As a commercial arbitration specialist with the Zurich law firm MME Partners, Bernhard Meyer has been involved in proceedings resulting in multi-billion dollar awards and significant changes in international businesses customs. He recalls one concerning option rights in a fast growing telecommunication market. The option was granted for several thousand dollars and was worth several hundred million when it was exercised only a few years later. The respondent, failed to honour the commitment, alleging all sorts of grounds for the invalidity of the option, amongst them, criminal behaviour of the claimant corporation’s owner. The battle was carried out not only in Meyer’s arbitration proceeding but also in parallel arbitrations and in court proceedings throughout the world. A central allegation was that claimant was a “dummy” or “straw man” for a foreign government official who was instrumental for the grant of the telecom license to the company issuing the most valuable option right. The arbitral tribunal examined the corruption and money laundering allegations very carefully before deciding that the “straw man” defence could not be proven. The arbitral tribunal issued an award in claimant’s favour.
Such disputes are argued over regularly in conference rooms across Switzerland. In fact, Switzerland is one of the world’s top venues for arbitration, with a history dating back centuries and highlighted by the Alabama Claims when the US and British governments negotiated a 15.5 million dollar settlement at Geneva’s city hall in 1872. But competition has always been fierce and it is only getting stronger.
“The main competitors of ‘Swiss’ arbitration have traditionally been London, Paris and Stockholm. Now, we are talking of truly global competition, including not only European centres but also, to take a few examples, Mauritius, Singapore, Hong Kong and several places in the PRC,” says Geneva attorney Elliott Geisinger. Geisinger is the recently elected president of the Swiss Arbitration Association (ASA), which represents more than 1,000 members, including Bernhard Meyer, who is also a board member. The association aims to maintain Switzerland’s competitiveness while reinforcing ties with other centres in order to make the global arbitration pie bigger.
So what do arbitration venues compete on?
Most of the time the venue, or “seat”, is chosen long before any dispute arises, during the drafting of an agreement. Contracting parties agree that, in case of a dispute, instead of going to court they will submit their evidence and arguments to an arbitration panel and abide by the panel’s ruling. The parties like this arrangement because it provides a measure of certainty: regardless of where the dispute occurs they know where they will settle it, in what language and what law will apply. They know the seat will be in a neutral location where neither party has a “home field advantage”. Arbitration can also be faster and less expensive than court. And, it can be tailored to the needs of the parties. They choose the arbitrators who often are experts in the subject matter of the dispute, whether it is telecommunications or biomedical research. If the parties are concerned about privacy, arbitration proceedings offer confidentiality. If they are concerned about enforcement of the award, the New York Convention of 1958 ensures a worldwide acceptance of arbitral awards, which is not necessarily the case for court judgments.
Bern attorney and ASA board member Bernhard Berger advises clients to choose a liberal and neutral arbitral system with a known track record; choose law with a predictable procedure and without interference by local courts; and choose a country with swift annulment procedure to avoid costly postaward litigation in the local courts. He argues that Switzerland meets those criteria.
“Switzerland has an arbitral tradition going back centuries. The modern Swiss legislation on arbitration is in place since 1989 and backed-up by a rich and easily accessible body of case law. The Swiss Federal Supreme Court acts as the sole judicial authority to set aside in a procedure that normally takes only a few months. And there is a very broad pool of arbitrators and lawyers in Switzerland who are very experienced in arbitration,” he says.
Switzerland also plays a pre-eminent role in sports arbitration with the International Olympic Committee and Court of Arbitration for Sport (CAS) located in Lausanne. CAS is able to decide any issue concerning sport but, in practice, nearly all of its arbitrations are related to doping or football transfer fees. Major international competitions, such as the European football championships and World Cup, present a special challenge for CAS, which sets up an ad hoc division to handle disputes in pace with the competitions. Two days before the opening ceremony, the ad hoc tribunal in Sochi had already dismissed the claim of Argentine freestyle skier Clyde Getty who was seeking to participate although he hadn’t amassed enough points during the season.
Structural advantages and experience certainly add to Switzerland’s competitiveness in international arbitration. Geisinger, however, likes to mention the value of Swiss culture and history. Because of Switzerland’s own multi-cultural history, he says, Swiss practitioners are well-equipped to deal with the multiplicity of legal and cultural backgrounds present in international arbitration. “And don’t forget that the Swiss mentality is fundamentally down to earth and pragmatic. This permeates ‘Swiss’ arbitration, which results in a high degree of flexibility,” he adds.
Pragmatism? Flexibility? What does that mean in the context of arbitration? Remember the lucky claimant who won an award worth several hundred million in that telecoms options case? Two years later, in a parallel arbitration, a document was introduced proving that the foreign government official was, indeed, the true owner of the claimant. Even though the challenge period was only 30 days, the new evidence of fraud convinced the Swiss Federal Supreme Court to “reopen the books”, and the rights to hundreds of millions in telecoms shares went to someone else.
Article by Thomas Hunter