1. Binding effect to non-signatory (Swiss Supreme Court Decision 4A_528/2019 of December 7, 2020)

In connection with a dispute between the shareholders of a bank, the Swiss Supreme Court had to decide in its decision 4A_528/2019 whether the arbitration clause contained in the articles of incorporation, which however had not been signed by all shareholders, was valid for them. The arbitration was subject to Swiss procedural law, i.e. the Swiss Procedural Law Act (SPILA). The thirty-one respondents (!) concluded from the outset that the arbitral tribunal lacked jurisdiction, on the grounds that the arbitration clause was contained in a deed that had not been signed by either the claimants or the vast majority of the respondents, and that the agreements between the managing partners from 1982 had not been taken over in the context of the changes that the bank had undergone as a result of the various mergers.

The arbitral tribunal considered that in view of the principle of the relativity of contractual obligations, the arbitration agreement included in a contract is in principle only binding on the contracting parties, but that the pertinent Swiss case law identifies various hypotheses that may lead to an arbitration agreement binding parties who have not signed it or are not mentioned in it. This is the case in particular:

• in the case of assignment of a claim, assumption of a debt or transfer of a contractual relationship;
• when a third party interferes in the performance of the contract containing the arbitration agreement and it can be inferred from this interference that he or she wishes to be a party to the arbitration agreement; this case law, based on the rules of good faith, makes it possible to deduce from the conduct of a party the will to adhere to a contract that he or she has not signed and to submit to the arbitration clause contained therein;
• where the conditions of the principle of piercing the corporate veil (Durchgriff) are met, the arbitration clause is binding not on the person who has formally concluded the contract, but on the third party who forms an economic unit with him;
• in favour of the beneficiary of a stipulation for third parties within the meaning of Art. 112 para. 2 of the Swiss Code of Obligations (Vertrag zugunsten eines Dritten) (1): unless otherwise agreed, the beneficiary of such a stipulation may file for arbitration since he acquires a claim against the debtor (or promisor) with all the preferential rights and other ancillary rights attached to it, including therefore the arbitration clause, and it is not within the power of the stipulator or promisor to prevent him from doing so; the question of whether he may be brought against his will into the arbitration proceedings relating to the obligation stipulated in his favour, which is controversial in the doctrine, was left open yet;
• In contrast, in the case of security interests such as a bond, a surety bond or a bank guarantee, the arbitral tribunal cannot accept jurisdiction to rule on the creditor's rights against the guarantor merely because the contract between the creditor and the debtor contains an arbitration agreement.

In the case at hand, having evaluated the evidence, the arbitral tribunal had come to the conclusion that according to the contract the two respondents, both long-time managing partners which were standing for and preparing the entry into the bank of the next generation of the Geneva branch, intended to confer on the beneficiaries the right to personally claim the performance of the obligations stipulated in the deed. The articles of incorporation on which the arbitral tribunal had based its award reads as follows:

«In order to maintain in the bank a representative participation of the Geneva branch of the M. family as long as the possible beneficiaries of the provisions of art. 5 above are alive, the managing partners commit themselves to reserve for it a share or the equivalent of at least twenty percent of the capital and the advance of shareholders at N. [...]»

The Swiss Supreme Court confirmed the arbitral award and concluded in consid. 5.3.3. according to the above clause, it was the real will of the parties to confer on the claimants the right to personally claim the performance of the contractual obligations and one could only deduce thereof a stipulation for third parties in the sense of art. 112 al. 2 of the Swiss Code of Obligations, meaning that the arbitral tribunal was competent to hear the case.

2. Binding effect of non-signed Arbitration Clause on the Parties to the Agreement and third Parties (Swiss Supreme Court Decision 145 III 199)

In its decision 145 III 199, the Swiss Supreme Court confirmed an even broader scope of an arbitration clause and hold that its scope can extend to cases where the parties have not signed the agreement containing the arbitration clause, or to third parties.

The underlying facts were the following: The Claimant / Appellant was a joint stock company under Slovenian law with its registered office in Ljubljana, Slovenia. respondent was a joint-stock company with its registered office in V./Aargau and its purpose is the import, export and distribution of goods of all kinds. It is a company of the "B.-Group", which, in addition to the respondent, also includes B.-X/Y AG with its registered office in Basel and B.-X GmbH with its registered office in Innsbruck, Austria. On October 9, 2009, the plaintiff signed an agreement referred to as the "Distribution Agreement", which contains the following arbitration clause in clause 13.6:

«Arbitration and Jurisdiction thereof;

Any controversy or claim arising out of or relating to this 'Agreement' or the breach thereof shall be settled by arbitration. The number of arbitrators shall be 3 (three), One appointed by the 'Distributor', One appointed by the 'Company' and the Third being an independent body. The jurisdiction for arbitration shall be Ljubljana, the permanent arbitration of the Slovenian Chamber of Commerce, and Slovenian laws shall be used with regard to the resolution of the dispute. The language to be used in the arbitration proceeding shall be English. In the event that the 'Parties' are unable to agree on the acceptability of the Third arbitrator or in case agreed arbitration at relevant point of time shall not exist or be in function, the dispute shall be settled by the Competent Court in Ljubljana, Republic of Slovenia.»

It remained in dispute between the parties who was the contractual partner (referred to as "Distributor" in the agreement) of the claimant according to the Distribution Agreement. The agreement was signed by the claimant and "for and on behalf of the 'Distributor' B. X AG". It was undisputed that the claimant and the respondent had been in a business relationship at least since 2006, with the Plaintiff supplying the respondent with food products which the respondent sold on the Swiss market.

In a petition dated May 6, 2016, the claimant requested the Commercial Court of the Canton of Aargau to order the respondent to pay approximately EUR 614,000 plus interest.

The respondent, however, requested not to enter into the subject matter, and in eventu, to dismiss the claim. In support of its main claim, the respondent argued that the parties had entered into an arbitration agreement according to which an arbitral tribunal with its seat in Ljubljana, Slovenia, would have jurisdiction over disputes.

The Swiss Supreme Court further hold that it was undisputed among the Parties that the question of whether the arbitration clause contained in the Distribution Agreement, which provides for the jurisdiction of an arbitral tribunal with its seat in Ljubljana, Slovenia, was validly agreed upon, must be decided in accordance with Art. II para. 2 of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (NYC). If a court of a Contracting State is seized of a matter in respect of which the parties have entered into an arbitration agreement within the meaning of this Article, the court shall, in accordance with Art. II(3) NYC, the court shall, at the request of either party, refer it to arbitration unless it finds that the agreement is void, ineffective or incapable of performance.

The court of first instance held that the two parties to the proceedings were bound by the arbitration agreement in the Distribution Agreement even if it had not already been concluded between them on October 9, 2009. It reasoned that the Distribution Agreement had been executed by the respondent instead of B.-X/Y AG from the beginning and for years with the consent of all parties involved. In this context, it correctly pointed out that the binding effect would also occur under Swiss law concerning international arbitration, where case law is based on the principle that a third party who interferes with the execution of a contract containing an arbitration clauseis deemed to have consented to the arbitration clause by implied action.

The Swiss Supreme Court confirmed the award. It further held that, contrary to the view expressed in the appeal, it was not clear to it why these principles of extending an arbitration agreement validly concluded between the original contracting parties to third parties, even though the latter had not complied with the form provided for, would have to remain out of consideration when applying the New York Convention. According to the Swiss Supreme Court case law, the formal requirements of Art. II para. 2 NYC coincide with those of Art. 178 para. 1 SPILA.

The Swiss Supreme Court thus confirmed that the validity of an extension of an arbitration agreement to a third party under the New York Convention is in line with Swiss Supreme Court case law.

(1)     Art. 112(1) and (2) of the Swiss Code of Obligations provides as follows:

1    If a person acting in his own name has had performance promised to a third party for the latter's benefit, he is entitled to demand that performance be made to the third party.

2    The third party or his successor in title may independently demand performance if this was the intention of the other two parties or if it is in accordance with custom.