LKK TEAM SUCCEEDS BEFORE THE SWISS SUPREME COURT
The action was brought by a Turkish company and its Iranian affiliate against an international ad hoc arbitration award rendered in July 2019, under the UNCITRAL Rules, in a dispute arising out of a construction project in Iran. In the award, the Arbitral Tribunal declined jurisdiction, having found that the Parties had not agreed to have their disputes resolved by international arbitration.
In decision 4A_418/2019, issued on 18 May 2020, the Swiss Supreme Court reaffirmed its longstanding case-law by upholding the Respondents’ argument that annulment proceedings do not allow for a review of the arbitral tribunal’s interpretation of an arbitration agreement, to the extent such interpretation relies on the tribunal’s assessment of the evidence and factual determinations. The Supreme Court also subscribed to the Respondents’ argument that, where a tribunal arrives at the conclusion that it lacks jurisdiction on the basis of what is known under Swiss law as a “subjective interpretation” of the arbitration agreement, having found that the parties did not in fact mutually consent to arbitration, the tribunal need not further pursue its analysis on the basis of an objective interpretation, i.e. by examining the arbitration clause from the perspective of a good faith addressee of the declaration of intent.
Hence, the Supreme Court upheld the award, dismissed the application and ordered the applicants to bear the full costs of the annulment proceedings and to indemnify LKK’s clients for their legal costs. Decision 4A_418/2019 can be accessed here (original German version).