X. Kft v. Y. AG [The Hungarian Electric Steel Plant] No. 4A_108/2009 - Swiss International Arbitration Law Reports (SIALR) - 2009 Vol. 3 Nos. 1 & 2

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December, 2009

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Headnote

■ The parties’ right to present their case includes a right to express

their views on all the essential facts relevant to an arbitrator’s

decision on the merits, to present their legal argument, to present

appropriate evidence in a timely and proper manner on allegations

relevant to the decision, to participate in the hearings as well as a

right to have access to the record (confirmation of previous

decisions).

■ The parties have no constitutional right to present their case

specifically in relation to the legal characterisation of the facts which

is to be made by the arbitrator. An exception to this principle is

made when a court intends to rest its decision on a legal ground on

which neither party has relied in the proceedings and the relevance

of which could not be reasonably anticipated by the parties

(confirmation of previous decisions).

■ Where termination of an agreement is in dispute between the

parties and the agreement contains a term on termination, the

reference to and the application of such term by an arbitrator

cannot be considered as unexpected even where neither party

expressly relied on such contract term.

Summary of the Decision

X. Kft and Y. AG entered into an agreement relating to the

modernisation of X. Kft’s electric steel plant in Hungary. Y. AG

undertook to deliver and install a so-called COSS (continuous optimised

shaft system) charging system in consideration of a sum of money. The

parties disagreed on the outcome of two commissioning attempts. X. Kft

then informed Y. AG that it no longer intended to proceed with the

performance of the agreement and further sent a notice of termination.

X. Kft contended that the installation never worked due to fundamental

defects in its conception.

Y. AG brought arbitration proceedings and claimed payment of the

sums that were due under the agreement. The arbitral tribunal made an

award for Y. AG based on the terms of the agreement. X. Kft challenged

the award before the Swiss Federal Supreme Court complaining of a