12 February 2018

Wrapping up

"US Spotlight" blog series: demystifying Swiss arbitration for the US litigator (Volume 10 of 10)

This blog series provides the US litigator with a practical understanding of Swiss arbitration. It compares a Swiss arbitral proceeding under the Swiss Rules of International Arbitration ("Swiss Rules"), though other rules, e.g., the International Chamber of Commerce ("ICC") Rules, are often used, with a dispute in US Federal District Court ("USDC").

Statement of costs
Unlike in USDC where the presumption is that each party pays its own legal fees, the Swiss arbitration presumption is that the loser pays for the costs of the arbitration. Art. 40(1) Swiss Rules; Art. 38 and 39 Swiss Rules; Appendix B to the Swiss Rules. The allocation of costs need not be all or nothing, and the tribunal can apportion the costs as it sees fit. Art. 40(2) Swiss Rules. The cost-shifting approach is a deterrent to frivolous claims, and may also encourage plainly meritorious ones—a substantial advance on tribunal costs is more palatable to a party when it has the chance to claim those costs back.
Both parties will be ordered to simultaneously file their respective statement of costs shortly after post-hearing briefs are submitted. It is customary to attach invoices and expense receipts to substantiate these claims. The statement of costs is factually—rather than legally—heavy. While it is not unusual for a party to anticipate skepticism about certain costs, and preemptively argue why such costs should be reimbursed, or to highlight costs that it anticipates the other side will claim but that should not be reimbursed, the statement of costs is less like an argumentative brief and more like an extensive bill. There is likely to be a small window, e.g., a few days, for either party to object to any particularities of the counterparty's statement of costs. From that point on, nothing more is said by either party, who await the tribunal's final award.

The final award
The final award is the resolution of the arbitration, and its last act, distributed in writing, unless the parties agree otherwise, to the parties a few months after the submissions of the statement of costs. Art. 32 (3) Swiss Rules. The tribunal may set itself a firm deadline for issuing the final award, but need not do so. The final award is in principle binding, appealable only on narrow, procedural grounds. Art. 32 (2) Swiss Rules. Such appeals go directly to the Federal Supreme Court of Switzerland and there is a very limited chance of a final award being overturned, viz., approximately 4 %.

US litigators can be comfortable advocating in Swiss arbitral proceedings. Persuading a tribunal requires a fundamental skill set similar to that necessary to persuade a USDC judge or jury: facts from documents must be uncovered and marshalled; key witnesses must be identified and prepared to submit testimony; compelling arguments, grounded in the relevant law, must be presented in writing and orally; procedural steps must be followed along the way. Distinctions of the Swiss arbitral system—the minimal discovery, absence of juries, less strict rules of evidence, more limited avenues for parties to attack substantive pleadings on procedural grounds—are not insignificant, but come within a system that emphasizes the core dispute and bringing it to resolution more quickly than can be expected in USDC. The cost for such resolution can be significant but also predictable, and, unlike in the US, a party with a strong case can bring its claim with the reasonable expectation that it will not ultimately have to pay to do so. Taken together with the presumption of privacy, the Swiss arbitration system has long been enticing to US companies and will continue to be so. Hence, it is a system well worth US litigators taking the time to get acquainted with.

Author: Jim Nickovich

Prior volumes: Volume 1, Why Swiss Arbitration? Getting started; Volume 2, The organizational conference; Volume 3, Substantive pleadings; Volume 4, Evidence; Volume 5, Discovery (viz., the lack thereof); Volume 6, Experts; Volume 7, The Hearing, part 1; Volume 8, The Hearing, part 2; Volume 9, The Hearing, part 3

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