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Swiss Federal Supreme Court Upholds USD 104 Million Award in Clorox v. Venezuela Case
Background:
On April 26, 2024, the Swiss Federal Supreme Court (SFSC) rendered a landmark decision (4A_486/2023) affirming the Final Award in the case of Clorox Spain S.L. v. Bolivarian Republic of Venezuela (PCA Case No. 2015-30). The arbitration stemmed from Clorox's claims of expropriation and unfair treatment by Venezuela, citing price controls, currency restrictions, and nationalization of assets. The Geneva-seated tribunal, comprising Yves Derains, Raúl Vinuesa, and Bernard R. Hanotiau, awarded Clorox approximately USD 104 million for Venezuela's creeping indirect expropriation under the bilateral investment treaty (BIT) between Spain and Venezuela.
SFSC’s Decision on the Set-Aside Action:
The SFSC’s decision delineates the stringent procedural requirements for setting aside international arbitration awards in Switzerland. Requests must be based on specific grounds listed in Article 190(2) of the Swiss Private International Law Act (PILA). The appellant must present precise arguments justifying the set-aside directly in their brief, as general criticisms are inadmissible. In this case, Venezuela's set-aside action partly failed due to procedural shortcomings. Venezuela attempted to rewrite the facts and referenced arbitration file pleadings without raising specific objections against the facts as stated in the award. Consequently, the SFSC did not consider these alleged facts.
Public Policy Considerations:
Venezuela argued that the award contravened public policy (Article 190(2)(e) PILA). The SFSC reiterated its stance that public policy encompasses fundamental principles essential to the legal order. An arbitration award violates substantive public policy only if it contradicts these core principles to an extent that it is incompatible with the legal system. Venezuela's contention that Clorox's loss of control over its investment was unproven and that the tribunal's factual findings were erroneous did not meet the high threshold for a public policy violation. The SFSC emphasized that it is not an appellate court and cannot re-examine the case facts or the arbitral tribunal's application of substantive law.
Historical Context and Implications:
This decision marks the third set-aside action in the Clorox v. Venezuela arbitration. The SFSC had previously set aside a jurisdictional award in March 2020, remanding the case to the tribunal. In May 2022, the SFSC upheld the tribunal's new jurisdictional award, allowing the case to proceed to merits. The latest decision confirms the Final Award and demonstrates the SFSC's limited scope in reviewing arbitration awards on the merits.
Conclusion:
The SFSC's dismissal of Venezuela's set-aside action underscores Switzerland’s pro-arbitration stance and the high threshold for challenging arbitration awards on public policy grounds. This decision reaffirms Switzerland's position as a reliable and efficient arbitration jurisdiction. The Clorox v. Venezuela case highlights the SFSC's consistent approach to upholding arbitral tribunal decisions unless substantial procedural or fundamental legal principles are violated.
- The SFSC’s decision delineates the stringent procedural requirements for setting aside international arbitration awards in Switzerland.
- An arbitration award violates substantive public policy only if it contradicts these core principles to an extent that it is incompatible with the legal system.
- The latest decision confirms the Final Award and demonstrates the SFSC's limited scope in reviewing arbitration awards on the merits
