Publications

Simon Gabriel, Andreas Schregenberger; in: Indian Journal of Arbitration Law (IJAL), Volume 8, Issue 2, 2020, p. 48 et seqq.

Abstract

Based on recent jurispru­dence by the Swiss Supreme Court on the par­ties’ right to be heard, this arti­cle analy­ses how the focus on eval­u­at­ing infringe­ments of the right to be heard under Swiss lex arbi­tri has shift­ed over time. Where­as some decades ago any infringe­ment of the right to be heard led to the annul­ment of the arbi­tral award, the Swiss Supreme Court now requires that there be a poten­tial impact on the sub­stan­tive out­come of the case. As an analy­sis of per­ti­nent jurispru­dence in Aus­tria, Eng­land and in rela­tion to the Inter­na­tion­al Cen­tre for Set­tle­ment of Invest­ment Dis­putes [“ICSID”] demon­strates, this appears to be in line with devel­op­ments at the fore­front of inter­na­tion­al arbi­tra­tion. From a prac­ti­cal point of view, the new Swiss approach is like­ly to help tri­bunals increase pro­ce­dur­al effi­cien­cy, one of the utmost con­cerns of mod­ern arbi­tra­tion. At the same time, par­ties may, in cer­tain sce­nar­ios, run into evi­den­tiary prob­lems in annul­ment pro­ceed­ings. As a poten­tial rem­e­dy, par­ties may need to react time­ly with more specif­i­cal­ly rea­soned objec­tions against any poten­tial infringe­ments of the right to be heard by arbi­tral tri­bunals. The authors trust that the new approach adopt­ed by the Swiss Supreme Court will increase pro­ce­dur­al effi­cien­cy in Swiss arbi­tra­tion proceedings.
 

I. Intro­duc­tion

Pro­ce­dur­al fair­ness is quin­tes­sen­tial for every adju­di­ca­tion of a dis­pute. This holds true for inter­na­tion­al arbi­tra­tion pro­ceed­ings, whether they are con­duct­ed in India, Switzer­land or else­where. Despite the uni­ver­sal recog­ni­tion of the par­ties’ right to be heard, arbi­tral awards are rarely suc­cess­ful­ly chal­lenged on such basis.¹ In the view of State courts review­ing such chal­lenges, not every vio­la­tion of the par­ties’ right to be heard should lead to an annul­ment. But what are the appro­pri­ate con­se­quences of its vio­la­tion? In par­tic­u­lar, should an arbi­tral award only be annulled for a vio­la­tion of the par­ties’ right to be heard if it can be demon­strat­ed that such an infringe­ment was like­ly to have had an impact on the out­come of the award?

The Swiss Supreme Court, like oth­er State courts deal­ing with set­ting aside pro­ceed­ings,² has devel­oped this prac­ti­cal­ly rel­e­vant ques­tion for decades. Inter­est­ing­ly, it was more than once that the chal­lenge by a pro­fes­sion­al ten­nis play­er made the Swiss Supreme Court recon­sid­er and fur­ther refine its exten­sive case law on the right to be heard and the ques­tion of the appro­pri­ate require­ments for a suc­cess­ful chal­lenge of an arbi­tral award in this regard.³

As a first step, this arti­cle will dis­cuss ear­li­er and more recent approach­es of the Swiss Supreme Court on due process chal­lenges of arbi­tral awards. In order to com­pare the Swiss approach inter­na­tion­al­ly, the arti­cle will then go on to pro­vide a brief overview of the chal­lenge require­ments in select inter­na­tion­al arbi­tra­tion juris­dic­tions. This com­par­a­tive overview is not intend­ed to be com­pre­hen­sive, but to serve as a com­par­a­tive ref­er­ence for the Swiss devel­op­ment. In the final sec­tion, we will analyse key fac­tors which nec­es­sar­i­ly have to be con­sid­ered in the con­text of this top­ic, such as the cru­cial bal­anc­ing of fair­ness and effi­cien­cy. After all, the ques­tion of how the par­ties’ right to be heard in inter­na­tion­al arbi­tra­tions shall be effec­tive­ly pro­tect­ed is a key ques­tion not only for Switzer­land, but also of gen­er­al impor­tance for the future suc­cess of inter­na­tion­al arbitration.

II. The Swiss Supreme Court’s Approach to the Right to Be Heard

A. Legal Framework

As a gen­er­al prin­ci­ple of fair pro­ce­dur­al treat­ment under Swiss lex arbi­tri, the arbi­tral tri­bunal shall ensure equal treat­ment of the par­ties and the right of the par­ties to be heard in adver­sar­i­al pro­ceed­ings.⁴ These prin­ci­ples are of a manda­to­ry nature.⁵ Although Switzer­land is not a Mod­el Law coun­try (i.e. a sig­na­to­ry to the Unit­ed Nations Com­mis­sion on Inter­na­tion­al Trade Law [UNCI­TRAL] Mod­el Law on Inter­na­tion­al Com­mer­cial Arbi­tra­tion), the per­tain­ing pro­vi­sion of Arti­cle 182(3) of the Swiss Pri­vate Inter­na­tion­al Law Act [“PILA”] reflects the inter­na­tion­al min­i­mum stan­dards when it comes to due process.⁶ A vio­la­tion of the right to be heard is one of the few grounds under Swiss lex arbi­tri​⁷ on the basis of which an arbi­tral award may be chal­lenged,⁸ or refused recog­ni­tion and enforce­ment.⁹

The PILA as such, how­ev­er, is silent on the con­tent of the par­ties’ right to be heard and the require­ments for a suc­cess­ful chal­lenge as a con­se­quence of a vio­la­tion there­of. In prac­tice, the case law devel­oped by the Swiss Supreme Court is of out­stand­ing impor­tance. As the only forum before which an arbi­tral award ren­dered in Switzer­land may be chal­lenged, it is the Swiss Supreme Court which has effec­tive­ly shaped the con­tours of the right to be heard. This holds, in par­tic­u­lar, true for the require­ments to set aside an award due to infringe­ments of the right to be heard.

As a mat­ter of prin­ci­ple, the Swiss Supreme Court resorts to the guide­lines and case law devel­oped with a view to the pro­vi­sions of the Swiss Fed­er­al Con­sti­tu­tion and domes­tic law.¹⁰ In doing so, the court fol­lows a prag­mat­ic approach, there­by allow­ing itself to adjust the scope of the right to be heard depend­ing on the assess­ment of a par­tic­u­lar case. Essen­tial­ly, the right to be heard under Swiss lex arbi­tri entails the right of a par­ty (i) to give its views on any and all cir­cum­stances per­ti­nent for the deci­sion; (ii) to sup­port its legal points; (iii) to make motions; (iv) to present rel­e­vant evi­dence; (v) and to par­tic­i­pate in any hear­ings.¹¹ These prac­ti­cal impli­ca­tions of the right to be heard are always to be under­stood as such being embed­ded in adver­sar­i­al pro­ceed­ings i.e. each par­ty must be grant­ed the oppor­tu­ni­ty to scru­ti­nize the oth­er party’s argu­ments, to express its views there­on and to try to prove them wrong with its own alle­ga­tions and means of evi­dence.¹²

Final­ly, it is impor­tant to note that the right to be heard encom­pass­es a sender (par­ty) and a recip­i­ent (arbi­tral tri­bunal) angle:¹³ it may be vio­lat­ed when a par­ty is pre­vent­ed from effec­tive­ly express­ing its views in the pro­ceed­ings (“active” vio­la­tion; e.g., because the tri­bunal does not grant an oppor­tu­ni­ty to com­ment on a spe­cif­ic sub­ject), as well as when the tri­bunal – for what­ev­er rea­son – does not take any expressed views into con­sid­er­a­tion (“pas­sive” vio­la­tion; e.g., where an arbi­tral award is rea­soned in detail, but does not address an argu­ment raised by the par­ty which is rel­e­vant to the out­come of the dis­pute).¹⁴ In the words of the Swiss Supreme Court:

“The right to be heard […] does not require that an inter­na­tion­al arbi­tral award be rea­soned. How­ev­er, jurispru­dence has inferred a min­i­mum duty on arbi­tral tri­bunals to analyse and deal with the rel­e­vant issues. This duty is vio­lat­ed if an arbi­tral tri­bunal inad­ver­tent­ly or due to a mis­un­der­stand­ing fails to con­sid­er alle­ga­tions, argu­ments, evi­dence or offers of evi­dence which have been raised by a par­ty and are impor­tant for the award.”¹⁵ (Infor­mal translation)

B. For­mal Nature as Con­sti­tu­tion­al Guarantee

By virtue of its express men­tion in the fun­da­men­tal rights sec­tion of the Swiss Fed­er­al Con­sti­tu­tion,¹⁶ the right to be heard has an excep­tion­al­ly strong foot­ing in Swiss law as a pro­ce­dur­al guar­an­tee cov­er­ing all legal proceedings.

The pur­pose of the right to be heard against its con­sti­tu­tion­al back­ground is twofold: on the one hand, the right to be heard serves as a means of clar­i­fy­ing the facts of the case (pre­sen­ta­tion of the facts, tak­ing of evi­dence), and thus, of estab­lish­ing the truth in the process. On the oth­er hand, the right to be heard should, in the sense of equal­i­ty of arms, enable the par­ties to have a per­son­al right to par­tic­i­pate (per­sön­lichkeits­be­zo­genes Mitwirkungsrecht/​droit per­son­nel de par­ticiper) in the process which leads to the issu­ing of the deci­sion.¹⁷

Accord­ing to its gen­er­al impor­tance as a fun­da­men­tal right – vest­ing the par­ties with a right to prop­er­ly par­tic­i­pate – the right to be heard is reg­u­lar­ly con­strued and referred to by the Swiss Supreme Court as a right of for­mal nature: its vio­la­tion, thus, leads to the annul­ment of the con­test­ed deci­sion irre­spec­tive of the chances of suc­cess of an appeal on the mer­its.¹⁸ This also holds true in the field of inter­na­tion­al arbi­tra­tion.¹⁹

This ini­tial approach tak­en by the Swiss Supreme Court may be illus­trat­ed by its land­mark deci­sion in SFT 121 III 331, a dis­pute aris­ing out of a ser­vice agree­ment for con­struc­tion projects in Turkey.²⁰ The sole arbi­tra­tor based its deci­sion on fac­tu­al find­ings con­trary to the sub­mis­sions of both par­ties. More specif­i­cal­ly, the sole arbi­tra­tor found that the agent had stopped ren­der­ing any ser­vices for the prin­ci­pal in June 1991, while the par­ties had sub­mit­ted that ser­vices had been ren­dered by the agent even after June 1991. The find­ing of the sole arbi­tra­tor was, in his opin­ion, rel­e­vant to the out­come of the case under the legal con­cept of a synal­lag­mat­ic rela­tion­ship²¹ between the par­ties. Accord­ing­ly, he con­clud­ed that for lack of ser­vices, no fur­ther con­sid­er­a­tion was owed by the prin­ci­pal to the agent after June 1991. In the chal­lenge pro­ceed­ings before the Swiss Supreme Court, the sole arbi­tra­tor, while admit­ting his error on the men­tioned fac­tu­al find­ing, sub­mit­ted that his legal analy­sis had led to the same result i.e. that the agent had to con­clude that the ser­vice agree­ment had (implied­ly) been ter­mi­nat­ed by the prin­ci­pal.²²

The Swiss Supreme Court ruled that the sole arbi­tra­tor had refused the agent’s right to be heard by not tak­ing note of its cor­re­spond­ing sub­mis­sion.²³ More­over, the court stat­ed that – due to the for­mal nature of the right to be heard – the award had to be set aside irre­spec­tive of the prospects of suc­cess on the sub­stan­tive lev­el of the case ​“since the actu­al mean­ing [of the for­mal pro­ce­dur­al guar­an­tee of the right to be heard] is not to ensure that the deci­sion on the mer­its is free of errors in accor­dance with the cog­ni­tion of the appel­late court, but to guar­an­tee the par­ties an inde­pen­dent assess­ment of the claims and fac­tu­al asser­tions sub­mit­ted to the court in con­for­mi­ty with the pro­ce­dure.​”²⁴ (Infor­mal translation)

C. Phase I: Empha­sis on For­mal Nature and its Implications

On the basis of the for­mal nature of the right to be heard, the Swiss Supreme Court devel­oped its tra­di­tion­al approach with the two basic require­ments for a suc­cess­ful chal­lenge of an arbi­tral award:

First, the right to be heard does not pro­tect the par­ties from erro­neous deci­sions as such and, hence, not from a sub­stan­tive denial of jus­tice. The pur­pose of the right to be heard is not to ensure a flaw­less deci­sion on the mer­its, but to pro­tect the par­ties from a for­mal denial of jus­tice in pro­vid­ing the par­ties with the pos­si­bil­i­ty to par­tic­i­pate in an inde­pen­dent assess­ment of their claims and sub­mis­sions by the tri­bunal.²⁵ The Swiss Supreme Court spec­i­fied this require­ment as follows:

“A for­mal denial of jus­tice only exists if the par­ties are pre­vent­ed from par­tic­i­pat­ing in the process, influ­enc­ing it and putting for­ward their point of view, and thus their right to be heard is effec­tive­ly under­mined by the obvi­ous over­sight. This alone jus­ti­fies annulling the deci­sion with­out regard to the sub­stan­tive chances of suc­cess of the com­plaint, since the right to be heard does not guar­an­tee sub­stan­tive cor­rect­ness but the right of the par­ties to par­tic­i­pate in the deci­sion-mak­ing process.”²⁶ (Infor­mal translation)

Sec­ond, not every (tech­ni­cal) vio­la­tion of the right to be heard leads to a suc­cess­ful chal­lenge. The hur­dles for an effec­tive denial of jus­tice are high­er. The Swiss Supreme Court inter­venes only if a par­ty suc­ceeds in estab­lish­ing that the error or inad­ver­tence of the arbi­tral tri­bunal pre­vent­ed it from pre­sent­ing its argu­ments and the nec­es­sary evi­dence on an issue rel­e­vant to the proceedings:

“If the arbi­tral deci­sion were set aside in the event of any obvi­ous over­sight, irre­spec­tive of the sub­stan­tive prospects of suc­cess of the chal­lenge, the Fed­er­al Supreme Court would have a cog­ni­tion in the con­text of the arbi­tral com­plaint which it does not even have as a prop­er appeal instance in oth­er pro­ceed­ings […] Rather, the par­ty con­cerned must demon­strate that the over­sight of the court made it impos­si­ble for it to intro­duce and prove its point of view on an issue rel­e­vant to the pro­ceed­ings.”²⁷ (Infor­mal translation)

Con­se­quent­ly, the ini­tial test devel­oped by the Swiss Supreme Court was for the par­ty con­cerned to estab­lish (only) that it was pre­vent­ed, by error or inad­ver­tence of the arbi­tral tri­bunal, from pre­sent­ing (and prov­ing) its views in respect of an issue rel­e­vant to the pro­ceed­ings. In oth­er words, the deci­sive fac­tor was that a par­ty has been dis­ad­van­taged in the pro­ceed­ings and its right to par­tic­i­pate had been deval­ued in such a way that it was, as a result, in no bet­ter posi­tion than if it had not been grant­ed the right to be heard on a deci­sive ques­tion at all.²⁸ In turn, if it was estab­lished that the pro­ce­dur­al con­di­tions allowed the par­ty to put for­ward its argu­ments and the tri­bunal took note of the party’s sub­mis­sions, the right to be heard was not affect­ed.²⁹

D. Phase II: Increased Require­ments and Poten­tial Causality

Although the con­sti­tu­tion­al foot­ing of the right to be heard has remained the same, the ini­tial test devel­oped by the Swiss Supreme Court has evolved over time and become more strin­gent. The first major step in the direc­tion of a more restric­tive approach tak­en by the Swiss Supreme Court may be illus­trat­ed by the famous Cañas case of 2007,³⁰ which con­cerned a dis­pute between the pro­fes­sion­al ten­nis play­er, Guiller­mo Cañas (who would lat­er chal­lenge the award) and the Asso­ci­a­tion of Ten­nis Pro­fes­sion­als [“ATP”] aris­ing out of a pos­i­tive drug test dur­ing a tour­na­ment in Aca­pul­co, Mexico.

In this case, the ten­nis play­er had put for­ward a num­ber of sub­sidiary argu­ments before the Court of Arbi­tra­tion for Sport [“CAS”], in the event that it reject­ed his main sub­mis­sions. How­ev­er, the arbi­tral tri­bunal did effec­tive­ly ignore a num­ber of these sub­sidiary argu­ments in its legal analy­sis. While the main sub­mis­sion refut­ed the alle­ga­tion that he had com­mit­ted any fault in con­nec­tion with the recep­tion of the test­ed drug, the sub­sidiary sub­mis­sions addressed the non-com­pli­ance of any sanc­tion with a num­ber of alleged­ly applic­a­ble laws.³¹

First, the Swiss Supreme Court held that the con­cerned par­ty has to estab­lish that it was not heard on an impor­tant point (not only an issue rel­e­vant to the pro­ceed­ings).³² Sec­ond, the court estab­lished a new ​“dou­ble test” with a new require­ment of poten­tial causality:

“It is for the par­ty con­cerned to estab­lish, on the one hand, that the arbi­tral tri­bunal did not exam­ine some of the facts, evi­dence or law that it had prop­er­ly put for­ward in sup­port of its sub­mis­sions and, on the oth­er hand, that those facts were of such nature as to affect the out­come of the dis­pute.”³³ (Infor­mal translation)

The intro­duc­tion of this new require­ment had no neg­a­tive impact on the suc­cess of the chal­lenge in the case. The Swiss Supreme Court held that the sub­sidiary argu­ments made by the ten­nis play­er were like­ly to alter the out­come of the dis­pute, since they exclud­ed the pos­si­bil­i­ty of impos­ing any sanc­tion on him. Their rel­e­vance could, hence, not be denied from the out­set. In the view of the Swiss Supreme Court, the CAS had in its deci­sion not suf­fi­cient­ly indi­cat­ed (save for a timid ref­er­ence to Delaware law in its sum­ma­ry of the appellant’s legal plead­ings) why it con­sid­ered that the laws relied on by the appel­lant were not applic­a­ble in the present case.

Con­se­quent­ly, it could not be exclud­ed, so the court rea­soned, that the omis­sion was the result of an inad­ver­tence on the part of the arbi­tral tri­bunal. The Swiss Supreme Court con­clud­ed that due to the for­mal nature of the right to be heard, the chal­lenged award had to be set aside, regard­less of the out­come of the effec­tive analy­sis of the sub­sidiary legal plead­ings put for­ward by the appel­lant.³⁴

Although the Swiss Supreme Court for­mal­ly intro­duced a new require­ment to the ini­tial test, its actu­al appli­ca­tion in the Cañas deci­sion shows that it did not effec­tive­ly change the tra­di­tion­al approach of the Swiss Supreme Court: the vio­la­tion of the right to be heard must be rel­e­vant for the deci­sion, so that it can be proven to what extent the ele­ments not tak­en into account were eli­gi­ble to have an impact on the deci­sion.³⁵ How­ev­er, as the Cañas deci­sion shows, a demon­stra­tion of the causal con­nec­tion between the vio­la­tion of the right to be heard and the out­come of the deci­sion is not required. This ​“eli­gi­bil­i­ty” test used to be applied by the tri­bunal until recent­ly, includ­ing in anoth­er land­mark deci­sion on the right to be heard, SFT 142 III 360.³⁶

Pur­suant to very recent case law, how­ev­er, this eli­gi­bil­i­ty test has been replaced by an approach of a ​“hard” causal­i­ty requirement.

E. Phase III: Empha­sis on Inter­con­nec­tion with Out­come of the Award

Late­ly, the Swiss Supreme Court has issued two deci­sions set­ting a new frame­work for suc­cess­ful chal­lenges due to infringe­ments of the right to be heard.³⁷

One of them, the Errani Case,³⁸ illus­trates a sec­ond major shift by the Swiss Supreme Court to a more restric­tive approach. In this case, a dis­pute between the pro­fes­sion­al ten­nis play­er Sara Errani (who would lat­er chal­lenge the award) and a sports orga­ni­za­tion (i.e., the Ital­ian dop­ing agency, NADO) arose out of a pos­i­tive drug test. The CAS did not pro­vide the ten­nis play­er with an oppor­tu­ni­ty to com­ment on the effects of the back­dat­ing of her sus­pen­sion peri­od from the date of the arbi­tral award. The Swiss Supreme Court held that, as the ten­nis play­er could not have expect­ed that the CAS would rule sev­en months lat­er than she had antic­i­pat­ed, and the arbi­tral tri­bunal had not offered her the oppor­tu­ni­ty to express her views on future effects of the back­dat­ing from the date of the CAS deci­sion, the CAS had there­by vio­lat­ed her right to be heard.³⁹

Sur­pris­ing­ly, the ten­nis player’s chal­lenge of the CAS deci­sion was, nev­er­the­less, unsuc­cess­ful. While the dou­ble test pur­suant to the Cañas case as such remained essen­tial­ly the same,⁴⁰ the Swiss Supreme Court put par­tic­u­lar empha­sis on the notion that the right to be heard is ​“not an end in itself” and there­by embed­ded the test in a new legal setting:

“Undoubt­ed­ly, the right to be heard is a con­sti­tu­tion­al guar­an­tee of a for­mal nature. How­ev­er, since it is not an end in itself, when it is not clear what influ­ence its vio­la­tion may have had on the pro­ce­dure, there is no rea­son to set aside the chal­lenged deci­sion […]. This case law also applies, mutatis mutan­dis, to inter­na­tion­al arbi­tra­tion.”⁴¹ (Infor­mal translation)

Apply­ing this test to the facts of the Errani Case, the Swiss Supreme Court found that the appel­lant had failed to demon­strate that the vio­la­tion of her right to be heard could have any impact on the deci­sion of the CAS. The court rea­soned as follows:

“How­ev­er, the Court does not see what influ­ence this vio­la­tion may have had on the fate of the dis­pute. If she had been ques­tioned by the Pan­el before it hand­ed down its sen­tence, the appel­lant could cer­tain­ly have claimed that her sport­ing per­for­mance had, in her view, been gen­er­al­ly neg­a­tive in the pre­vi­ous months and that a back­dat­ing would be less harm­ful to her. How­ev­er, this would not have changed the fact that it was impos­si­ble to pre­dict the ath­lete’s future per­for­mance […]. There­fore, it is not demon­strat­ed that the vio­la­tion of the ath­lete’s right to be heard could have had any impact on the solu­tion adopt­ed by CAS.”⁴² (Infor­mal translation)

With this deci­sion, it becomes evi­dent that the Swiss Supreme Court has changed its approach, com­pared to its ini­tial stance that a vio­la­tion of the right to be heard ​“jus­ti­fies annulling the deci­sion with­out regard to the sub­stan­tive chances of success.”​⁴³ The very notion of the for­mal nature of the right to be heard is to guar­an­tee the for­mal par­tic­i­pa­tion of the par­ties. Under this notion, the sub­stan­tive out­come of a dis­pute is sec­ondary. This holds, in par­tic­u­lar, true as the right to be heard is a per­son­al right to par­tic­i­pate in the deci­sion-mak­ing process of the tri­bunal. Against this back­ground, the right to be heard as such, indeed, appears in its ini­tial inter­pre­ta­tion by the Swiss Supreme Court as an end in itself.

The major impact of the Errani deci­sion on the require­ments for a suc­cess­ful chal­lenge might be illus­trat­ed if the facts of the Cañas deci­sion were to be exam­ined under the new régime. In the Cañas deci­sion, the Swiss Supreme Court held that regard­less of the out­come of the effec­tive analy­sis of the sub­sidiary legal plead­ings, the award had to be set aside. If we look at the rea­son­ing of the Swiss Supreme Court in the Errani deci­sion, it is like­ly that the court would have run a pri­ma facie analy­sis on the poten­tial impact of the sub­sidiary legal plead­ings on the out­come of the dispute.

F. First Conclusion

Orig­i­nal­ly, the right to be heard was con­sid­ered as for­mal in nature in that a vio­la­tion of the right to be heard had to result in the set­ting aside of the chal­lenged deci­sion, no mat­ter whether the vio­la­tion had adverse­ly impact­ed the out­come of the case or not.

In the mean­time, the right to be heard has – in two major shifts – moved away from such for­mal nature. Nowa­days, the chal­leng­ing par­ty has to estab­lish that the out­come of the dis­pute would have been (prac­ti­cal­ly) affect­ed if the right to be heard had not been infringed. Con­se­quent­ly, the chal­leng­ing par­ty must not only estab­lish that its right to be heard was vio­lat­ed in con­nec­tion with an impor­tant issue of the case, but also effec­tive­ly show that such vio­la­tion was like­ly to have had an adverse impact on the out­come of the award. We under­stand that this is the case if the oper­a­tive part of the award (in Ger­man: ​“Dis­pos­i­tiv”) would have any dif­fer­ent con­tent, had the right to be heard not been violated.

This new approach tak­en by the Swiss Supreme Court has set the scene for a de fac­to change of the nature of the right to be heard. The refer­ral by the Swiss Supreme Court to the con­sti­tu­tion­al right of for­mal nature is, there­fore, at least ques­tion­able.⁴⁴ This major change has impor­tant impli­ca­tions. Thus, while the pro­ce­dur­al effi­cien­cy has been strength­ened, one of the core pil­lars of the right to be heard – the per­son­al right to par­tic­i­pate in the process of issu­ing the award – has been more and more undermined.

III. Select­ed Inter­na­tion­al Developments

In the fol­low­ing sec­tion, three dif­fer­ent chal­lenge regimes of impor­tant inter­na­tion­al arbi­tra­tion juris­dic­tions (or, in the case of ICSID, inter­na­tion­al dis­pute set­tle­ment sys­tems) shall be briefly con­sid­ered, specif­i­cal­ly with regards to the nature of the right to be heard. In this way, the Swiss approach may be com­pared to inter­na­tion­al devel­op­ments in this field.

A. Aus­tria: No Require­ment to Demon­strate Influ­ence on Award

In Aus­tria, as it is a Mod­el Law coun­try,⁴⁵ the par­ties to arbi­tra­tion pro­ceed­ings shall be treat­ed fair­ly and each par­ty shall be giv­en the right to be heard.⁴⁶ Accord­ing­ly, the vio­la­tion of the right to be heard is a ground for set­ting aside the award.⁴⁷ Like in Switzer­land, statu­to­ry laws are silent on the con­tent and scope of the right to be heard in inter­na­tion­al arbi­tra­tion and the require­ments for a suc­cess­ful chal­lenge based on a vio­la­tion there­of.⁴⁸ While the par­ties’ right to be heard is manda­to­ry in nature,⁴⁹ the Aus­tri­an Supreme Court gen­er­al­ly takes a restric­tive approach on the con­tent of the par­ties’ right to be heard in arbi­tra­tion pro­ceed­ings; pur­suant to long­stand­ing jurispru­dence of the Aus­tri­an Supreme Court, the right to be heard is only infringed if a par­ty was not able to present its case at all.⁵⁰

We under­stand the major­i­ty of legal doc­trine in Aus­tria to sub­mit that the chal­leng­ing par­ty is not required to demon­strate that the vio­la­tion of its right to be heard had any effect on the out­come of the pro­ceed­ings.⁵¹ This is against the back­ground of the already very strict require­ments set by the Aus­tri­an Supreme Court for the qual­i­fi­ca­tion of an instance of pro­ce­dur­al mis­con­duct by the tri­bunal as a ​“prop­er” vio­la­tion of the par­ties’ right to be heard.⁵² As lead­ing schol­ar­ship points out, it would be unrea­son­ably bur­den­some for the par­ty chal­leng­ing the award to addi­tion­al­ly prove that the vio­la­tion of its right to be heard indeed caused it to lose the arbi­tra­tion.⁵³

Inter­est­ing­ly, one schol­ar­ly opin­ion pos­tu­lates that it must be assessed by way of a plau­si­bil­i­ty check (in Ger­man: ​“Plau­si­bil­isierung”): whether the vio­la­tion of the right to be heard had at least been ​“eli­gi­ble” to influ­ence the out­come of the pro­ceed­ings. Accord­ing to this view, the door to chal­lenges of arbi­tral awards would oth­er­wise be opened too wide, as the los­ing par­ty would always find a cir­cum­stance that alleged­ly estab­lished a vio­la­tion of its right to be heard.⁵⁴ This lat­ter view, which has been express­ly reject­ed by the Aus­tri­an Supreme Court,⁵⁵ might in the­o­ry be com­pa­ra­ble to the eli­gi­bil­i­ty test under the Cañas deci­sion (as dis­cussed above in Phase II).⁵⁶

In sum, we under­stand that in Aus­tria the over­all dis­cus­sion on the right to be heard in arbi­tra­tion pro­ceed­ings has so far focused on its con­tent as such (i.e., is there any vio­la­tion?) rather than on the require­ments for a suc­cess­ful chal­lenge in case of an actu­al vio­la­tion (i.e., is there any causal­i­ty between the vio­la­tion and the out­come of the award?). Against this back­ground, it is not sur­pris­ing that nei­ther the Aus­tri­an Supreme Court nor lead­ing schol­ar­ship pos­tu­late that the par­ty chal­leng­ing the award, as a rule, has to demon­strate that the alleged vio­la­tion of the right to be heard had a like­ly or any impact on the out­come of the award.

B. Eng­land: Require­ment of Real­is­tic Impact on Outcome

Like Switzer­land, Eng­land is not a Mod­el Law coun­try.⁵⁷ Pur­suant to Sec­tion 33 of the Eng­lish Arbi­tra­tion Act 1996 [“Act”], arbi­tral tri­bunals have to act fair­ly and impar­tial­ly, giv­ing each par­ty a rea­son­able oppor­tu­ni­ty of putting its case and deal­ing with that of its oppo­nent.⁵⁸ Although the Act is silent on the exact scope of the right to be heard, it has a more restric­tive approach in com­par­i­son to the Mod­el Law. Under Eng­lish lex arbi­tri, the scope of the right to be heard must be deter­mined by the con­sid­er­a­tions of rea­son­able­ness. As lead­ing com­men­ta­tors explain:

“Such a term [i.e. the Mod­el Law term ​“a full oppor­tu­ni­ty of pre­sent­ing his case”] might have giv­en the impres­sion that a par­ty was enti­tled to take as long as he required to explore every aspect of his case, at absurd length if nec­es­sary. The term ​“a rea­son­able oppor­tu­ni­ty” con­veys an objec­tive­ly viewed bal­ance of what is fair to the par­ty, but is also com­pat­i­ble with expe­di­tion and econ­o­my.”⁵⁹

In the same vein, the respec­tive ground for set­ting aside an arbi­tral award is inter­pret­ed very nar­row­ly.⁶⁰ Pur­suant to Sec­tion 68 of the Act, the fail­ure of the tri­bunal to com­ply with its duties under Sec­tion 33 – and, hence, to hon­our the par­ties’ right to be heard – may con­sti­tute a ground for set­ting aside the award,⁶¹ in case such fail­ure con­sti­tutes a ​“seri­ous irreg­u­lar­i­ty affect­ing the tri­bunal, the pro­ceed­ings, or the award.”​⁶² A ​“seri­ous irreg­u­lar­i­ty” is under­stood as an irreg­u­lar­i­ty which has caused or will cause sub­stan­tial injus­tice to the appli­cant.⁶³ Gen­er­al­ly, the test of sub­stan­tial injus­tice will be ful­filled only in those cas­es where it can be said that what has hap­pened is ​“so far removed from what could rea­son­ably be expect­ed” that the review­ing State court shall take action.⁶⁴

The Act is silent on oth­er require­ments for a suc­cess­ful chal­lenge, includ­ing whether the vio­la­tion needs to have an impact on the out­come of the award. How­ev­er, rel­e­vant case law sug­gests that mere ​“tech­ni­cal” vio­la­tions of the right to be heard are not suf­fi­cient for a suc­cess­ful chal­lenge. In War­bor­ough Inv. Ltd. v. S. Robin­son & Sons (Hold­ings) Ltd. [“War­bor­ough”], the Court of Appeal of Eng­land and Wales held that the court decid­ing over the chal­lenge shall assess how the infringed par­ty would have argued its case if the vio­la­tion of its right to be heard would not have tak­en place.⁶⁵ On such basis, the Court of Appeal of Eng­land and Wales concluded:

“In the instant case, I am not sat­is­fied that the case which Mr. Gillott would have put had he been afford­ed the oppor­tu­ni­ty to sub­mit a fur­ther report along the lines indi­cat­ed in his wit­ness state­ment would have been so dif­fer­ent as to jus­ti­fy the con­clu­sion that the lack of that oppor­tu­ni­ty in itself caused a sub­stan­tial injus­tice, regard­less of what the out­come of the arbi­tra­tion would have been. Nor, for that mat­ter, am I sat­is­fied that the out­come in that event would have been mate­ri­al­ly dif­fer­ent. Accord­ing­ly, I agree with the judge that the appeal fails on this ques­tion also.”⁶⁶ (Empha­sis added)

Pur­suant to such hold­ing, we under­stand the test before the Court of Appeal of Eng­land and Wales to be twofold: first, the chal­leng­ing par­ty must demon­strate that the vio­la­tion of its right to be heard has pre­vent­ed it from putting for­ward a mate­r­i­al point in addi­tion to its exist­ing pre­sen­ta­tion of the case. Sec­ond, such point (not brought to the arbi­tral tribunal’s atten­tion) might have like­ly influ­enced the out­come of the award. Accord­ing­ly, lead­ing com­men­ta­tors pos­tu­late that one of the con­se­quences of the War­bor­ough case is the neces­si­ty to show that the pro­ce­dur­al irreg­u­lar­i­ty (which includes a vio­la­tion of the right to be heard) is like­ly to have made a real dif­fer­ence on the result of the pro­ceed­ings.⁶⁷

How­ev­er, fur­ther case law sug­gests that there is no need to demon­strate that the pro­ce­dur­al irreg­u­lar­i­ty would in any event have had an impact on the out­come of the award.⁶⁸ Rather, as point­ed out by the High Court of Jus­tice in Cameroon Air­lines v. Transnet Ltd. [“Cameroon Air­lines”], it needs to be demon­strat­ed (only) that the pro­ce­dur­al irreg­u­lar­i­ty could real­is­ti­cal­ly have an impact on the out­come of the award:

“[…] I do not think it needs to be shown that the out­come of a remis­sion will nec­es­sar­i­ly or even prob­a­bly be dif­fer­ent but it does need to be estab­lished that the appli­cant has been unfair­ly deprived of an oppor­tu­ni­ty to present its case or make a case which had that not occurred might real­is­ti­cal­ly have led to a sig­nif­i­cant­ly dif­fer­ent out­come.”⁶⁹ (Empha­sis added)

It appears that the Eng­lish courts gen­er­al­ly take a restric­tive approach to both the con­tent of the right to be heard, as well as the require­ments for a suc­cess­ful chal­lenge. Against this back­ground, it is not sur­pris­ing that, under the Act, the par­ty chal­leng­ing the award has to demon­strate that the alleged vio­la­tion of the right to be heard could real­is­ti­cal­ly impact the out­come of the award. Prac­ti­cal­ly, this might, in our view, be com­pa­ra­ble to the new test of the Swiss Supreme Court pur­suant to the Errani Deci­sion (as dis­cussed above in Phase III), requir­ing the chal­leng­ing par­ty to demon­strate that the vio­la­tion like­ly had an impact on the out­come of the award.⁷⁰

C. ICSID: Require­ment of Poten­tial Impact on Outcome

The lim­it­ed grounds for the annul­ment of an ICSID award are set out in Arti­cle 52 of the Con­ven­tion on the Set­tle­ment of Invest­ment Dis­putes between States and Nation­als of oth­er States [“ICSID Con­ven­tion”].⁷¹ The forum decid­ing over appli­ca­tions for annul­ments is an ad hoc com­mit­tee appoint­ed by the Chair­man of the Admin­is­tra­tive Coun­cil.⁷² One of the annul­ment grounds is a ​“seri­ous depar­ture from a fun­da­men­tal rule of pro­ce­dure”.⁷³ The vio­la­tion of a rule of pro­ce­dure will be a ground for annul­ment only if two require­ments are met: the depar­ture from the rule must be seri­ous and the rule con­cerned must be fun­da­men­tal.⁷⁴ The right to be heard belongs to such cat­e­go­ry of fun­da­men­tal rules.⁷⁵

Accord­ing to emi­nent schol­ars in this field, in order to be seri­ous, the depar­ture must be more than min­i­mal; it must be sub­stan­tial and must have had a mate­r­i­al effect on the affect­ed par­ty. In oth­er words, it must have deprived that par­ty of the ben­e­fit of the rule in ques­tion or cause a tri­bunal to reach a result sub­stan­tial­ly dif­fer­ent from what it would have award­ed had such a rule been observed.⁷⁶ Accord­ing­ly, as set out in the annul­ment deci­sion in Vic­tor Pey Casa­do and Foun­da­tion ​“Pres­i­dente Allende” v. Repub­lic of Chile [“Pey Casa­do”], there are basi­cal­ly two views relat­ing to the ​“seri­ous­ness” of the depar­ture:⁷⁷

At least one (ear­li­er) ad hoc com­mit­tee has looked at the impor­tance of the right involved.⁷⁸ In essence, it con­clud­ed that if the right is fun­da­men­tal or sub­stan­tial as such, the depri­va­tion there­of is like­ly to jeop­ar­dize the legit­i­ma­cy or integri­ty of the arbi­tral process. Against this back­ground, we under­stand this ad hoc com­mit­tee pos­tu­lates that the vio­la­tion of the right to be heard as such may already qual­i­fy as a seri­ous depar­ture, with­out the need of any (demon­strat­ed) impact on the out­come of the award.

How­ev­er, more recent ad hoc com­mit­tees have opined that the depar­ture must relate to an out­come-deter­mi­na­tive issue in order to be seri­ous.⁷⁹ This line of prece­dents focus­es on the impact of the infringed right on the out­come of the pro­ceed­ings. In the land­mark case of Wena, the ad hoc com­mit­tee held that the vio­la­tion of a fun­da­men­tal rule must have caused the arbi­tral tri­bunal to reach a ​“result sub­stan­tial­ly dif­fer­ent” from what it would have award­ed had such rule been observed.⁸⁰

On such basis, we under­stand that there is a basic under­stand­ing among more recent ad hoc com­mit­tees that ​“in order for a depar­ture from a fun­da­men­tal rule of pro­ce­dure to be seri­ous, an appli­cant is not required to show that, if the rule had been respect­ed, the out­come of the case would have been dif­fer­ent or that it would have won the case. What an appli­cant must show is that the depar­ture may have had an impact on the award.”​⁸¹ (Empha­sis added)

Cer­tain ad hoc com­mit­tees have con­clud­ed – some­times implied­ly⁸² – that the depar­ture may have had an impact on the award, if it con­cerned an issue that was deter­mi­na­tive for the out­come of the case.⁸³

In gen­er­al, ad hoc com­mit­tees have proven not to over­ly restrict the con­tent and exact scope of the par­ties’ right to be heard in a spe­cif­ic case. This might be against the back­ground that the ​“annul­ment sys­tem is designed to safe­guard the integri­ty, not the outcome.”​⁸⁴ In this con­text, it has been voiced in legal doc­trine that in the case of invest­ment arbi­tra­tion, where the arbi­tra­tion aris­es from a dis­pute between a pri­vate par­ty and a State or State enti­ty, legit­i­ma­cy con­cerns must pre­vail over final­i­ty (and effi­cien­cy con­cerns).⁸⁵

Addi­tion­al­ly, regard­ing the actu­al require­ments of a suc­cess­ful appli­ca­tion for annul­ment due to a vio­la­tion of the par­ties’ right to be heard, we under­stand ad hoc com­mit­tees to gen­er­al­ly take – sim­i­lar to the Swiss Supreme Court – a prag­mat­ic, and not an over­ly for­mal­is­tic, approach. In any event, more recent deci­sions of ad hoc com­mit­tees show that the par­ty chal­leng­ing the award has to demon­strate that the alleged vio­la­tion of the right to be heard may have had a poten­tial impact on the out­come of the award.

Although it is not pos­si­ble to exact­ly match the stan­dards set by the Swiss Supreme Court, we under­stand that such a test of a poten­tial­ly dif­fer­ent impact may be com­pa­ra­ble to the eli­gi­bil­i­ty test of the Swiss Supreme Court under the Cañas deci­sion (as dis­cussed above in Phase II), requir­ing the chal­leng­ing par­ty to demon­strate that the vio­la­tion might the­o­ret­i­cal­ly have had an impact on the out­come of the award.⁸⁶ In turn, we under­stand this approach to be less strin­gent than the test of a real­is­ti­cal­ly dif­fer­ent impact as fol­lowed by the Eng­lish High Court of Jus­tice.⁸⁷

IV. Legal Con­sid­er­a­tions on the Swiss Supreme Court’s Present Approach

A. Strong Right to Be Heard in Line with Inter­na­tion­al Stan­dards for Challenge

The analy­sis of select inter­na­tion­al devel­op­ment yields two main con­clu­sions regard­ing the Swiss approach to the par­ties’ right to be heard:

First, the com­par­i­son with the inter­pre­ta­tion of the right to be heard of oth­er impor­tant inter­na­tion­al arbi­tra­tion sys­tems shows that par­ties enjoy, gen­er­al­ly, a broad scope of the right to be heard under Swiss lex arbi­tri. This becomes par­tic­u­lar­ly clear when we look at the jurispru­dence in Aus­tria, where it is con­stant­ly held that the right to be heard is only infringed if a par­ty was not at all able to present its case, which, in prac­tice, will very rarely be the case.⁸⁸ Also, under Eng­lish lex arbi­tri, the con­cept of ​“sub­stan­tial injus­tice” is in line with the leg­is­la­tors’ intent to only cov­er extreme cas­es of injus­tice – for a very nar­row inter­pre­ta­tion of when an instance of pro­ce­dur­al mis­con­duct of the tri­bunal qual­i­fies as a vio­la­tion of the par­ties’ right to be heard.⁸⁹ On the oth­er hand, the exten­sive case law devel­oped by the Swiss Supreme Court on the right to be heard shows that this fun­da­men­tal pro­ce­dur­al right is tak­en very seri­ous­ly under Swiss lex arbi­tri due to its anchor­ing with­in the Swiss Fed­er­al Constitution.

Sec­ond, we sub­mit that with the ear­li­er approach tak­en by the Swiss Supreme Court under the Cañas deci­sion, the require­ments were – at least mea­sured by its prac­ti­cal impli­ca­tions – com­pa­ra­ble to the annul­ment stan­dards set by cer­tain ad hoc com­mit­tees under ICSID. This is par­tic­u­lar­ly inter­est­ing against the back­ground that the integri­ty and legit­i­ma­cy of the pro­ceed­ings may have a high­er stand­ing in invest­ment arbi­tra­tions than in com­mer­cial arbi­tra­tions.⁹⁰ This shows, in con­se­quence, that the require­ments set by the Swiss Supreme Court in the Cañas deci­sion were, as a mat­ter of prin­ci­ple, more relaxed than one might expect in the con­text of inter­na­tion­al com­mer­cial arbitration.

With the new approach tak­en under the Errani Case, the Swiss Supreme Court now applies a stan­dard for a suc­cess­ful chal­lenge, which is more sim­i­lar to the stan­dards set by the Eng­lish courts. With Lon­don being one of the most impor­tant arbi­tra­tion hubs in the world, the Swiss Supreme Court’s recent jurispru­dence is in line with inter­na­tion­al devel­op­ments at the fore­front of arbi­tra­tion.⁹¹

B. Devel­op­ment of Increased Pro­ce­dur­al Efficiency

The new approach tak­en by the Swiss Supreme Court shifts the bal­ance between the key prin­ci­ple of due process and the key pos­tu­late of time and cost effi­cien­cy. This is because the strin­gency of the require­ments for a suc­cess­ful chal­lenge – at least in the­o­ry – are an expres­sive denom­i­na­tor of how these two key dri­vers in inter­na­tion­al arbi­tra­tion pro­ceed­ings are to be bal­anced against each other.

Gen­er­al­ly, a régime with less strict require­ments for a suc­cess­ful chal­lenge tends to encour­age the par­ty dis­con­tent with the out­come of the pro­ceed­ings to chal­lenge the award. In turn, arbi­tral tri­bunals under a chal­lenge-friend­ly régime tend to be pro­ce­du­ral­ly more cau­tious in order to avoid any poten­tial risks of a chal­lenged award. This might, depend­ing on the case, sub­stan­tial­ly affect the effi­cien­cy and speed of the arbi­tra­tion; arbi­tra­tors may, just for the sake of ​“good order”, albeit with­out any rel­e­vance for their assess­ment of the mer­its, grant addi­tion­al rounds of sub­mis­sions or addi­tion­al time for over­due sub­mis­sions, sum­mon wit­ness­es where their tes­ti­mo­ny is not need­ed accord­ing to their assess­ment, etc. Sim­ply put, the eas­i­er it is for par­ties to suc­cess­ful­ly chal­lenge an arbi­tral award on the basis of due process con­cerns, the more cau­tious (and poten­tial­ly inef­fi­cient) arbi­tral tri­bunals will be in order to avoid any poten­tial vio­la­tion of the par­ties’ right to be heard.

In turn, the stricter the require­ments for a suc­cess­ful chal­lenge are, the less­er the par­ties may be inclined to chal­lenge an award with an out­come unfavourable to them. Con­se­quent­ly, if the poten­tial risk of a chal­lenged award is gen­er­al­ly low­er, arbi­tral tri­bunals might feel encour­aged to focus on the mer­its of the case rather than on ​“com­fort­ing” the par­ties for the sake of mere for­mal­i­ty. As a mat­ter of prin­ci­ple, effi­cient con­duct of the pro­ceed­ings might gen­er­al­ly increase under a stricter chal­lenge régime.

Whether the prin­ci­ple of due process or the pos­tu­late of time and cost effi­cien­cy is to be giv­en more weight is ulti­mate­ly a pol­i­cy con­sid­er­a­tion. Pol­i­cy con­sid­er­a­tions, in turn, depend on the spe­cif­ic bal­ance of the key inter­ests involved. When it comes to the nature of the right to be heard, the Swiss Supreme Court has, with its new approach, decid­ed to give more weight to effi­cien­cy con­cerns than it did in the past.

In times where users of inter­na­tion­al arbi­tra­tion are reg­u­lar­ly faced with the man­i­fold ram­i­fi­ca­tions of ​“due process para­noia”,⁹² any tool or means to reduce the risk of over­ly cau­tious tri­bunals is to be wel­comed. Thus, at least on a the­o­ret­i­cal lev­el, the new approach by the Swiss Supreme Court will help to increase the effi­cien­cy of arbi­tral pro­ceed­ings in Switzer­land. At the very least, such an approach takes on and sup­ports the inter­na­tion­al endeav­ours to strength­en the much-need­ed effi­cien­cy of arbi­tra­tion proceedings.

C. Poten­tial Uncer­tain­ties and Risks

For a par­ty will­ing to chal­lenge an arbi­tral award based on a vio­la­tion of its right to be heard, it will be nec­es­sary to con­vince the Swiss Supreme Court that such vio­la­tion had an adverse impact on the out­come of the award. What does that mean in prac­tice? As a mat­ter of prin­ci­ple, such demon­stra­tion must be based on (i) an antic­i­pat­ed alter­na­tive sce­nario in terms of facts and/​or evi­dence, and (ii) the legal analy­sis of a poten­tial­ly dif­fer­ent legal out­come of the dis­pute tak­ing into account such antic­i­pat­ed alter­na­tive sce­nario. In par­tic­u­lar, the first ele­ment of this two- pronged test may come with con­sid­er­able uncer­tain­ties as to its prac­ti­cal consequences.

In our view, an impor­tant dis­tinc­tion has to be drawn between an ​“active” and a ​“pas­sive” vio­la­tion of the right to be heard.⁹³ In the sce­nario of an active vio­la­tion of the right to be heard, a par­ty is pro­hib­it­ed from pre­sent­ing cer­tain aspects of its case as a result of pro­ce­dur­al mea­sures tak­en by the tri­bunal. This may, for instance, be the case if a par­ty can­not sub­mit an addi­tion­al brief set­ting out its posi­tion on an impor­tant point. In this sit­u­a­tion, it will not be pos­si­ble for the par­ty to demon­strate what infor­ma­tion the addi­tion­al brief would have con­tained, had it been filed. As a fur­ther exam­ple, if a wit­ness whose tes­ti­mo­ny was request­ed by the chal­leng­ing par­ty is not being sum­moned by the tri­bunal, it is not pos­si­ble (for any­one) to estab­lish what the request­ed wit­ness would have tes­ti­fied. In oth­er words, no one can be asked to prove some­thing which does not exist – this fun­da­men­tal evi­den­tiary prin­ci­ple is also known as ​“neg­a­ti­va non sunt proban­da”. The par­ty bur­dened with such a task may spec­u­late what might have hap­pened but can­not demon­strate it. Tak­en fur­ther to the legal analy­sis of a poten­tial­ly dif­fer­ent legal out­come, it will addi­tion­al­ly be impos­si­ble to demon­strate how the tri­bunal might have decid­ed dif­fer­ent­ly on the basis of such neg­a­ti­va. Hence, this sce­nario might in fact become prob­lem­at­ic for the par­ty chal­leng­ing an award due to a vio­la­tion of its right to be heard before the Swiss Supreme Court.

On the oth­er hand, in the sce­nario of a pas­sive vio­la­tion of the right to be heard, although a par­ty is not pro­hib­it­ed from pre­sent­ing its case, the arbi­tral tri­bunal fails to con­sid­er alle­ga­tions, argu­ments, evi­dence or prof­fered evi­dence raised by a par­ty.⁹⁴ This was the case in the Cañas deci­sion, where cer­tain legal argu­ments made by the chal­leng­ing par­ty were ignored by the tri­bunal.⁹⁵ In our view, this sce­nario might be less prob­lem­at­ic as the submission(s) by the par­ty and the award’s rea­son­ing will gen­er­al­ly pro­vide suf­fi­cient mate­r­i­al to demon­strate a vio­la­tion of the right to be heard.

On the basis of these con­sid­er­a­tions, the impli­ca­tions of the new approach tak­en by the Swiss Supreme Court may be sum­ma­rized as fol­lows, in a some­what sim­pli­fied manner:

D. Pos­tu­late for Rea­soned Objec­tions by Counsel

Under Swiss lex arbi­tri, the par­ty which con­sid­ers itself to be affect­ed by a vio­la­tion of its right to be heard must imme­di­ate­ly object and sub­mit its com­plaints to the arbi­tral tri­bunal. Oth­er­wise, such par­ty runs the risk of for­feit­ing its right to be heard (for the respec­tive issue).⁹⁶ Against the back­ground of poten­tial dif­fi­cul­ties with neg­a­ti­va, it may be cru­cial for coun­sel not only to object, but to explic­it­ly men­tion the rea­sons for their objec­tions in the respec­tive sub­mis­sion to the tribunal.

This con­sid­er­a­tion may be illus­trat­ed with a sim­pli­fied exam­ple regard­ing the lapse of a pre­scrip­tion peri­od. In case the par­ty chal­leng­ing the award has already plead­ed that the claim of the oppo­nent par­ty had become time-barred due to pre­scrip­tion, but such claim is upheld by the tri­bunal in the final award and the issue of pre­scrip­tion is not addressed at all, it will be straight­for­ward for the chal­leng­ing par­ty to estab­lish that the tri­bunal engaged in a pas­sive vio­la­tion of its right to be heard.⁹⁷ On the oth­er hand, if the chal­leng­ing par­ty was not grant­ed any pos­si­bil­i­ty to raise the issue of pre­scrip­tion in an addi­tion­al brief (e.g., because this issue sur­faced only in the hear­ing on the basis of a poten­tial­ly dif­fer­ent trig­ger­ing point in the past), it will be impos­si­ble to demon­strate what it would have sub­mit­ted if it had been grant­ed leave to do so (neg­a­tivum). In this sce­nario, coun­sel are, in our view, well-advised to imme­di­ate­ly object to the arbi­tral tribunal’s rejec­tion of a request to grant an addi­tion­al sub­mis­sion, by explic­it­ly men­tion­ing that the rea­son for the sub­mis­sion is the rais­ing of the pre­scrip­tion issue. On such basis, coun­sel will be in a much bet­ter posi­tion in the chal­lenge pro­ceed­ings before the Swiss Supreme Court as it will, in prin­ci­ple, be com­pre­hen­si­ble why the rejec­tion by the tri­bunal had an impact on the out­come of the award which was adverse for the chal­leng­ing party.

V . Conclusion

The new approach of the Swiss Supreme Court towards a stricter chal­lenge régime for vio­la­tions of the right to be heard has con­se­quences on dif­fer­ent levels:

First, it will help arbi­tral tri­bunals which intend to con­duct the pro­ceed­ings in an effi­cient man­ner. This is in line with devel­op­ments in impor­tant inter­na­tion­al arbi­tra­tion cen­tres, and the key pos­tu­late of pro­ce­dur­al effi­cien­cy in inter­na­tion­al arbi­tra­tion proceedings.

Sec­ond, although the new require­ments have the poten­tial of ​“for­mal­is­tic” rejec­tions of chal­lenges on the basis of an improb­a­ble prej­u­dice on the out­come of the award, how­ev­er, we believe that the Swiss Supreme Court will – accord­ing to its long­stand­ing prag­mat­ic approach – fur­ther devel­op its rich case law, dif­fer­en­ti­at­ing sce­nar­ios which may typ­i­cal­ly affect the out­come of the case.⁹⁸

And final­ly, although the bur­den for par­ties will­ing to chal­lenge the award has been raised, coun­sel will, in our view, have the oppor­tu­ni­ty – and maybe even the onus – to pre­pare them­selves for a poten­tial (sub­se­quent) chal­lenge by explic­it­ly address­ing the sub­stan­tive argu­ment behind the pro­ce­dur­al request which was even­tu­al­ly reject­ed by the tri­bunal. This par­tic­u­lar­ly holds true when it comes to pro­ce­dur­al deci­sions by the tri­bunal pre­vent­ing par­ties from pre­sent­ing their case (active vio­la­tions). From a wider per­spec­tive, this will dis­ci­pline coun­sel to con­sid­er, right at the out­set, the (tech­ni­cal) vio­la­tions by the tri­bunal which might have an impact on the out­come of the pro­ceed­ings. We expect this to add to more effi­cient­ly con­duct­ed inter­na­tion­al arbi­tra­tion proceedings.