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10 September 2020
In a recently published decision, the Supreme Court upheld an arbitral award in which the arbitral tribunal had declined jurisdiction in the absence of a valid arbitration agreement.(1) The Supreme Court confirmed that it does not review arbitral tribunals' findings as to the parties' actual and common intent to arbitrate.(2)
The dispute arose out of a trilateral agreement entered into between a Turkish company, an Iranian state company and an Iranian state bank in relation to a housing project in Iran. The trilateral agreement contained an arbitration clause which was almost identical to Article 11 of the 1996 bilateral investment treaty between Turkey and Iran and provided for arbitration under the United Nations Commission on International Trade Law Arbitration Rules. Further to numerous disagreements, the Turkish company, together with a newly incorporated Iranian company which had taken over the Turkish company's obligations under the trilateral agreement (the claimants), started arbitration proceedings against the Iranian company and the Iranian bank (the respondents). The seat of arbitration was Geneva. The respondents successfully objected to the arbitral tribunal's jurisdiction. The claimants then challenged the arbitral tribunal's decision on jurisdiction before the Supreme Court.
The Supreme Court held that it cannot review an arbitral tribunal's findings of fact and that, in the context of a challenge of jurisdiction, it can review these findings only if admissible grounds for challenge are raised against them or, exceptionally, new facts or evidence are taken into account.(3)
According to the Supreme Court, the arbitral tribunal had found that although not pathological as such, the disputed arbitration clause contradicted the trilateral agreement's formulations and bore no connection to that agreement as it did not refer to the parties or to disputes arising out of or in connection with the agreement.(4) Further, the contract negotiations established that when the trilateral agreement had been concluded, the parties had disagreed on whether to refer potential disputes to international arbitration outside Iran or Turkey, and that the claimants had recognised the respondents' objection to this conflict resolution method.(5) Accordingly, based on a subjective interpretation of the arbitration clause, no jurisdiction for an international arbitral tribunal to decide disputes under the trilateral agreement was established. Thus, the arbitral tribunal had denied its jurisdiction.(6)
Since the arbitral tribunal's findings as to the parties' actual and common intent constituted findings of fact – which the Supreme Court can review only under the abovementioned circumstances (which were not met in the present case) – the Supreme Court was bound by those findings. Thus, it rejected the challenge.(7)
This decision confirms the Supreme Court's well-established practice in relation to findings regarding parties' actual and common intent. The Supreme Court rejected the claimants' argument that the formulation of Article 190(2)(b) of the Private International Law Act – in particular, its mention of how the question of jurisdiction must be "fully examined" – would require the Supreme Court to also review findings of facts.(8) In the Supreme Court's view, there is no reason to depart from its well-established practice. Thus, the difficulties for a party to challenge an arbitral tribunal's finding based on the parties' actual and common intent remain.
For further information on this topic please contact Frank Spoorenberg or Daniela Franchini at Tavernier Tschanz by telephone (+41 22 704 3700) or email (firstname.lastname@example.org or email@example.com). The Tavernier Tschanz website can be accessed at www.taverniertschanz.com.
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