According to Article 105(1) of the Federal Supreme Court Act (FSCA), "the Supreme Court renders its decision based on the factual findings of the lower instance".

Article 190(2)(d) PILA provides that an award may be set aside "where the principle of equal treatment of the parties or their right to be heard in an adversary procedure has not been observed".

Under Article 190(2)(e) PILA, an award may be set aside if it is incompatible with ordre public.

Y is a company based in the Democratic Republic of Congo (DRC) involved in the export of a mineral called cassiterite. X is a Belgian company active in the selling of ores and metal. In January 2009, Y and X signed a one-year contract governed by Swiss law (Contract), whereby Y would sell cassiterite to X. Four months later, X suspended the Contract on the ground that it had received instructions from experts of the United Nations (UN) to stop buying ores suspected to come from areas controlled by the Congolese rebels. Indeed, a few days earlier, the Security Council of the UN had issued a resolution threatening to sanction any individuals or companies suspected to be involved in the illegal trade of natural resources, a major source of income for the rebels in Eastern DRC.

Subsequent to the suspension of the Contract by X, Y initiated ICC arbitral proceedings against X (seat in Geneva, substantive Swiss law, proceedings conducted by a sole arbitrator). In the final award, the sole arbitrator ruled in favour of Y and ordered X to pay a sum of US$9,188,162.48.

X challenged the award before the Swiss Supreme Court, alleging, among other things, a breach of the principle of equal treatment and the right to be heard (Article 190(2)(d) PILA), as well as an infringement of ordre public (Article 190(2)(e) PILA).

The Supreme Court dismissed the appeal.

The Supreme Court first reiterated the principle set out in Article 105(1) FSCA, according to which the Supreme Court renders its decision based on the factual findings of the lower instance (here the arbitral tribunal). The Supreme Court also referred to the exception to this rule, that is, when the petitioner relies on the factual findings of the arbitral tribunal to challenge the award based on Article 190(2) PILA, or when a fact relevant to the dispute is discovered after notification of the award. However, the Supreme Court pointed out that the party who, relying on such an exception, wishes the factual findings of the arbitral tribunal to be amended or supplemented, must refer to documents on record in order to show that the alleged facts had duly been introduced in the arbitration proceedings.

The Supreme Court also confirmed the basic principle that the party who invokes a violation of its right to be heard must set out the reasons in support of its application in its motion to challenge: mere reference to exhibits is not sufficient.

The Supreme Court also rejected the petitioner's complaint that its right to equal treatment and its right to be heard had been violated, on the basis that it was inadmissible. Confirming existing case law, the Supreme Court reiterated that the aggrieved party must raise such a complaint immediately during the arbitral proceedings, thus allowing the arbitral tribunal to rectify it, instead of waiting until the filing of a petition before the Supreme Court to invoke such violation for the first time. By doing so, the petitioner acts in bad faith and it is therefore deemed to have waived its right to object. In this case, Y had filed a certain number of new documents four days before the hearing. However, although it was given the opportunity to comment on the production of documents by the sole arbitrator, X did not object to it, either then or later in the proceedings.

Lastly, the Supreme Court touched upon the question as to whether the granting of punitive damages in an award is incompatible with "ordre public" in terms of Article 190(2)(e) PILA. However, it left this question unanswered. The Supreme Court came to the conclusion that the damages granted in the award were not punitive but compensatory, and therefore considered that it did not have to deal with this question any further.

This case confirms the Supreme Court's reluctance to allow parties to use tactical practices consisting of "reserving" the right to object to a violation of procedural rights (in this case, the principle of equal treatment and right to be heard) until the filing of an action for annulment, when the award turned out to be unfavourable. In the present case, the Supreme Court firmly established that such a party will be deemed to have waived its right to object. However, it is important to add that there is one exception to this "waiver" effect, that is when the procedural error is "irreparable" or "particularly serious" (see decisions 4P.282/2001 of 3 April 2002 and 4P.146/2005 of 10 October 2005). Nevertheless, it should be noted that the case law referring to the exceptions is not sufficiently established to run the risk of keeping this argument in reserve until the award is rendered. Counsel who intend to invoke the violation of procedural rights should therefore do so without delay during the arbitral proceedings, for instance by asking to record their procedural objection in the transcript of the hearing. Similarly, arbitrators should also confirm with the parties that they have no procedural objections before closing the proceedings and such confirmation should be included in the award.

The question as to whether the granting of punitive damages infringes public order remains unsettled after this decision. However, one may assume that, if the Supreme Court follows the view of the prevailing doctrine, it might in the future answer this question in the negative. Indeed, the majority view has taken the position that the preclusion of punitive damages under Swiss law does not belong to "ordre public" (defined by the Supreme Court as "the essential and widely accepted values, which, pursuant to the concepts that prevail in Switzerland, should constitute the fundament of any legal system"), because punitive damages are admitted under certain foreign laws. Furthermore, there are also provisions in Swiss law which grant compensation that goes beyond the pure restitution of damages. Accordingly, where the parties have chosen a foreign law that permits punitive damages to govern their contractual relationship, the Supreme Court will most likely not set aside an award which granted punitive damages.

Finally, while the decision provides a lengthy account of the underlying facts of the case, it does not provide any information as to the reasons why, by ruling in favour of X, the sole arbitrator did not consider the UN resolution a case of "force majeure" justifying the suspension of the Contract by Y. It would have been interesting to know how the sole arbitrator dealt with the UN resolution potentially influencing Y's obligation to continue accepting deliveries under the Contract to reach its ruling.

4A_16/2012.