Switzerland: When is a Partial Award Binding on the Arbitral Tribunal?

Facts: X. initiated arbitration proceedings against Z. under a joint venture agreement ("JVA"). A partial award on liability held that X. had standing to claim under the JVA and that Z was in breach of its contractual obligations. At the subsequent hearing on the quantum of damages, Z produced a document entitled "Certificate of Incorporation", showing as date of incorporation of X. a date subsequent to the making of the JVA and the filing of the request for arbitration. Based on this document, Z. challenged the jurisdiction of the tribunal and X.'s standing. Having given the parties the opportunity to submit written argument, the tribunal rendered its final award. The tribunal held that it had jurisdiction and that X. was not a legal entity. Consequently, the tribunal declared the proceedings closed for lack of a legal person on claimant's side. "X., a division of Y, a pseudonym of Y. Inc.," challenged the award before the Swiss Supreme Court, asserting that the final award contradicted the partial award in violation of the principle of res iudicata, rendering the final award incompatible with the procedural ordre public.

Held: An arbitral tribunal violates ordre public if it renders a decision without regard to the binding force of a prior decision or if, in the final award, it departs from its opinion contained in an interim award settling a preliminary matter concerning the merits.

There are two types of partial awards in a broad sense: Partial awards properly so called, containing a decision on a quantitatively limited part of the claims that have been presented to the tribunal, no doubt fall under the principle of res iudicata, with the principle applying only in relation to the claims on which the tribunal has decided, and not with regard to other or more ample prayers for relief. By contrast, preliminary or interim awards, settling preliminary questions of procedure or merits, are not covered by res iudicata. However, in contrast with procedural orders or directives, this form of award is binding on the arbitral tribunal.

The partial award in the present case can be characterized as a preliminary award, as it dealt with preliminary questions concerning the merits (claimant's standing, extent of the obligations imposed on respondent by the JVA and the latter's liability vis-à-vis claimant). Thus, the award did not have res iudicata. However, it was binding on the arbitral tribunal. The issue, therefore, arises whether the tribunal disregarded the binding nature of the partial award. In its partial award, the arbitral tribunal dealt with the question of whether claimant had standing to claim, in the sense of having a sufficient legal interest. It did not deal with claimant's capacity to be a party to the proceedings nor claimant's capacity to sue. Therefore, the tribunal was free to deal with these issues in the final award, without thereby departing from it partial award. Consequently, claimant's claim of violation of the procedural ordre public is not founded.