted that the Arbitral Tribunal had analyzed in detail whether a material change in circumstances justified the conclusion that it was no longer appropriate to consider Gazprom bound by the arbitration agreement between the Parties. The Swiss Federal Tribunal considered itself bound by the facts that the Arbitral Tribunal had determined and saw no reason to deviate from the same.
[31] In the author’s view, this outcome is in line with longstanding jurisprudence and also makes sense in the present case. Gazprom did not dispute that the Parties had previously entered into an arbitration agreement governing the subject matter of the dispute. In such a situation, it appears appropriate to require a party that considers itself no longer bound by the arbitration agreement to explain to the arbitral tribunal the reasons on which its conclusion is based.
[32] The second aspect that is worth mentioning in the author’s view is that a non-participating party cannot rely on the wording of Article 182 para. 4 PILA to argue that it is not prevented from raising procedural issues (such as an improper composition of the arbitral tribunal or a violation of the party’s procedural rights) for the first time in the setting-aside proceedings before the Swiss Federal Tribunal.
[33] This is not obvious, as Article 182 para. 4 PILA expressly addresses the situation of «a party that continues with the arbitration proceedings». It states: «A party that continues with the arbitration proceedings without objecting immediately to a breach of the rules of procedure of which it is aware or which it would have been aware had it exercised due diligence may not invoke this breach at a later point in the proceedings» (non-binding translation by the Swiss government).
[34] The provision was introduced as part of the 2021 revision of the 12th chapter of the PILA. The legislator intended to transpose the Swiss Federal Tribunal’s longstanding jurisprudence into statutory law. The Swiss Federal Tribunal intended to prevent parties from holding back objections for potential setting-aside proceedings.
All parties were required to raise procedural objections immediately. The application of this requirement was not limited to participating parties. There is no evidence that the legislator intended to limit the scope of Article 182 para. 4 PILA to participating parties.
[35] The decision confirms this conclusion. In the author’s view, such confirmation is appreciated. It shows that non-participation is not an alternative to an immediate objection.