Definitive Rechtsöffnung (definitive debt enforcement authorisation) for a foreign arbitral award after bankruptcy opening over the arbitration respondent; objective arbitrability and vis attractiva concursus

Facts

Parties and instances: The appellant ([A.] , former director of [C. AG] ) is a bankruptcy creditor and, by decision of the Zug Bankruptcy Office of 25 October 2016, received the right to contest and defend the claim under Art. 260 DEBA. The respondent is [B.] Ltd. The prior instance was the Zurich Higher Court, I. Civil Chamber (judgment of 31 October 2019, RT190049-O/U); at first instance, the Horgen District Court ruled (judgment of 18 March 2019).

Background: The proceedings are based on an arbitral award of 3 September 2018 of the London Court of International Arbitration (LCIA). [B.] Ltd (claimant) and [C. AG] (respondent) disputed a litigation funding agreement, in particular the validity of the termination of 14 May 2014. [B.] Ltd was to finance an arbitration with seat in Switzerland between [C. AG] and [D. AG] (ICC proceedings) and in return receive 50% of the litigation proceeds.

Bankruptcy: During the LCIA proceedings, bankruptcy was opened in Switzerland over [C. AG] on 3 May 2016. The arbitral tribunal held that the termination was ineffective and that [B.] Ltd was entitled to 50% of any compensation payable to [C. AG] in liquidation from the ICC proceedings (operative paragraphs 1 and 2). Operative paragraph 8 obliged the appellant to pay GBP 74'298.60 in procedural costs, and operative paragraph 9 governed the obligation to pay interest.

Rechtsöffnung proceedings: On 23 January 2019, [B.] Ltd, in enforcement proceeding No. xxx of the Horgen Debt Enforcement Office (payment order of 21 November 2018), applied on the basis of operative paragraphs 8 and 9 for definitive Rechtsöffnung for CHF 95'126.75 plus 5% interest from 3 September 2018. The District Court found, as a preliminary question, that the operative paragraphs were recognisable and enforceable. The appeal to the Higher Court was essentially unsuccessful.

Proceedings before the Federal Supreme Court: The appellant requests that the Higher Court judgment be set aside and the Rechtsöffnung application be dismissed. Suspensive effect was granted by order of 27 November 2019. No responses were requested.

Legal question: Whether the opening of bankruptcy over the arbitration respondent eliminated the objective arbitrability of the subject matter from the Swiss perspective, so that the arbitral award as a whole would not be recognisable under Art. 177 PILA or Art. 194 PILA in conjunction with Art. V para. 2 lit. a and b NYÜ.

Considerations

Admissibility: The Rechtsöffnung decision is a final decision (Art. 90 FSCA) in a matter of pecuniary interest, and the amount in dispute threshold is met (Art. 74 para. 1 lit. b FSCA). The Higher Court decided as the last cantonal instance (Art. 75 FSCA). The civil law appeal is timely (Art. 100 para. 1 FSCA) and in principle admissible. In Rechtsöffnung proceedings, violations of law under Art. 95 et seq. FSCA may be complained of (BGE 133 III 399 E. 1.5).

Legal framework of enforceability: Under Art. 80 para. 1 DEBA, definitive Rechtsöffnung may be requested if the claim is based on an enforceable court judgment; arbitral awards are equated with state judgments (BGE 130 III 125 E. 2). Foreign arbitral awards are enforceable only if a Swiss court has declared them enforceable; this may occur as a preliminary question in Rechtsöffnung proceedings (Art. 81 para. 3 DEBA; BGE 135 III 136 E. 2.1). Recognition and declaration of enforceability are governed by Art. 194 PILA and the NYÜ. Art. V NYÜ is an exhaustive system of grounds for refusal; only the grounds under Art. V para. 2 NYÜ are to be examined ex officio, namely lack of objective arbitrability (lit. a) and public policy (lit. b).

Objective arbitrability: Under Art. 177 para. 1 PILA, all disputes of a pecuniary nature are arbitrable; the legislator intended to open access to international arbitration broadly (BGE 118 II 353 E. 3a, 3b). DEBA matters are in principle of a pecuniary nature, but in the area of enforcement the state's unconditional sovereignty applies (BGE 136 III 583 E. 2.1). Disputes that are so closely connected with the conduct of insolvency proceedings that they cannot be left to arbitration are not arbitrable.

Collocation action: The collocation action (Art. 250 DEBA) forms an integral part of bankruptcy liquidation (BGE 141 III 382 E. 3.5.2; 133 III 386 E. 4.3.3). In collocation proceedings the bankruptcy estate is not bound by an arbitration agreement of the debtor; the place of bankruptcy as forum is mandatory (BGE 71 III 80 E. 1; 71 III 192 E. 2). The collocation action is therefore not arbitrable within the overall proceedings. A party that, after bankruptcy opening, files a new arbitration claim instead of a collocation action must reckon with the ground for refusal of lack of objective arbitrability.

Pending proceedings at the time of bankruptcy opening: The claim was already the subject of an arbitration at the time bankruptcy was opened and, under Art. 207 DEBA as well as Art. 63 BOPO, is to be merely noted pro memoria in the collocation plan if the proceeding is discontinued. The Federal Supreme Court left open the question of whether Art. 207 DEBA applies directly to arbitrations seated in Switzerland. Swiss bankruptcy law requires consideration of the bankruptcy proceedings but does not raise absolutely decisive objections against arbitrations against the debtor. The legislator deliberately left open the scope of vis attractiva concursus for foreign proceedings pending at the time of bankruptcy opening (Dispatch of 24 May 2017, FF 2017 4132).

Vis attractiva concursus: According to BGE 141 III 382 E. 5.4, a foreign judgment concerning bankruptcy claims is not binding on the Swiss collocation judge, and the decision must in principle be made in Switzerland (vis attractiva concursus; BGE 35 II 341 E. 2). This principle does not, however, preclude recognition of a foreign…