Originially from: World Arbitration and Mediation Review (WAMR)

SUPREME COURT RULES ON SEVERABILITY,
WAIVER OF APPEAL, RIGHT TO BE HEARD
By Dr. Charles Poncet, Poncet Warluzel & Partners, Geneva
In two decisions in the same case, the Swiss Supreme Court has clarified issues
concerning severability of an arbitration clause, the waiver of the right to appeal,
the issue of ultra petita, and the meaning of “right to be heard” under the Swiss
Arbitration Law.
On April 12, 1974, the Algerian company Sonatrach entered into an oil drilling
contract with the English company KCA, the performance of which was to take
place in Algeria. The contract’s arbitration clause provided that any dispute
between the parties would be brought before an arbitration tribunal in Zurich,
applying the ICC procedural rules.
By an amendment dated June 25, 1978, the parties agreed to terminate the 1974
contract. Sonatrach, in this amendment, undertook to assist KCA in re-exporting
its equipment. However, KCA could not get all of it back.
On June 2, 1986, KCA filed a claim for damages against Sonatrach in the sum
of US $48,618,971, in accordance with the arbitration clause in the initial
contract. Noting that the parties had terminated the agreement, Sonatrach
challenged the jurisdiction of the arbitrators.
First Ruling
The Swiss Supreme Court, in a decision dated March 15, 1990, rejected this
challenge. Sonatrach v, KCA, published in 116 BGE (Entscheidungen des
Sckweizerischen Bundesgerichts) Ia 56 and JT (Journal des Tribunaux)
19901563.
The applicable law at the time was the Swiss Concordate (Art. 4), which says
nothing about the severability of the arbitration clause, as opposed to the new
Swiss Statute on International Private Law (SIPL). However, the severability of
the arbitration clause—i.e., its separate legal viability—is a principle that the
Swiss courts have consistently recognized. (See Lalive, Poudret, and Reymond,
Le droit de l’arbitrage interne et international en Suisse 49 (1989) (hereinafter
“Lalive”)).
The Court found that once the existence of an arbitration clause has been
established—under a strict scrutiny, since such a clause deprives the parties of