THE ARBITRABILITY OF INTELLECTUAL PROPERTY DISPUTES WITH PARTICULAR EMPHASIS ON THE SITUATION IN SWITZERLAND
Robert Briner
Lenz & Staehelin, Geneva, Switzerland
1. Generalities
1.1 Notion of Arbitration
Like the legislative and the executive power, the judicial power is a prerogative of the State. However, parties to a dispute are free to agree to confer this judicial power on private arbitrators with a view to settling their disputes. The State may reserve certain areas for the exclusive jurisdiction of the State Courts and, in such a case, the dispute is deemed not to be arbitrable. An arbitration agreement, in respect of a subject matter which is not arbitrable, is invalid.
1.2 Arbitration Agreement
An agreement to arbitrate is the corner stone of the arbitration. It may be contained in an arbitration clause which is embodied in the main contract between the parties, or it may take the form of a specially drawn submission to arbitration. Such a submission agreement as a separate agreement can be entered into either before a dispute has arisen or afterwards.
1.3 Notion of Arbitrability
Basically the validity of an arbitral agreement depends first of all on whether the subject matter is arbitrable (this is called "objective arbitrability") and on the quality of the parties to the agreement to arbitrate (this is called "subjective arbitrability").
In this paper I shall only deal with objective arbitrability. Further this report will be limited to arbitrability in a specific field: intellectual property rights.
1.4 The Law Applicable to the Issue of Whether a Settlement by Arbitration is Admissible
1.4.1 The question arises under which law the arbitrator will decide whether settlement by arbitration is admissible and, as a consequence, whether the arbitration agreement is valid. In this context, basically three laws can enter into consideration:
- the law governing the substantive contract;
- the law governing the agreement to arbitrate;
- the law governing the conduct of the arbitration (referred to as "lex arbitri")(1).
1.4.2 The law governing the agreement to arbitrate is in practice often the same as the law governing the substantive contract.
1.4.3 It is well established in both the theory and practice of international arbitration that the arbitration process is governed by the law of the place in which it has its seat. This law is referred to as the lex arbitri.
1.4.4 Some national systems leave the determination of the arbitrability to the law governing the agreement to arbitrate.
1.4.5 To conclude this point, the lex arbitri, i.e., the law applicable at the seat of the arbitral tribunal, is the law which, in general, determines whether the subject matter of the agreement is arbitrable or not. We will deal later in this paper with the question of the influence of the law in force at the place of execution.
1.5 Scope of Application of the "lex arbitri"
The lex arbitri does not necessarily govern the whole of the arbitral tribunals work and procedure as it usually allows much room for the application of the rules of other legal systems. The scope of their application is basically determined by the lex arbitri. The existence and the measure of the freedom of the parties in respect of the regulation of the arbitration proceedings is determined by the lex arbitri which should be taken as the starting point (2).
1.6 Nature of the Rules Designated by the "lex arbitri" to Govern the Question of Arbitrability
1.6.1 The lex arbitri resolves the issue of the arbitrability either by a rule of conflicts or by a substantive rule of private international law. A rule of conflict states which law is applicable to a particular subject matter and in the present case to the issue of arbitrability (3). A substantive rule of private international law addresses the issue by determining itself the criteria according to which a particular matter, in the present case arbitrability, is to be considered (4).
1.6.2 As will be examined later, the Swiss Private International Law Act of December 18, 1987 (hereafter referred to as "PIL"), in its Chapter 12 governing international arbitration in Switzerland, since January 1, 1989, contains a substantive rule of private international law in respect of arbitrability, while the Swiss Intercantonal Arbitration Convention of March 27, 1969, governing Swiss domestic arbitration, deals with arbitrability with a rule of conflicts of law.
1.6.3 Where the lex arbitri addresses the determination of the arbitrability by a rule of conflicts of law, objective arbitrability has to be determined pursuant to the solution offered by the rule of conflicts of law which may refer to the law found applicable either to the arbitration agreement, or to the main contract, or to both or to the procedure of arbitration, or to the subject matter in question (5).
1.7 Stage at Which the Issue of Arbitrability is Raised
1.7.1 A challenge to the validity of the arbitration agreement should be raised at the beginning of the arbitration. It is closely linked at that stage to the jurisdiction of the arbitral tribunal. In many national laws, any objection to the jurisdiction must be raised prior to any defence on the merits. This is, in particular, the case of Article 186 of the Swiss Private International Law Act. The UNCITRAL Model Law on International Commercial Arbitration of June 21, 1985, states in this connection in Article 16(2) that: "A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence. ...."
The same provision further states that the arbitral tribunal may admit a later plea if it considers the delay justified.
1.7.2 A challenge to the validity of the arbitration agreement on the ground that the dispute is not arbitrable sometimes also occurs at the time of the enforcement of the award, as many countries allow the State courts to refuse enforcement on the ground that the award violates public policy, e.g., for the reason that the dispute was not arbitrable. Such a provision can be found, in particular, in Article V(2)(b) of the New York Convention of June 19, 1958, on the Recognition and Enforcement of Foreign Arbitral Awards (hereafter the "New York Convention").
1.7.3 The issue of arbitrability may therefore arise at least at four stages:
- normally the issue of arbitrability is invoked by a party at the beginning of the arbitration, before the arbitral tribunal, which will have to decide whether it has jurisdiction or not;
- the issue of arbitrability may be also referred by a party to a State court which will be requested to determine whether the arbitration agreement relates to a subject matter which is arbitrable;
- the issue of non-arbitrability can be raised in setting aside proceedings before the State court, usually at the place where the arbitral tribunal has its seat;
- non-arbitrability may also be invoked by the defendant before the court deciding on the recognition and enforcement of the award.
1.8 Arbitration of Intellectual Property Disputes
1.8.1 One of the main issues arising in connection with arbitration in intellectual property disputes relates to the necessity of a contractual link between the parties in an arbitration. Arbitration is only possible when the claimant and the defendant have agreed (either before or after the dispute has arisen) to confer jurisdiction over their dispute to an arbitral tribunal.
1.8.2 In intellectual property matters in general, disputes often arise as a result of an infringement of a right by a third party which has not entered into an arbitration agreement with the person entitled to exercise the right.
1.9 Notion of Intellectual Property
1.9.1 The term "intellectual property" covers a variety of rights. It relates in particular to patents, to plant variety rights, to designs and models, copyright, software, integrated circuits, know-how, distinctive signs including trademarks, etc.
More precisely, according to Article 2(viii) of the Convention Establishing the World Intellectual Property Organization (149 contracting States), "intellectual property shall include the rights relating to:
- literary, artistic and scientific works,
- performances of performing artists, phonograms, and broadcasts,
- inventions in all fields of human endeavor,
- scientific discoveries,
- industrial designs,
- trademarks, service marks, and commercial names and designations,
- protection against unfair competition,
and all other rights resulting from intellectual activity in the industrial, scientific, literary or artistic fields."
It is further generally recognized that certain matters governed by unfair competition laws fall into the category of intellectual property rights (6).
1.9.2 In addition to covering a variety of rights, intellectual property is characterized by a variety of policy bases underlying such rights (i.e., regulation of the market, encouragement of creation, etc.), as well as by a variety of means of acquisition of the rights and a variety in the legal nature of the rights.
1.9.3 One could add that, as a consequence of the various policy bases underlying such rights, intellectual property perhaps more than other fields is subject to a diversity of national rules.
1.10 Comparative Study of National Rules Governing the Various Intellectual Property Rights
1.10.1 The diversity of rules has been highlighted by a recent study made by the International Association for the Protection of Industrial Property (IAPIP) which in 1991 addressed the question of the possibility of arbitration of intellectual property disputes between private parties. A summary report of the 24 national reports was published in the Yearbook 1992/I relating to the XXXVth Congress of Tokyo in April, 1992. It results from the reports that no domestic statute in a general way prohibits the recourse to arbitration in respect of industrial property rights.
1.10.2 According to the national reports, four main principles could prevent or restrict arbitration in the respective countries:
- public policy has been mentioned as such a principle, although the majority of groups consider that public order is not involved with industrial property rights, except where those rights affect the rights of third parties;
- lack of free disposal by the parties over some rights;
- inter partes effect as opposed to erga omnes effect, i.e., effects between the parties only as opposed to effects towards third parties as well;
- exclusive jurisdiction reserved to certain courts or to the national industrial property offices;
1.10.3 The issues raised in connection with the industrial property rights are ownership, validity, scope, infringement and licenses.
1.10.3.1 Patents
- In a few countries such as Canada, Switzerland, the United States, "all contentious questions relating to patents" may be submitted to arbitration. Most other countries know differentiated solutions.
Most domestic laws accept that the question of "ownership" of a patent be submitted to arbitration.
- In respect of the "validity" of a patent, apart from Canada, Switzerland, and the United States, which very broadly accept the possibility of arbitration, Australia, Germany, Great Britain and the Netherlands admit arbitration. However, in these last four countries, the decision may not involve revocation of the patent and has an effect only inter partes (i.e., between the parties to the arbitration).
In Australia, there exists no objection in principle to prevent the parties to act on the assumption that particular intellectual property rights are valid or invalid. However, where a dispute involves a public register, the arbitrators cannot deal with objections to the initial registration or with claims for rectification of the register (7).
In Canada any matter related to patents may be referred to arbitration apparently without any restrictions (8).
In France, Law No. 78.742 of July 13, 1979, underscores that disputes relating to patents may be resolved by arbitration, following the conditions laid down in Articles 2059 and 2060 of the Civil Code (9). Arbitration is possible in cases concerning the validity of a patent as well as patent counterfeiting or patent licenses. On the other hand, an arbitrator may not declare a French patent invalid, since French public policy is directly concerned within the meaning of Article 2060 of the Civil Code (10).
In Germany, rights based on patents cannot be directly created nor rescinded by arbitral awards. However, they can, like a regular court judgment, order a party to submit statements which may then constitute the basis for entries or cancellations in official registers. Thus they have indirectly effect toward third parties as well (11).
In Japan, registered rights, such as patent rights, which are granted by the Patent Office, may not be invalidated or altered without first obtaining an invalidation decision from the Patent Office. Therefore, an arbitration award declaring invalid a patent cannot be enforced in the absence of such decision from the Patent Office. There is no established rule or opinion on whether, in cases where the claimant requests an arbitration award to enjoin patent infringement and recover damages, the defendant can challenge the validity of the registered patent in question as a defense and whether the arbitrator can consider such defence as a reason for dismissing the claimants request. The authors of the Japanese report conclude that an arbitral award by itself cannot invalidate and cancel a registered intellectual property right but that the validity of such a right can be challenged by a party as a defence to an infringement claim and can be considered as a reason for dismissing claimants request (12).
In the Netherlands, the validity of a patent falls within the exclusive jurisdiction of the District Court of The Hague. However, a claim for damages resulting from patent infringement may be submitted to arbitration (13).
In Switzerland, the Federal Office of Intellectual Property published a decision according to which arbitral awards rendered in connection with the validity of intellectual property rights are recognized as a basis for the entries in the register. We will come back to this decision in the section dealing with Switzerland.
- All reports submitted to the IAPIP recognize that arbitration is possible in relation to a "patent license," although they admit that the arbitrators may have to, as a preliminary issue, first examine the validity of the patent in question.
1.10.3.2 Distinctive Signs
The reports submitted to the IAPIP show that arbitration is possible in connection with tradenames, emblems, signs, slogans, titles of books, magazines or newspapers and the unregistered use of trademarks. In respect of registered trademarks, the reports conclude that in principle such rights may be submitted to arbitration, but a decision in respect of validity and infringement will in many countries exert its effects only between the parties.
In France, it may reasonably be assumed that the situation will be dealt with in the same way as in the field of patents: an arbitrator may decide upon the validity of registered trademarks, but may not declare a French trademark invalid, since French public policy is directly concerned within the meaning of Article 2060 of the Civil Code.
In Japan, for example, where registered rights may not be invalidated or altered without first obtaining an invalidation decision from the Patent Office, what has been said in respect of patent rights equally applies to registered trademarks.
In Switzerland, the question of the validity of a registered trademark is dealt with in the same way as in respect to patents: the arbitral tribunal may validly decide on the validity of a registered trademark and the Federal Office of Intellectual Property will recognize the award as the basis for an entry in the register.
1.10.3.3 Copyright
The majority of reports submitted to the IAPIP indicate that copyrights are arbitrable. In such cases, the arbitral tribunal does not have to decide on the revocation of a title but has to examine whether the work complies with the criteria required to enjoy the benefit of protection. The Hungarian, Romanian, Italian, Israeli and Spanish reports express reservations about the possibility of arbitration in relation to copyrights.
1.10.3.4 Software and Integrated Circuits
Most reports submitted to the IAPIP revealed that protection was ensured by way of copyright rules whether directly or by analogy.
1.10.3.5 Know-How
Disputes arising out of the transfer or licenses of know-how, etc., are among the most common causes for arbitration and, as there is no need for entries in a public register, no particular problems arise.
1.11 Application of Foreign Rules Regarding the Question Whether Intellectual Property Disputes are Capable of Settlement by Arbitration?
1.11.1 Application of Foreign Mandatory Rules
1.11.1.1 The question arises whether, when determining the arbitrability of a dispute, arbitrators need to take into consideration foreign mandatory rules, i.e., provisions of the various, other domestic laws which may be involved in the arbitration in which the interest of the respective States is too important for them not to apply (14). These domestic laws include, in particular, the law governing the substantive contract, the law governing the agreement to arbitrate, the law of the country where the effects of the agreement of the parties might take place.
1.11.1.2 Among the mandatory rules of law most frequently encountered one can mention: competition laws, currency controls, environmental protection laws, measures of embargo, blockage, boycott, as well as laws falling in the category of legislation intended to protect parties presumed to be in an inferior bargaining position, such as employees or consumers (15).
1.11.1.3 At the domestic level, mandatory rules are often identified with domestic public policy (16).
1.11.1.4 In Switzerland, the Federal Supreme Court adopted on June 23, 1992, a very restrictive approach as to the application of foreign rules when determining the arbitrable character of a dispute (ATF 118 II 353 et seq). This decision will be discussed later.
1.11.1.5 At the international level the application of foreign mandatory rules by arbitrators to the substance of the dispute has given rise to many theories. They cannot, however, be followed as such with respect to arbitrability, which is a procedural and not a substantive matter.
1.11.1.6 The least restrictive approach should be upheld in this connection. More precisely one should favor the opinion that an arbitrator should not be concerned with foreign mandatory rules in the above meaning when determining whether a dispute is arbitrable or not.
1.11.1.7 This view has been adopted in particular in two ICC awards involving an arbitral tribunal having its seat in Switzerland.
1.11.1.8 The first award (rendered in 1984 in the ICC case No. 4604) (17) involved an Italian claimant and an American defendant. It dealt with the alleged nullity of a trademark license agreement submitted to Italian law both on the basis of Article 85 of the EC Treaty and Articles 1379 and 2596 of the Italian Civil Code. The arbitral tribunal excluded the application of the Italian mandatory rules. It stated in particular:
"The question of the arbitrability of a dispute shall not be determined by way of application of a foreign law, be it the law applicable to the merits of the dispute or another law designated by connecting factors which would appear more appropriate to the international character of the arbitration."(18)
The reasoning of this award was also approved by Mr. Yves Derains, in a note following the publication of this award.
1.11.1.9 The second award (ICC case No. 6162) of 1990 (19) involved a French claimant and an Egyptian defendant (Egyptian local authority). The main contract contained an arbitration clause providing for arbitration in Geneva under the ICC rules. It also provided that "Egyptian laws will be applicable." Defendant contended that the arbitrator had no jurisdiction as, under Egyptian law, the parties may only submit a dispute to arbitration if a legal provision expressly allows them to resort to arbitration.
Referring to Article 177(1) PIL, the arbitral tribunal refused to apply Egyptian law to determine the question of the arbitrability of the dispute.
1.11.2 Influence of Public Policy on the Issue of Arbitrability
1.11.2.1 On the domestic level, public policy consists of those mandatory rules which are considered as fundamental to a State.
On the international level, the notion of public policy is less restrictive in its approach. It refers in general to principles which a State can in no way renounce, although there is no general agreement on the definition of the term "international public policy."
1.11.2.2 As pointed out by Karl Heinz Böckstiegel: (20)
"Public policy in the context of international arbitration is normally considered from the basis of the New York Convention where it may be a defence against enforcement once the arbitral award is rendered. Thus the issue appears only in the very end of the arbitral procedure. Public policy in relation to arbitrability, however - although it may still be a defence against enforcement - concerns the very beginning and basis of arbitration, namely the arbitration agreement or arbitration clause" (emphasis added).
1.11.2.3 In international cases, arbitrability involves the balancing of competing policy considerations (21). The legislators and courts in each country must weigh the importance of reserving matters of public interest to the courts against the public interest in the encouragement of arbitration of commercial matters. Accordingly, at the international level, there are some matters which a State may consider as arbitrable while the same matters cannot be submitted to arbitration at the domestic level and might also not be considered arbitrable at all by other States. For example, Switzerland has various domestic laws protecting the weaker party and which are mandatory rules or public policy rules. When enacting the PIL, Switzerland renounced the application of these rules in the international context.
1.11.2.4 More generally, with the growing acceptance of arbitration, public policy limits to arbitrability tend to considerably lessen, at least in respect of international arbitration.
1.11.3 The Influence of Public Policy on the Issue of Arbitrability Before the Enforcement Judge
1.11.3.1 Public policy is normally considered especially in the light of the New York Convention as a defense against enforcement once the arbitral award has been rendered.
1.11.3.2 Since the contents of public policy differ from one national system of law to another it may well be that a subject matter which has been considered as arbitrable by the arbitrators applying the lex arbitri will be held not capable of settlement by arbitration by the judge who is called upon to enforce the award when applying his law.
1.11.3.3 According to Article V(2)(b) of the New York Convention:
"2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that:
... (b) the recognition or enforcement of the award would be contrary to the public policy of that country."
1.11.3.4 This means that the determination made by the arbitrators in respect of the arbitrability of the subject matter of the dispute may be challenged before the enforcement judge.
1.11.3.5 The question arises whether an arbitrator should be concerned with the effectiveness of his decision and whether in particular he should take into consideration the public policy of the States where enforcement and recognition of the award might be sought. There are numerous theories in this respect which cannot be discussed here. The Swiss Federal Supreme Court clearly answered this question by the negative (ATF 118 II 353, esp. 358).
1.12 Measures Which Can be Taken by the Arbitrators
The reports submitted to the General Reporter of the IAPIP show that five measures have been considered:
- all reports recognize that the arbitral tribunal may direct a party to "pay damages";
- the question whether the arbitrators can issue an "injunction" which may or may not be accompanied by a "financial penalty" for non-compliance (i.e., the payment of a certain sum of money as an incitement to comply with the injunction) has received different answers. In Denmark, Finland, Romania and Sweden, arbitrators are not empowered to issue such an injunction. In Belgium and Germany, the arbitral tribunal is empowered to issue an injunction but cannot accompany it by a penalty. In other countries, the arbitrators seem to be empowered to issue an injunction with penalty. This is in particular the case in France where, however, the enforcement of the penalty can only be sought from the court (Tribunal de Grande Instance); (22)
- an order for confiscation (i.e., the handing over or destruction of infringing items) cannot be validly made by arbitrators in Denmark, Finland and Sweden, whereas this is possible in Belgium, France and Great Britain;
- in many countries, the arbitral tribunal is empowered to issue a "provisional injunction." This is in particular the case in Switzerland, Germany, the Netherlands. The power seems to be denied in Japan;
- in some countries, arbitrators can order "publication" of the relevant parts of their award or "rectification" of an entry in a register.
1.13 Is the Lugano Convention Applicable to Arbitrability of Intellectual Property Matters?
Finally, this section should not be closed without mentioning that the Lugano Convention (23), which provides in Article 17 for an exclusive forum in intellectual property matters, does not apply to arbitration (24). Accordingly, no restrictions in respect of arbitrability are imposed on arbitrators by this Convention.
2. Arbitrability of Intellectual Property Disputes in Switzerland
2.1 Applicable Regulations
2.1.1 International and domestic arbitrations are governed by different rules:
- the Swiss Intercantonal Arbitration Convention of March 27, 1968, governs domestic arbitration (hereafter the "Concordat") in all Swiss Cantons (except Lucerne); and
- Chapter 12 of the Swiss Private International Law Act of December 18, 1987, contains the rules on international arbitration.
2.1.2 Chapter 12 PIL provides, at Article 176:
"The provisions of this chapter shall apply to any arbitration if the seat of the arbitral tribunal is in Switzerland and if, at the time when the arbitration agreement was concluded, at least one of the parties had neither its domicile nor its arbitral residence in Switzerland."
2.1.3 As an exception to the rule that domestic arbitration is governed by the Concordat and international arbitration is governed by Chapter 12 PIL, Article 176 para. 2 PIL allows the parties to an international arbitration to choose the Concordat instead of Chapter 12 PIL. In such a case, the parties must exclude in writing the application of Chapter 12 PIL and provide expressly that the Concordat shall apply to their arbitration. This rarely seems to occur.
2.1.4 The Swiss arbitration rules, both domestic and international, provide for the arbitrability of intellectual property disputes.
2.1.5 Article 5 Concordat governing domestic arbitration states:
"The arbitration may relate to any right of which the parties may freely dispose unless the suit falls within the exclusive jurisdiction of a State authority by virtue of a mandatory provision of the law."
2.1.6 According to Article 177 PIL:
"Any dispute involving property may be the subject matter of an arbitration."
2.1.7 Contrary to Article 5 Concordat, Article 177 PIL governs the question of arbitrability as a substantive rule of private international law. Hereafter, only Article 177 PIL will be examined as the Concordat is of little interest in international arbitrations.
2.1.8 According to Article 177 PIL any claim presenting a financial interest, whether direct or indirect is arbitrable.
2.2 Policy in Switzerland in Respect of Arbitrability of Intellectual Property Disputes
2.2.1 Arbitration in respect of intellectual property disputes has always been recognized in Switzerland. In 1945, the Federal Supreme Court already decided that the jurisdiction reserved to the State courts as per Article 76 of the Federal law on patents - in respect of all civil suits provided for in that law - was not exclusive.
2.2.2 In spite of the decision of the Supreme Court, it was only in 1975 that the Federal Office of Intellectual Property held that arbitral tribunals are empowered to decide on the validity of patents, trademarks and designs (25) Awards rendered in connection with the validity of intellectual property rights are recognized as the basis for entries in the register, provided these awards are accompanied by a certificate of enforceability issued by the Swiss court at the seat of the arbitral tribunal in accordance with Article 193 para. 2 PIL. It should be noted that this certificate does not involve a review of the merits of the award.
2.3 Main Swiss Laws Relating to Intellectual Property
The following laws in particular relate to intellectual property: (26)
1. The Federal law on patents dated June 25, 1954
2. The Federal law on trademarks of August 28, 1992 -| industrial
3. The Federal law on designs and models of March 30, 1900 - property
4. The Federal law on plant varieties of March 20, 1975
5. The Federal law on public emblems and signs of June 5, 1931
6. The Federal law on copyright and on neighboring rights - literary of October 9, 1992 - and artistic
7. The Federal law on topography of semi-conductor products of property October 9, 1992
8. The Federal law on unfair competition, December 19, 1986 - competition
2.4 Case Law of the Swiss Federal Supreme Court in Respect of Arbitrability
2.4.1 The main decision of the Federal Supreme Court on the issue of arbitrability in international matters was rendered on June 23, 1992, in the matter Fincantieri - Cantieri Navali Italiani SpA and Oto Melara S.p.A. v. M. and Tribunal arbitral (ATF 118 II 353 et seq.) (27). The dispute involved, on the one hand, two Italian companies which had been nationalized (respondents in the arbitration proceedings and claimants before the Federal Supreme Court). These companies were specialized in the production of war material. In 1979 and 1980 they engaged M to act as intermediary ("agent") for the sale of boats and other military equipment to Iraq. Until 1987 the agreements concluded with this State, as well as the agency agreement, were performed regularly. Thereafter difficulties occurred, as Iraq ceased its payments. The agent M introduced arbitration proceedings against the two Italian companies in order to obtain the payment of certain commissions for his work. The agreement provided for arbitration in Geneva, Switzerland. Referring to the resolutions adopted in 1991 by the Security Council of the United Nations prohibiting any commercial activity with the Republic of Iraq and which became binding law in Italy and Switzerland, the two Italian companies raised the defense that the arbitral tribunal did not have jurisdiction because the matter was non-arbitrable. The arbitral tribunal held in an partial award that it had jurisdiction over the matter. The two Italian companies brought the matter before the Federal Supreme Court in setting aside procedures invoking Article 190 para. 2(b) PIL (lack of jurisdiction of the arbitral tribunal) and requested the Federal Court to annul the partial award. The Italian companies contended in particular that arbitrability of the claim should not be admitted as such admission would constitute a violation of the applicable public policy ("ordre public déterminant").
2.4.2 The Federal Supreme Court stated that the arbitrability of the case does not depend on the material existence of the claim. Accordingly, arbitrability cannot be denied for the sole reason that, as a consequence of the application of mandatory rules or substantive provisions of public policy, a claim is deemed null or cannot be enforced. Arbitrability could only be denied in respect of claims which are reserved to the exclusive jurisdiction of a foreign authority by provisions whose application is required by public policy in accordance with Swiss legal understanding.
2.4.3 The Federal Supreme Court further expressly stated that, in adopting a substantive rule to govern arbitrability, the legislator knowingly opted for a solution which does not exclude that an award rendered in Switzerland will not be enforced in a foreign State. The legislator, continued the Federal Supreme Court, left knowingly the parties to be the sole judges of the risk they run arising out of the possible non-recognition of the arbitral award.
2.4.4 Accordingly, a restriction of the general rule of Article 177 PIL could only be envisaged on the basis of a double condition, i.e., by reference to public policy and by the fact that this public policy imperatively requires the application of the foreign law which contains such a rule of non-arbitrability.
2.4.5 In a note regarding this decision of the Federal Supreme Court, François Knoepfler observed that one can seriously doubt whether there exist situations where arbitrability, as defined by Swiss law, may be denied by reference to a foreign law (28). Knoepfler concludes from the holding of the Federal Supreme Court, according to which the question of the enforcement of an arbitral award is not a fundamental element to be taken into account by arbitrators in Switzerland, that the definition of arbitrability contained in Article 177 PIL is for all practical purposes not subject to any restrictions (29).
2.5 Conclusion
As a conclusion to this section one can state that all aspects of intellectual property rights are arbitrable in Switzerland without restriction and that arbitrators shall not take into consideration any restriction of the notion of arbitrability as defined in Article 177 PIL.
3. International Arbitration and Competition (Antitrust) Law Questions
3.1 Respective Purpose of Intellectual Property Rights and of Antitrust Law
Intellectual property rights and antitrust law show common features and reflect the conflict of public policies: on the one hand, the State creates monopolies by granting exclusive rights; on the other hand, it enacts legislation to fight against monopolies and abusive positions in the market.
3.2 Arbitrability and Competition Law
3.2.1 According to a 1993 study on Competition and Arbitration Law conducted by the Institute of International Business Law and Practice of the ICC Court of Arbitration (30), only three countries out of the 21 examined had statutory provisions relating specifically to the submission to arbitration of disputes relating to competition, namely Austria, Germany and Switzerland.
3.2.2 Article 18 of the Swiss Federal Law on cartels and similar organizations does not prohibit the conclusion of an arbitration agreement in relation to cartels but merely states that in connection with domestic arbitrations a party to a cartel or a similar organization cannot in advance waive its right to bring legal actions regarding such a cartel before a State court. However, this restriction does not apply if non-Swiss parties are involved and such agreements may therefore provide for international arbitration.
3.2.3 Most national systems of law which were examined in this study have a liberal attitude towards arbitration.
3.2.4 The criteria used in determining whether an issue is arbitrable are either: (a) the parties are free to dispose of their rights as in Germany, Spain, Italy, Portugal, Belgium, the Netherlands, the United States and Switzerland (in relation to domestic arbitration), or (b) the dispute relates to property rights, e.g., in Argentina and Poland, as well as in Switzerland (in relation to international arbitration) (31). Only a small number of States prohibit arbitration in relation to any matter involving public policy, as e.g., France based on Article 2060 of its Civil Code. But in respect of France, we shall see that a very recent decision allows arbitrators, at least in international matters, to apply the rules of public policy and also to sanction violations of public policy in so far as these sanctions are not incompatible with the nature of arbitrators powers (32).
3.2.5 The report further shows that two major systems of competition law can be identified: those based on prohibition of anti-competitive practices (United States, Germany, France, European Community, Spain, Greece and Portugal) and those based on the control of abuses (Belgium, Sweden, Poland, Switzerland, for example) (33).
3.2.6 In relation to the second system, where competition law is based on the control of abuses, one type of national law attributes jurisdiction to a specialized State authority to decide whether there exists an abuse (Belgium and Sweden). In such a case, an arbitrator may only become involved if an abuse has been held by the specialized authority to exist. Another type of national law reserves also the identification of an abuse to civil courts, as in Switzerland, in which case arbitrators will have the same powers as the civil courts, namely to decide whether a constraint upon competition is lawful or not, to prohibit such a constraint and to order the person responsible to repair the damage caused (34).
3.3 Law Applicable to Arbitrability in the Field of Competition
3.3.1 The issue of the law applicable to arbitrability in the field of competition was addressed in some detail by Berthold Goldman at a conference organized by the Swiss Arbitration Association in 1989 (35).
3.3.2 According to Mr. Goldman, from among the various municipal systems of law which may be taken into consideration in this connection, the positive law which is the most appropriate law is the competition law whose application is claimed by one party or the other (36).
3.4 Swiss Cases Regarding Arbitrability of Competition Matters
3.4.1 The basic Swiss case in respect of arbitrability of competition matters is the Ampaglas case (37). In a decision rendered in 1975, the Court of Appeal of the cantonal tribunal of Vaud dismissed an action to set aside an award made by an arbitrator acting as amiable compositeur who, while refusing to set aside the patent license agreement on the basis of Article 85(1) of the EC Treaty, invalidated a clause of the contract whereby the parties had agreed not to question the validity of certain patents under the law of Luxembourg, which applied to the substance of the dispute. The party seeking the setting aside of the award had requested the arbitrator to stay the arbitration in order to submit to the Court of Justice of the European Community the question of compliance of the contract with Article 85(1) and to notify the contract to the European Commission. The arbitrator decided that the request has been made late and was of a dilatory nature and that, pursuant to a Commission Communication dated May 27, 1970, concerning agreements of minor importance, Article 85(1) was not applicable to the agreement.
In this decision, the Appeal Court of the cantonal tribunal of the Canton of Vaud stated in an obiter dictum:
"Let us point out, however, that at first sight, we cannot see why a dispute as to whether a contract or contractual provision is void or voidable cannot be submitted to arbitrators, even if one or the other party invokes a ground drawn from a mandatory legal provision. A distinction should be drawn between the subject matter of the arbitration over which the parties are free to exercise their rights, and the legal rules which are applicable to the resolution of the dispute."
3.4.2 In a decision of April 28, 1992, published in ATF 118 II 193, involving an international arbitration having its seat in Switzerland, the Federal Supreme Court held that arbitrators sitting in Switzerland are obliged to decide whether the contract is valid under Article 85 of the EC Treaty if such a determination has to be made in order for them to be able to decide the case.
The Federal Supreme Court held in particular:
"Neither Article 85 of the Treaty, nor Regulation No. 17 on its application forbids a national court or an arbitral tribunal that has been seized with a case which has as its object the settling of accounts between parties in relation to the performance or the non-performance of a contract from examining the validity of said contract. In this respect, the risk of contradictory decisions is not a determining factor nor is the risk that the enforcement authority will not grant an exequatur. It is essential that arbitrators examine the conformity with Community regulations of the contracts that have been submitted to them, so as to avoid the making of decisions which would be contrary to these regulations. Thus, the arbitral tribunal could not make its award without having first examined whether the agreement between the parties was valid." (p. 198).
3.5 Situation in the United States
In the United States the decisive step was made by the Federal Supreme Court of the United States in the Mitsubishi case of July 2, 1985 (38). Prior to this decision, it was considered that claims based on the Sherman Act were not arbitrable. In the Mitsubishi case, the Supreme Court admitted that a dispute relating to an international agreement governed by Swiss law and involving the application of the Sherman Act was arbitrable.
3.6 Situation in France
3.6.1 In France, a recent case clarified the situation in respect of arbitrability involving competition law matters.
3.6.2 Article 2060 of the French Civil Code excludes from arbitration "all matters in the realm of public policy." The restrictions upon arbitrability imposed by Article 2060 have slowly disappeared as case law of the French Courts developed. The last step, in this respect, was made in a decision of the Court of Appeal of Paris of May 19, 1993, in the matter Société Labinal v. Sociétés Mors and Westland Aerospace (39).
3.6.3 This decision states that arbitrability in international arbitration cases is not excluded for the sole reason that provisions of public policy apply to the disputed legal relationship and goes on to allow arbitrators to make a determination on the validity or the invalidity of the agreement and to order the appropriate sanctions.
3.6.4 Charles Jarrosson, Professor at the University of Paris V, observes in connection with this decision that arbitrators proceed in two steps. First, they examine whether they have jurisdiction in respect of the arbitrability of the dispute in the light of international public policy. If jurisdiction has been established, arbitrators apply these public policy rules and may be led to order the appropriate sanctions (40).
3.7 Conclusion
The field of competition acutely highlights the general tendency of the States to reduce, or even abolish, public policy limits to arbitrability in international arbitration.
Notes
1. See in this connection, in particular, Alan Redfern and Martin Hunter, Law and Practice of International Commercial Arbitration, Second Edition, London, 1991, p. 70 et seq. and also Klaus Peter Berger, International Economic Arbitration, Studies in Transnational Economic Law, Deventer, Boston, 1993, p. 477 et seq.
2. See in particular Klaus Peter Berger, op. cit., pp. 478 and 479.
3. E.g., Article VI(2) of the European Convention on International Commercial Arbitration of 1961, Article V(2)(a) of the New York Convention of June 19, 1958, on the Recognition and Enforcement of Foreign Arbitral Awards, Article 1(2)(b) of the Geneva Convention of September 26, 1927, regarding the Enforcement of Foreign Arbitral Awards.
4. E.g., Article 1 of the UNCITRAL Model Law on International Commercial Arbitration of June 21, 1985.
5. See Karl H.-Heinz Böckstiegel, "Public Policy and Arbitrability in Comparative Arbitration Practice and Public Policy in Arbitration," in ICCA New York Arbitration Congress 1986, at p. 184, together with the references.
6. See Article 10bis of the Paris Convention for the Protection of Industrial Property of 1983, as amended in 1979.
9. Article 2059 of the Civil Code states: "Any person may submit to arbitration those rights to which he is fully entitled."
Article 2060 of the French Civil Code states: "One may not submit to arbitration questions relating to the civil status and capacity of persons, or those relating to divorce or to judicial separation or disputes concerning public collectivities and public establishments and more generally in all areas which concern public policy. However, categories of public establishment of an industrial and commercial nature may be authorized by decree to submit to arbitration."
10. Decision of the Cour dAppel de Paris of February 3, 1992, published in: "Propriété Intellectuelle Bull. Documentaire de lIRPI" 1992, III, 359; see also comment of J.-C. Dubarry and E. Loquin in Revue Trimestrielle de Droit Commercial 46(2) April-June 1993, p. 293 et seq.
11. In particular, IAPIP Yearbook 1991/VI, p. 11.
13. International Handbook on Commercial Arbitration, op. cit., Volume II, Report on The Netherlands, Deventer, Boston, p. 7 at 3(f).
14. See Yves Derains, "Possible Conflicts of Laws Rules Applicable to the Substance of the Dispute," in: UNCITRALs Project for a Model Law on International Commercial Arbitration, ICCA Congress, Series N.2, Deventer, 1984, p. 169 et seq. esp. p. 179.
15. See Pierre Mayer, "Mandatory Rules of Law in International Arbitration," in: Arbitration International, 1986, p. 274 et seq., esp. p. 275.
16. Ibid.; see also Pierre Lalive, "Transnational (or truly international) Public Policy in International Arbitration," in: Comparative Arbitration Practice and Public Policy in Arbitration, ICCA Congress Series N.3, Deventer, 1986, p. 257 et seq., esp. p. 260.
17. Published in Clunet (Journal de droit international) 1985, p. 973 et seq.
19. Yearbook of Commercial Arbitration No. XVII (1992), p. 153 et seq.
20. "Public Policy and Arbitrability," in: Comparative Arbitration Practice and Public Policy in Arbitration, ICC A Congress Theory No.3, VIIIth International Arbitration Congress New York, May 6-9, 1986, Deventer-Antwerp-London-Frankfurt-Boston-New York, 1987, p. 177 et seq., esp. p. 178.
21. Alan Redfern and Martin Hunter, op. cit. p. 137.
22. Decisions of the Cour dAppel de Paris of May 24, 1991, and of October 11, 1991, Revue de lArbitrage 1992, p. 636 et seq.; see also note of Jean-Claude Dubarry and Eric Loquin in Revue Trimestrielle de Droit Commercial 46(2), April-June 1993, pp. 296-297.
23. The complete name of this Convention is: "Convention on jurisdiction and the enforcement of judgments in civil and commercial matters".
This Convention is intended to solve the issues related to the territorial jurisdiction of the courts of the Contracting States when a dispute arises in civil and commercial matters. The Lugano Convention is based on the Brussels Convention and is intended to bind the EC countries as well as the EFTA countries on the same basis as the Brussels Convention.
As of March 24, 1994, the following countries are bound by this Convention:
- Finland
- France
- Great Britain
- Italy
- Ireland
- Luxembourg
- The Netherlands
- Norway
- Portugal
- Sweden
- Switzerland
24. Article 16 provides as follows: "The following courts shall have jurisdiction, regardless of domicile: ... in proceedings concerned with the registration of validity of patents, trade marks, designs or other similar rights required to be deposited or registered, the court of the Contracting State in which the deposit or registration has been applied for, has taken place or is under the terms of an international convention deemed to have taken place."
25. Decision of December 15, 1975, published in the Swiss Review of Industrial Property and Copyright of 1976, pp. 36-38 (in German: Schweizerische Mitteilungen über gewerblichen Rechtsschutz und Urheberrecht, in French: Revue Suisse de la Propriété Industrielle et du Droit dAuteur). The name of this review was changed in 1985 to Swiss Review of Intellectual Property (in German: Schweizerische Mitteilungen über Immaterialgüterrecht, in French: Revue Suisse de Propriété Intellectuelle). This decision has also been published in Feuille Suisse des Brevets, Dessins et Marques, 1976 I 9-10.
26. These laws have been published in the "systematic" official collection of Swiss Federal Laws as follows:
1. AS/RS 232.14
2. AS/RS 232.11
3. AS/RS 232.12
4. AS/RS 232.116
5. AS/RS 232.2.1
6. AS/RS 232.1
7. AS/RS 232.2
8. AS/RS 241
"AS" stands for "systematische Sammlung des Bundesrechts" (in German) and "RS" stands for "Recueil systématique du droit fédéral" (in French).
27. Also published in Semaine Judiciaire 1993, p. 2 et seq, and in Revue de lArbitrage 1993 N.4 p. 691 et seq followed by a note by François Knoepfler.
28. See Revue de lArbitrage 1993 N.4 p. 695 et seq, p. 703.
30. Competition and Arbitration Law, ICC Dossier of the Institute of International Business Law and Practice, Publication No 480/3, 1993, especially Introductory report by Laurence Idot (Professor at the University of Paris V), N.22-24, pp. 47 and 48. This publication shall be referred to hereafter as the "ICC Dossier No.480/3."
31. Laurence Idot, Introductory Report, ICC Dossier No. 480/3, N.28, p. 49 (see Note 27).
32. Decision of the Cour dAppel de Paris of 19 mai 1993, Société Labinal v. Sociétés Mors & Westland Aerospace, published in Revue de lArbitrage 1993, N.4, p.645 et seq. This decision is followed by a Note of Charles Jarrosson.
33. Laurence Idot, Introductory Report, ICC Dossier No. 480/3, N.18 et seq., pp. 46-47.
35. Berthold Goldman, "LArbitrage international et le droit de la concurrence," Bull. ASA 1989 N.3, p. 260 et seq., especially p. 280 et seq. (conference of May 29, 1989).
36. op. cit. p. 282 (the author favors the application of the substantive transnational law in this connection, see p. 283).
37. Chambre de Recours of the Tribunal Cantonal of the Canton of Vaud, Decision of October 28, 1975, Ampaglas S.p.A. v. Sofia SA commented in Journal des Tribunaux (JT) 1981 III pp. 71-72.
38. 473 US 614 (1985). See also Journal of International Arbitration 1985, 69.
40. Note following the decision of the Court of Appeal of Paris in Revue de lArbitrage 1993, p. 653 et seq, especially pp. 656 and 657.
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