International arbitration: jurisdiction denied for lack of matching party intent regarding the arbitration clause – appeal dismissed

Facts

Parties and proceedings: The appellants are a Turkish construction company (Claimant 1) and an Iranian construction company (Claimant 2, founded 12 June 2010). The respondents are an Iranian subsidiary of a state-controlled developer (Respondent 1) and an Iranian state bank (Respondent 2). The Claimants initiated arbitration proceedings on 5 April 2017 with an amount in dispute of USD 150 million. The arbitral tribunal seated in Geneva (PCA Case No. 2018-01) declared itself without jurisdiction by award of 2 July 2019; the arbitrator appointed by the Claimants issued a dissenting opinion. The Claimants lodge a civil law appeal under Art. 190-192 PILA.

Facts: Within the framework of the Iranian '[F.] Housing Plan' of 2007, the '[G.] Construction Project' was designed. On 14 April 2010, the [A.] Group, Respondent 1 and Respondent 2 signed the 'Trilateral Agreement' on the construction of 20'000 housing units. It was disputed whether Claimant 1 became a party to the contract.

Disputed arbitration clause (Art. 4): The clause adopts almost verbatim Art. 11 of the 1996 Turkey-Iran bilateral investment protection agreement (BIPA 1996) and refers to an ad hoc arbitral tribunal under UNCITRAL Rules for disputes between one Contracting State and investors of the other State.

Negotiation history: Respondent 1 initially proposed an internal arbitration clause in Iran, which the Turkish side rejected. The Turkish side (representative [H.] , legally trained) proposed an international arbitration clause with a seat outside Iran, which Respondent 1 rejected. Ultimately, Respondent 1 enforced the wording of Art. 4, which it presented as binding. The Turkish side unsuccessfully attempted to adapt the clause to cover disputes arising from the Trilateral Agreement.

Course of proceedings before the arbitral tribunal: The Respondents primarily raised the plea of lack of jurisdiction. The parties agreed Terms of Appointment subjecting the proceedings to the UNCITRAL Arbitration Rules (2010). The proceedings were limited to questions of jurisdiction and admissibility. On 22 October 2018, an oral hearing took place in Paris, including party hearings and witness examinations.

Requests before the Federal Supreme Court: The Claimants request annulment of the award, a finding that the arbitral tribunal has jurisdiction over disputes between Claimant 2 and the Respondents arising from the Trilateral Agreement, and remittal with regard to Claimant 1 and costs. The Respondents request non-entry into the appeal, alternatively dismissal. The arbitral tribunal waived submitting a response.

Considerations

Admissibility and scope of review: The Federal Supreme Court notes that the final decision on jurisdiction is appealable under Art. 190 para. 2 PILA, the seat is in Geneva and no party has domicile or registered office in Switzerland (Art. 176 PILA). The respondents argued that Art. 4 paras. 5 and 6 of the arbitration clause exclude an appeal under Art. 192 PILA; this objection is rejected, since the validity of the arbitration agreement, which is disputed, must be examined first. The appeal is in principle of a cassatory nature (Art. 77 FSCA); however, the Federal Supreme Court may itself determine jurisdiction. Only the grounds of complaint exhaustively listed in Art. 190 para. 2 PILA, and substantiated, are examined; appellate-style criticism is inadmissible (Art. 77 para. 3 FSCA).

Binding nature of the facts: The Federal Supreme Court is bound by the arbitral tribunal's factual findings (Art. 105 para. 1 FSCA; Art. 77 para. 2 FSCA excludes correction and supplementation). A free review of the factual findings, including in the area of jurisdiction, is not possible; the older case law (BGE 117 II 94, 120 II 155) does not change this. The appellants wrongly complain of an objectified rather than subjective interpretation; the statement in the costs decision concerns only the procedural conduct of the Claimants.

Subjective and objectified interpretation of the arbitration clause: The validity of the arbitration agreement is assessed under Art. 178 para. 2 PILA; the arbitral tribunal applied Swiss law, which the parties accept in agreement. The decisive factor is first the actual, common intent of the parties (subjective interpretation), which rests on the assessment of evidence and is subject only to limited review by the Federal Supreme Court (BGE 142 III 239 consid. 5.2.1). Only where no actual intent can be established does the objectified interpretation follow according to the…