X. Ltd. v. Y. and WIPO Arbitral Tribunal [The Coffee Percolator Patent] - Swiss International Arbitration Law Reports (SIALR) - 2007 Vol. 1 Nos. 1 & 2

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December, 2007

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Headnote

Where an arbitration agreement provides that an arbitrator will decide

in a “final manner”, such a clause does not amount to a valid exclusion

agreement precluding setting aside proceedings.

A party may proceed directly to arbitration where the contract does not

contain a binding requirement for pre-arbitration conciliation or

mediation. A non-binding pre-arbitration conciliation or mediation

agreement does not preclude arbitral jurisdiction.

Summary of the Decision

X. and Y. signed two exclusive license agreements concerning the

manufacturing of household coffee makers. Their relationship worsened

and the parties pursued settlement negotiations. The negotiation attempts

were unsuccessful and Y. proposed to begin arbitration proceedings,

whereupon X. terminated the license agreements. Y. then submitted a

request for arbitration, seeking an order declaring the termination to be

unlawful and an award of damages. X. objected that the language in the

license agreements required conciliation proceedings and thus the

arbitration had been brought prematurely. The arbitral tribunal declared

that it had jurisdiction, ruled that there was no binding conciliation

prerequisite, and awarded Y. damages. X. then brought setting aside

proceedings on the grounds that the arbitral tribunal (1) wrongly accepted

jurisdiction and (2) violated the petitioner’s right to present its case. The

respondent objected, inter alia, that setting aside proceedings were

inadmissible as the parties had made a valid exclusionary agreement.

The Federal Supreme Court first rejected the respondent’s objection

that the petitioner had waived its right to bring setting aside proceedings.

The expression in an arbitration agreement that an arbitrator will decide

in a “final manner” does not amount to a valid exclusion agreement

precluding setting aside proceedings; any exclusion agreement as may be

contained in the arbitration rules referred to by the parties (Art. 64(a) of

the WIPO Arbitration Rules in the present case) would represent an

indirect exclusion agreement, which fails to meet the requirements of

article 190(2) FPILA.

The court then held that the language in the license agreements could

not be interpreted as imposing a binding obligation to conciliation or