In an ICC arbitration between the Turkish company X and the US company Y, the arbitral tribunal awarded Y damages of approximately US$2.4m. X challenged the award before the Swiss Supreme Court and, at the same time, submitted a request for correction and interpretation of the award to the arbitral tribunal.

The arbitral tribunal issued an addendum to its award, reducing the damages awarded to Y to just under US$500,000. The Swiss Supreme Court subsequently set aside the initial award and the addendum and remanded the case to the arbitral tribunal (Case 4A_433/2009, discussed in Legal update, Swiss Supreme Court sets aside arbitral award based on a violation of the right to be heard). The court held that the arbitral tribunal had violated X's right to be heard by failing to take into account the latter's allegations regarding a payment retained by Y, which could have had an impact on the determination of the damages due by X.

X filed a challenge against the members of the arbitral tribunal in the re-opened proceedings. The challenge was, however, dismissed by the ICC Court.

The arbitral tribunal invited the parties to indicate which points they wished to see re-examined. X listed 12 points that it felt should be reconsidered in the re-opened proceedings. The arbitral tribunal decided to only reconsider its decision in relation to the issue which had led to the setting aside of the award, that is that of the payment retained by Y. After Y had declared that it waived all claims in relation to said payment, the arbitral tribunal, in its final award, reduced the damages due by X to Y to an amount just under US$100,000. X was further ordered to pay Y US$200,000 for the arbitration costs.

X challenged this award before the Swiss Supreme Court and requested that the members of the arbitral tribunal be removed.

The Swiss Supreme Court dismissed X's request.

The Supreme Court first confirmed its recent case law, according to which it may, in the context of a challenge to the award, decide to remove one or several members of the arbitral tribunal (see Case 4A_234/2010, discussed in Legal update, Swiss Supreme Court clarifies standard of impartiality required of party-appointed arbitrators). This constitutes an exception to the rule that the Swiss Supreme Court may only set aside arbitral awards, but not render direct decisions on the merits or on procedure.

X had argued that, due to the specific circumstances of the case (including the length of the proceedings and the procedural error committed by the arbitral tribunal), the arbitrators could no longer be expected to be impartial when re-examining the case. Referring to the arbitral tribunal's decision to limit its reconsideration to the issue of the retained payment, X argued, in particular, that the arbitral tribunal lacked the "independence of spirit" to re-examine the case in its entirety, as this would have called into question its previous work and led to additional delays.

The Supreme Court rejected this argument. It confirmed that, when a case is remanded to the arbitral tribunal after a successful challenge, the arbitrators can only re-examine the issues which led to the setting aside of their first award. They are bound by the rest of their previous findings. In this case, the arbitral tribunal could not have reconsidered any issues other than that of the retained payment. Therefore, its impartiality could not be called into question on that basis.

In addition, the Supreme Court confirmed its case law, according to which the mere fact that an award has been set aside due to a procedural or substantive mistake of the arbitral tribunal is not sufficient to prevent the same arbitrators from re-examining the case, unless the mistake was particularly grave. The violation of X's right to be heard, which led to the setting aside of the initial award, was not sufficiently serious to call into question the arbitral tribunal's independence and impartiality when re-examining the case.

This decision deals with the sensitive issue of whether, when an award is set aside, the case can and should be remanded to the original members of the arbitral tribunal, that is, whether they can be expected to act impartially. After providing a useful overview of the present state of its case law on independence and impartiality, the Supreme Court confirmed that, as a rule, cases should be remanded to the original arbitrators.

Exceptions could include cases in which the very reason for which the award was set aside warranted the removal of one or more members of the arbitral tribunal (for example, corruption). While in the present case the ICC Court confirmed the appointment, it does not have a standard practice in such situations, but rather looks at the specific circumstances of the case. In another (unpublished) case, the ICC Court had accepted the challenge of a sole arbitrator who had indicated in the context of setting aside proceedings that the outcome of the arbitration would be the same even if he had to re-examine the case.

Another interesting aspect of this decision is that it sets out in very clear language that the arbitral tribunal may only re-examine those issues which led to the award being set aside, but is otherwise bound to its previous decision. The scope of any re-examination is therefore strictly limited. In a very recent decision in a domestic arbitration case (Case 4A_628/2011), the Supreme Court accepted a challenge against a domestic award because the arbitral tribunal to which the case had been remanded had gone beyond the findings of the court setting aside the first award. However, this was based on a specific provision of the Swiss Code of Civil Procedure (Article 395(2)) and there is no comparable provision in the conclusive list of grounds for setting aside an international arbitral award under Article 190(2) of the Swiss Private International Law Act. However, it can be assumed that such an award could be set aside for violation of substantive ordre public if it fell foul of the principle of res judicata.