The parties in X SpA v. Y Srl (4P.278/2005) were Italian companies, recognised internationally as leaders in the field of riggings and cables. The companies entered an agreement to submit a joint bid for participation in the construction of two bridges in an Italian high-speed railway construction project. The parties stipulated that neither company would bid for the project with other companies or individually. The agreement contained an ICC arbitration clause, designating Lausanne, Switzerland, as the seat of any arbitration.

Despite the agreement, X SpA submitted competing bids and secured the projects for itself and a consortium of companies it headed. Y Srl commenced arbitration, claiming damages for breach of contract. In its defence, X SpA argued that the contract between X and Y was void because it contravened Italian and European Community competition laws. The tribunal upheld the contract and found in favour of Y. X appealed to the Swiss Federal Tribunal requesting that the award be set aside pursuant to Article 190.2(e) of the Swiss Private International Law Act, which provides:

“Proceedings for setting aside the award may only be initiated: … (e) where the award is incompatible with public policy.”

The Federal Tribunal declined to do so. The Court held that Article 190.2(e) of the Swiss Private International Law Act, is not concerned with the national public policy of Switzerland or of any other states. Rather, it strives to protect the “system of values prevailing within the Swiss legal culture as well as the basic principles of the civilization to which Switzerland belongs”. Because national antitrust and competition laws vary widely from one country to another, they cannot form part of the “fundamental and widely recognised values forming the foundation of every legal order”. Accordingly, the Supreme Court concluded that competition law does not amount to substantive public policy in Swiss arbitration law. It was, therefore, for the arbitral tribunal to finally determine any competition law issues put to it.

The Swiss decision conflicts with the stance taken on this question respectively by the United States Supreme Court in Mitsubishi Motors Corp v. Soler Chrysler-Plymouth Inc. (473 U.S. 614) and by the European Court of Justice in Eco Swiss China Time Ltd v Benetton International NV (Case C-126/97, [1999] ECR I-3055). Both held that a national court may conduct a “second look” review of arbitral awards in order to ensure that they do not undermine the important public policy advanced by antitrust and competition laws. Both decisions have been criticised by international arbitration practitioners for adding a further substantive ground for court review of arbitration awards.

The Swiss decision is likely to have significant implications and may influence judges in other jurisdictions. In the meanwhile, lawyers advising on transactions that may implicate antitrust or competition law issues (for example, agreements conferring territorial or other exclusivity to one party) must carefully consider the implications of X SpA v. Y Srl. In particular, lawyers drafting arbitration clauses must now consider whether or not Switzerland is the most suitable jurisdiction in which to hold any future arbitration. Parties seeking to enforce an arbitration award dealing with competition law claims could avoid some challenges to the award, if the losing party has assets in Switzerland and the award can be enforced there.

For more information on the impact of competition or antitrust laws on international transactions, contact Kilpatrick Stockton’s Antitrust lawyers.

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