• Swiss Federal Court Refused a Set Aside Request Based on the Failure of the Tribunal to Appoint an Independent Expert in Arbitration Proceedings
  • October 15, 2017
  • Expert evidence in international arbitration is a source of evidence widely used, both in terms of party-appointed experts and independent experts. Considering the close connection between the right to be heard and the appointment of experts, the requests of the appointment of experts by arbitral tribunals require special attention. As the infringement of the right to be heard is a ground to set-aside the award, as well as a ground to oppose recognition and enforcement, the refusal of appointment of an independent expert may lead to crucial results in terms of the arbitral award.
    A very recent decision of the Swiss Federal Court (Decision 4A_277/2017, dated August 28, 2017)1, which analyzes the issue of independent expert reports in arbitral proceedings, is analyzed in this article.
    In General
    The role of expert evidence in international arbitration is quite significant, considering the fact that most of the disputes submitted to arbitration require specific technical knowledge. In international arbitrations, the parties are free to appoint their own experts and submit these expert reports to the attention and consideration of the arbitral tribunal. While there may be party-appointed experts, the arbitral tribunal, itself, may also appoint experts. These tribunal-appointed experts may be classified as independent experts.
    In international arbitrations, the right to be heard is beyond any doubt one of the cornerstones of arbitral proceedings. The right to be heard manifests itself under many occasions during arbitral proceedings, as well as during post-award proceedings. The infringement of the right to be heard is a ground to set-aside the arbitral award, as well as a ground of objection to the recognition and enforcement of the award. Accordingly, the decisions of the arbitral tribunal as to whether to order an independent expert review would also be reviewed by state courts, within the scope of the right to be heard.
    As a general rule, the tribunal is free to appoint an independent expert, considering the specifics of the case at hand. On the other hand, the parties may also request this appointment, in which case the tribunal will review the request in light of the fundamental principles, such as the right to be heard, and the conduct of arbitral proceedings in a timely and efficient manner. It should be emphasized that the appointment of an independent expert requires an analysis in light of certain conditions that justify the appointment.
    The recent decision of the Swiss Federal Court, which conducts a thorough analysis of these conditions in light of the precedents of the Court, as well as the legal literature, is analyzed, below.
    Swiss Federal Court Decision
    In the arbitral proceedings that gave rise to the decision of the Swiss Federal Court, the arbitral tribunal rejected the request of one of the parties that an independent expert would be appointed, in order to conduct an assessment of its claims for loss of profit. In support of its request, the relevant party had submitted to the attention of the tribunal various supporting documents, namely, a bank report, a feasibility study along with an update, and a further report.
    In its decision, the arbitral tribunal concluded that the request lacked the required factual basis, and the documents submitted in support of the request had been created subsequent to the dispute, with the aim to influence the arbitral tribunal, and were not sufficient to justify the request. Accordingly, the arbitral tribunal clarified that it has discretionary powers to appoint an independent expert and, therefore, it is possible not to appoint an expert if the arbitral tribunal does not consider the appointment to be necessary.
    The party whose request of appointment of an independent expert had been rejected filed a set-aside action under Article 190(2)(d) of the Federal Act on Private International Law, which sets forth that the arbitral 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 observed2.
    Conditions set forth by the Swiss Federal Court to be considered in the appointment of an independent expert
    In its decision, the Swiss Federal Court conducted a thorough analysis of the conditions to be taken into consideration in the appointment of an expert, by referring to its jurisprudence, as well as the legal literature3. These conditions are further elaborated upon, below.
    The first condition cited by the Federal Court is a clear request of appointment of independent expert by the relevant party. Secondly, the request should have been made in accordance with the form requirements and time frame agreed upon during the arbitral proceedings, and the requesting party should have agreed to pay the relevant costs. Finally, the request should include the necessary documents that are capable of proving the facts that render the appointment of an expert necessary. This would be the case when the determination of the facts requires specific technical knowledge, and the arbitral tribunal lacks this specific knowledge.
    This requirement of submission of documents, along with the request, is considered as a new aspect concerning the arbitral proceedings seated in Switzerland4. Considering the decision of the Federal Court, it would be advisable to submit the necessary documents, along with the request of appointment of an independent expert, instead of submitting them subsequent to the instruction of the expert5.
    Finally, the fact that the requesting party is aiming to establish proof should be relevant to the tribunal's final decision, which requires the set-aside judge to examine whether the administration of the evidence would have led to a different award. At this point, the Swiss Federal Court clarifies that the set-aside judge may only conduct a limited review of assessment of evidence, within the scope of the right to be heard, which should not lead to a review of the merits of the case. Accordingly, a potential infringement of the right to be heard should also have an impact on the tribunal's decision, which would lead the tribunal to decide differently, had the independent expert been appointed. This requirement imposed by the Federal Court aims to exclude the set-aside actions based on infringements of the right to be heard that do not have an influence on the arbitral tribunal's decision.
    Conclusion
    The decision of the Swiss Federal Court on the appointment of an independent expert by the arbitral tribunal includes very important determinations in terms of the right to be heard, as well as the conditions that should be fulfilled in the request of expert appointment by the tribunal. Accordingly, there are certain conditions that need to be fulfilled in order to duly request an independent expert. Considering the close connection between the appointment of experts and the right to be heard, the Swiss Federal Court reviewed these conditions quite thoroughly, in order not to give rise to set-aside decisions based on purely formal violations of the right to be heard. It is quite important that the request of expert appointment should include supporting documents, which may be considered as a new aspect under Swiss law. Another significant finding of the Federal Court is that the right to be heard is infringed upon when the refusal of appointment of the expert would have an impact on the final decision of the arbitral tribunal.
    1 Decision of the Swiss Supreme Court 4A_277/2017, dated August 28, 2017. Source:
    https://www.bger.ch/ext/eurospider/live/fr/php/aza/http/index.php?highlight_docid=aza%3A%2F%2Faza://28-08-2017-4A_277-2017&lang=fr&zoom=&type=show_document.
    2 An English translation of the Federal Act on Private International Law may be accessed under http://www.andreasbucher-law.ch/images/stories/pil_act_1987_as_from_1_1_2017.pdf.
    3 The Supreme Court referred to an article by Jean-Francois Poudret, titled Expertise et droit d'ĂȘtre entendu dans l'arbitrage international, published in Etudes de droit international en l'honneur de Pierre Lalive, p. 607-624.
    4 Nathalie Voser, Benjamin Gottlieb, Swiss Supreme Court Rejects Challenge and Reiterates Principles of Rights to a Tribunal Appointed Expert, p. 4. Source: http://www.swlegal.ch/getdoc/ae0ff02c-56c5-4c24-82... ("Voser-Gottlieb").
    5 Voser-Gottlieb, p. 4.