Facts
The parties A. AG and B. N.V. concluded an exclusive distribution contract on 20 May/22 June 1992, which contains an arbitration clause. This clause provides that disputes arising from the contract shall be settled in accordance with the rules of the Zurich Chamber of Commerce (ZCC) and the UNCITRAL Arbitration Rules. However, the arbitration clause also contains a provision that designates the International Chamber of Commerce (ICC) as the appointing authority for the arbitrators.
In August 2002, the respondent initiated arbitration proceedings before the ZCC and requested that the appellant be ordered to pay damages. The arbitral tribunal was constituted, and the appellant raised an objection to the jurisdiction, arguing that the arbitral tribunal had not been validly constituted.
The appellant argued that the arbitration agreement was invalid due to the partially impossible provisions. It claimed that the arbitration clause contained contradictory orders and that the parties had not reached a consensus on the content of the arbitration agreement.
Considerations
The Federal Court ruled that the arbitration agreement was valid despite the partially impossible provisions. It held that the arbitration clause was clear and specific insofar as the parties had withdrawn any potential disputes from the original state jurisdiction and submitted them to private arbitration.
The court found that the arbitration agreement contained an incurable pathological clause insofar as it provided for a three-member arbitral tribunal to be appointed by the ICC. However, it decided that this partial impossibility did not lead to the complete ineffectiveness and thus to the lack of jurisdiction of the ZCC arbitral tribunal.
The court held that the arbitration agreement should be interpreted in a validity-preserving manner to respect the parties' will to submit to arbitration. It decided that the arbitrators should be…