X. SA v. Y. Limited [Post-Award Avoidance of the Agreement in Dispute] No. 4A_210/2008 - Swiss International Arbitration Law Reports (SIALR) - 2008 Volume 2 No. 2

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35 pages

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December, 2008

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Headnote

■ In order to determine whether an application to set aside a

decision by an arbitral tribunal is admissible, the Swiss Federal

Supreme Court will consider the content of the decision sought to be

set aside and not its title.

■ A procedural order in which an arbitral tribunal has decided on

its jurisdiction or the propriety of its constitution, if only implicitly,

may be challenged in setting aside proceedings.

■ When reviewing an application to set aside based on the improper

constitution of an arbitral tribunal, the Swiss Federal Supreme

Court is not bound by a decision made by the ICC (or any private

institution) and may freely review the circumstances on which the

petitioner has relied in support of its challenge.

Summary of the Decision

Swiss company X. SA and professor A. entered into a know-how

licence agreement, pursuant to which A. assigned to X. SA the exclusive

right to develop a substance discovered by A. in consideration of the

payment of royalties. The parties amended the Licence Agreement on

two occasions, first to extend its scope to the entire world, and second to

modify the calculation and duration of royalties. Subsequently, A.

transferred all rights and obligations under the agreement to Y. Ltd.

Y. Ltd. commenced arbitration proceedings against X. SA seeking

payment of certain royalties. X. SA sought the dismissal of the request

and filed a counterclaim for the reimbursement of royalties already paid.

The arbitral tribunal bifurcated the proceedings, first to decide on X. SA’s

liability to pay royalties and then, in a second stage of the arbitration, to

decide on quantum. The arbitrators made a partial award in which they

determined that Y. Ltd. was entitled to royalties during a ten-year period,

and dismissed X. SA’s counterclaim.

X. SA considered that the arbitral tribunal wrongly interpreted the

second amendment to the Licence Agreement, and avoided the second

amendment relying on an essential mistake. X. SA. then filed its own

request for arbitration against Y. Ltd seeking a declaration that the second