In case of breach of a mandatory multi-tier dispute resolution clause (i.e., failure of the claimant to comply with a contractual obligation to resort to mediation or conciliation prior to going to arbitration), what is the most appropriate sanction to be pronounced by the arbitral tribunal and, ultimately, by the State court judge seized of a challenge against the award? Should they treat the breach as a question of admissibility of the claim (in most countries, the arbitrators’ decision on admissibility is final) or as a question of jurisdiction of the arbitral tribunal (which is open to review by state courts through annulment proceedings)?
Two of the most frequently chosen places of arbitration (France and Switzerland) have adopted radically opposite approaches. French courts consider that the violation of a contractual obligation to first try to conciliate the dispute affects only the admissibility of the claim and, as such, is not subject to judicial review. Whereas Swiss courts consider that the arbitrators’ disregard of a mandatory pre-arbitral tier is tantamount to failing to decline jurisdiction ratione temporis and, as such, constitutes a ground for setting aside the award. In a decision dated 16 March 2016, the Swiss Supreme Court set aside, for the first time, an award on the ground that the conciliation proceedings had not terminated in accordance with the applicable rules and, accordingly, that claimant had launched arbitration prematurely. The Supreme Court also decided the long-open question of the consequence of a breach of a mandatory pre-arbitral tier, finding that the most appropriate sanction is the stay of the arbitral proceedings until the pre-arbitral tier has been complied with. The practical modalities of such stay (in particular, the timeframe within which the arbitration proceedings shall resume in case of failure of the conciliation) should be set by the arbitrators. This article examines and analyses these two different approaches.
Iurgium [previously Spain Arbitration Review]