In a decision published in late 2013 the Supreme Court clarified open issues regarding the independence and impartiality of judges – specifically, of a part-time judge who was a partner in a law firm.(1) The court raised the independence standards in the interest of justice and impartiality. The decision is relevant not only for state court proceedings, but also for the arbitration community since – from a Swiss law perspective – the same standards apply to arbitrators.
Nestlé sued Swiss retailer Denner for alleged patent infringement regarding capsules for its Nespresso coffee machines. The case was removed to the Federal Patent Court, which invited the parties for a hearing and announced that, among other things, part-time judge X would be a member of the bench. X disclosed that a partner of his law firm was representing a sister company of the respondent that had its seat abroad in an unrelated trademark matter. However, the presiding judge held the view that the prerequisites for a recusal were not met. The claimant moved to disqualify X, but its motion was dismissed. The claimant then filed an appeal with the Supreme Court, which reversed the decision and disqualified X for lack of independence.
The Supreme Court emphasised that the right to an independent and impartial decision maker is constitutional. According to Article 30(1) of the Federal Constitution and Article 6(1) of the European Convention on Human Rights, everyone is entitled to a fair hearing before an independent, impartial and unbiased judge. The purpose of these fundamental rights is to guarantee that no circumstances outside of the courtroom unjustifiably influence the court's decision, be it in favour of or to the detriment of a party. The guarantee of an impartial decision maker is violated if, from an objective viewpoint, there are facts which lead to the conclusion that a judge may be biased or prejudiced. Prejudice and bias are assumed if the circumstances of a specific case are of such a nature as to raise doubts about the judge's independence. It is not necessary to prove that the judge is indeed biased; demonstrating objective circumstances which may allow an inference as to the judge's lack of independence is sufficient.
For the first time, the Supreme Court addressed the issue of whether a law firm must be treated as a unit or whether each lawyer should be seen as an individual practitioner for conflict of interest and independence purposes. The court held that bias is assumed not only if a judge is representing one of the parties to the dispute before him or her, but also if another lawyer of the same firm is representing a party. Further, the court pointed out that it does not matter how the law firm is structured (ie, whether it is a partnership or a corporation). Outsiders do not normally know:
- how a law firm is organised;
- how far cooperation between lawyers goes;
- what the financial incentives are; and
- how the flow of information between the lawyers works.
Further, a client expects loyalty not only from its own lawyer, but also from the law firm as a whole. Ties between the members of a law firm on the one hand and between the law firm and its clients on the other are sufficient to raise doubts as to the impartiality of an adjunct judge in a case that involves a client of his or her firm. Since the right to an independent and impartial judge is fundamental, the probability of bias in cases such as this is not tolerable.
The Supreme Court also had to consider for the first time whether a relationship between a judge or his or her law firm and an affiliated company of a party to the dispute is sufficient to cause a risk of bias. The court did not formulate a strict rule, but held that the circumstances must be examined on a case-by-case basis. It pointed out that the independence of a judge may be in jeopardy not only if the adjunct judge or his or her law firm is representing a party to the dispute, but also if he or she is representing an affiliated company – particularly a company belonging to the same group as a party to the dispute. However, due to the variety of possible relations between companies of a particular group, no bright-line rule can be established. It is not justified to assume bias in every case where an adjunct judge or his or her law firm has an existing attorney-client relationship with a company affiliated with a party to the dispute; nor is it from an objective viewpoint justifiable to deny any risk of bias by just pointing to the legal independence of a company without taking into account that the judge's client and a party to the dispute belong to the same group. Rather, it must be considered based on the specific circumstances, whether the existing relationship between an adjunct judge's law firm and a company affiliated with a party to the dispute causes undue proximity to such a party or its interests. In order to have a basis for such an examination, a judge is required to disclose any facts or circumstances which might call his or her independence into question.
In this case, the court found the relationship between X's law firm and the party to the dispute too close to be tolerable, since certain IP matters of all group companies were handled by the parent company and the parent company's general counsel was to participate in the hearing.
The court clarified important issues and continued its trend of raising the standards of independence for judges. The decision is welcome, since it outlines the importance of the right to an impartial and independent judge and enhances trust in the judicial system.
The position of treating law firms as a unit and not considering their internal structure accords with the conflict of interest rules of the Swiss Bar Association and is further justified by the fact that discovery is often unavailable in Switzerland. Consequently, the internal structures of a law firm are not usually transparent for outsiders. Further, as the court pointed out, a client expects loyalty not only from his own lawyer, but also from the firm as a whole. These and other moral and factual ties between a party and a judge create a risk of bias that should at least be disclosed. It is still up to the counterparty to move for recusal.
For more information please contact Robin Moser at Lenz & Staehelin by telephone (+41 58 450 8000), fax (+41 58 450 8001) or email ([email protected]). The Lenz & Staehelin website can be accessed at www.lenzstaehelin.com.
Endnotes
(1) BGE 139 III 433 (published version), BGer 4A_142/2013 (full version).
