Mrs Y. v. Z. and ad-hoc Arbitral Tribunal [The Bahamian Offshore Structure] - Swiss International Arbitration Law Reports (SIALR) - 2007 Vol. 1 Nos. 1 & 2
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Swiss International Arbitration Law Reports - 2007 Vol. 1 Nos. 1 & 2
A party is precluded under the rules of good faith from challenging
arbitral jurisdiction for the first time in setting aside proceedings.
Language contained in an arbitration agreement, to the effect that all
disputes “arising out of, or in connection with” the agreement are subject
to arbitration, is sufficiently broad and unqualified so as to cover the
matter in dispute.
A tribunal’s anticipatory assessment of the evidence is not reviewable
by the Federal Supreme Court, except under a challenge based on public
Summary of the Decision
X., an inventor, established an offshore structure consisting of a
network of agreements and companies, the purpose of which was to
minimize the taxable profits of Swiss company C. Upon X.’s, death, Y.
and Z. (stepmother and son) in effect became principal and equal
shareholders in the offshore structure. Z. sought to dissolve the offshore
structure, and in this regard concluded an agreement with Y. pursuant to
which Y. received a payment for agreeing to waive all her rights in a
trust, through which Y. held her interest in the offshore structure.
Subsequently, the Swiss Federal Tax Administration began a tax
investigation and found that Z., as a prior shareholder in the offshore
structure, owed withholding taxes in an amount of approximately CHF
28 million. After paying the withholding tax owed, Z. then brought
arbitration proceedings against Y. seeking payment in proportion to Z.’s
previous equity holdings in the offshore structure, as well as payment for
half of the costs in connection with the tax investigation.
The arbitral tribunal found that Y. and Z. had become severally liable
in a simple unincorporated partnership. As Z. had paid more than his
share of the tax debt and costs arising from the tax investigation, the
tribunal determined that Z. held a right of contribution against Y. in an
amount corresponding to Z.’s respective liability in the partnership. The
tribunal ordered Y. to pay such amount, whereupon Y. brought setting
aside proceedings based on the grounds that (1) the tribunal wrongly
accepted jurisdiction; (2) the tribunal decided the matter ultra petita; (3)
the tribunal breached her right to present her case and violated the