Once the dust settled and the award has been notified to the parties, the arbitrators' task is considered accomplished and the fees for their work are paid out. This is the last contact the arbitrators have with the parties, or, as the case may be, with the institution administering the case; at least until one of the parties' appeals against the arbitral award. In such occurrences, the question arises as to the role of the arbitrators in the subsequent appeal proceedings. In Switzerland, the Federal Tribunal has the power to invite arbitrators to file written observations with respect to the appeal against their own award. The present blog post addresses this matter, governed by lex arbitri, from a practical standpoint.
Section 102 para. 1 of the Swiss Federal Tribunal Law («SFT») stipulates that, if necessary, the Federal Tribunal shall communicate the appeal to, inter alia, the previous authority. In doing so, the Federal Tribunal shall invite the previous authority to submit written observations with respect to the appeal. It is undisputed that section 102 para. 1 SFT, when referring to «previous authority», not only encompasses state courts but also arbitral tribunals. Section 102 para. 1 SFT introduces a double layer of discretion: that of the Federal Tribunal with respect to the necessity of inviting the previous instance to file observations and that of the previous instance to follow-up on that invitation. Within the exercise of their discretionary powers, previous instances are free to submit written observations with respect to the appeal ensuing a corresponding invitation from the Federal Tribunal. Consequently, arbitration tribunals with seat in Switzerland are under no obligation to file such observations by virtue of section 102 para. 1 SFT.
The Swiss Rules of International Arbitration («Swiss Rules») do not provide for any duty to participate in subsequent appeal proceedings either. Quite on the contrary, article 45 para. 2 Swiss Rules stipulates that, after the award has been made, the arbitrators are not under any obligation to make statements to any person about any matter concerning the arbitration. Similarly, the ICC Arbitration Rules («ICC Rules») do not contain any duty for the arbitrators to partake in appeal proceedings once the award is rendered. Consequently, for an arbitral tribunal with seat in Switzerland operating under the Swiss Rules or the ICC Rules, the decision whether or not to follow-up on the Federal Tribunal's invitation to submit written observations with respect to an appeal against the award is a discretionary matter.
Thus far, in 2019 the Swiss Federal Tribunal rendered 24 decisions in the field of arbitration as per 11 September 2019. In only 6 of these occurrences (25%) did the Swiss Federal Tribunal not deem it necessary to invite the arbitral tribunal to submit written observations with respect to the appeal (e.g. when the appeal was obviously without merit or when the appeal requirements were not met).
In 18 occurrences, arbitrators were invited to take position with respect to the appeal against their own award. In 8 of these cases (44%), the arbitral tribunal chose not to submit written observations. In turn, in 10 occurrences (56%) did the arbitral tribunals take position and made a corresponding submission to the Swiss Federal Tribunal.
An appeal against an award is, ultimately, a grief against the best judgement of the (majority of the) arbitral tribunal. Consequently, the decision by the arbitrator(s) to file written observations following an appeal against the award is mainly motivated by the desire to defend their own work. Conversely, an arbitral tribunal which feels that either the award does not require any re-affirmation or the appeal does not amount to an actual threat to the award may lean towards not filing any observations at all.
Generally, the written observations filed by arbitral tribunals are lean, straightforward and with (very) limited content. Namely, in the vast majority of cases, arbitrators will simply refer to their award and the (factual and legal) arguments contained therein - without further reference to the appeal itself.
In some cases, however, arbitral tribunals will file a document of one to several pages containing either an executive summary of their award or actual, new arguments specifically against the appeal. In the latter case, arbitral tribunals ought to be cautious not to mud the water as to the fact that the award, subject to the appeal, is already rendered and, in that sense, final. Such written observations may not be drafted in such a way that they could be considered an award «bis» or an alternative award. Prudent arbitrators will therefore limit their observations to what is, in their best judgement, strictly required in view of the appeal and will not deviate from the argumentation laid out in their award.
Neither the SFT nor the Swiss Rules or the ICC Rules provide for a compensation mechanism regarding the work of the arbitral tribunal after the award is rendered, i.e. during subsequent appeal proceedings. In practice therefore, arbitrators are generally not compensated for the written observations they file following an appeal against their award. On the one hand, the current set up has the advantage of drawing a clear line opposite the arbitration costs. On the other hand, the missing financial incentive is an important reason why arbitral tribunals do not file written observations or, when they do, make minimalist submissions.
Upon communication of the award, the arbitral tribunal draws a line under the arbitration proceedings. Sometimes, however, this line cannot be drawn under the dispute between the parties - at least in cases where the award is subject to appeal.
An appeal against the award shifts the paradigm from private to public dispute resolution. The award, i.e. their work, not the arbitrators, monopolizes the attention and is to be tested against the grounds for appeal. Within that new framework, the arbitral tribunal still has a role to play, albeit a discretionary and limited one.