Sàrl X. v. Y. AG [The Algerian Brewery] - Swiss International Arbitration Law Reports (SIALR) - 2007 Vol. 1 Nos. 1 & 2

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December, 2007

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Headnote

An arbitral tribunal must present sufficient guarantees of independence

and impartiality; systematic criticism of a party’s conduct set out in

metaphorical language in an arbitral award does not amount per se to a

lack of impartiality.

An arbitrator is not bound in principle to seek the parties’ views as to

the legal principles he will apply to the merits of the dispute; however, an

arbitrator is bound to do so if he intends to base his decision on a

principle of law that was not relied upon by either party and the

application of which neither party could reasonably have expected.

Summary of the Decision

X. and Y. concluded an agreement whereby Y. undertook to supply X.

with a comprehensive beer production facility. Y. also promised to provide

technical assistance for a 12-month period following X.’s acceptance of the

unit. X. brought arbitration proceedings against Y. seeking damages for

breach of the agreement; Y. asserted a counterclaim and also sought the

dismissal of the action on the basis that it was time-barred. The arbitral

tribunal made a partial award declaring that the action was not time-barred.

Following further submissions and oral argument, the arbitral tribunal

made a second partial award in which it interpreted one of the protocols

established between the parties, and consequently dismissed X.’s claim, in

part. X. then brought setting aside proceedings against the second partial

award on the grounds that (1) the arbitral tribunal was improperly

constituted, (2) the arbitral tribunal breached its right to present its case

and (3) the tribunal’s award disregarded the principle pacta sunt servanda

and was thus incompatible with public policy.

The Federal Supreme Court held that the petitioner’s reliance on

metaphorical words and expressions used by the tribunal in its award to

criticise the conduct of one of the petitioner’s representatives during the

execution of the agreement was insufficient to demonstrate that the

arbitrators violated the constitutional guarantee of impartiality.

The court also held that an arbitrator is bound to seek the parties’

views as to the legal principles applicable to the merits in case he intends

to base his decision on a principle of law that was not relied upon by

either party or of which neither party could reasonably have anticipated.

The arbitrators did not violate this duty where (i) they gave the parties