X. Ltd. v. Novartis AG [The Israeli Court Action] No. 4A_444/2009 - Swiss International Arbitration Law Reports (SIALR) - 2010 Vol. 4 Nos. 1 & 2

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November, 2013

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Originally from: 

Swiss International Arbitration Law Reports 2010 Vol. 4 Nos. 1 and 2

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No. 12

X. Ltd. v. Novartis AG

[The Israeli Court Action]

No. 4A_444/2009

Headnote

■ Where the arbitration agreement is drafted in broad language, an

arbitrator has jurisdiction to declare that a party has breached such

arbitration agreement by bringing an action in a foreign court and

to award damages for such breach.

■ A decision on a claim will run counter to public policy only when

it disregards fundamental principles of law and is therefore

inconsistent with essential and generally accepted values underlying

any and all systems of law according to the prevailing conceptions in

Switzerland. Even a wrong or an arbitrary application of the law

does not amount to a breach of public policy (confirmation of

previous decisions).

■ The parties’ right to present their case does not include a right to

be given notice of the facts which are essential to the decision to be

made by the arbitrator (confirmation of previous decisions).

Summary of the Decision

Novartis AG terminated an agreement with X. Ltd., its distributor for

Israel, and brought an arbitration against X. Ltd. claiming inter alia

payment of the purchase price for goods sold and delivered. In addition,

Novartis AG sought a declaration that it owed no payment to X. Ltd. in

respect of any goodwill. X. Ltd. then sued Novartis AG before the Israeli

courts claiming payment of an indemnity for goodwill. Novartis AG in

turn sought a declaration from the arbitrators that X. Ltd. had breached

the arbitration agreement by suing in Israel and was liable in damages for

breach of contract. X. Ltd. raised an objection to arbitral jurisdiction

with respect to that declaration. The arbitral tribunal declared in a Partial

and Interim Award inter alia that it had jurisdiction to hear

Novartis AG’s request for declaratory relief and damages. That first

award was not challenged. The arbitral tribunal made a Second Partial

and Interim Award, in which it decided on a number of other claims and

made a fresh declaration that X. Ltd. had breached the arbitration

agreement and was liable in damages.

X. Ltd.. applied to the Federal Supreme Court in order to have the

Second Partial and Interim Award set aside.