Opinion ID: 788225
Heading Depth: 3
Heading Rank: 2

Heading: Swiss Law

Text: 45 After oral argument, we requested supplemental briefing from the parties on various points of Swiss law and invited the parties to submit statements from experts. Plaintiffs submitted a Joint Declaration of Dr. Pierre Karrer, Dr. Franz Kellerhals, and Dr. Beat Denzler (the Karrer Declaration), while defendants submitted an Affidavit of Dr. Phillipe Schweizer (the Schweizer Affidavit). All of these experts are highly credentialed Swiss lawyers who have substantial experience with arbitration law. 46 Having reviewed these statements and their supporting authorities, we conclude that under Swiss law, defendants, as nonsignatories to the agreements, may not invoke the arbitration clauses contained in those agreements. 47 The Karrer Declaration, submitted by plaintiffs, concludes that under Swiss law, a director, shareholder or employee of Telsim, or any other third party, would not be permitted to invoke the arbitration clause in the Finance Agreements. Karrer Decl. ¶ 16. Plaintiffs' experts admit that there are exceptions to this doctrine: where the nonsignatory is a successor in interest to a signatory, id. ¶¶ 18-20, or where the nonsignatory is willing to arbitrate. Id. ¶ 21. They cite a decision of the Swiss Federal Tribunal (the highest court in Switzerland), which provides, in relevant part: [I]n principle an arbitration clause is binding only on those parties which have entered into a contractual agreement to submit to arbitration, whether directly or indirectly through their representatives. Exceptions to this rule arise in cases of legal succession, retroactive approval of an arbitration clause or attempts to pierce the corporate veil of a legal entity in the case of abusive objections to the clause. 48 See Swiss Federal Tribunal, decision of May 19, 2003, 4C.40/2003, No. 4.1, appended to Karrer Declaration. 9 49 Plaintiffs' experts state that [t]here is no Swiss authority where a Non-Signatory has even tried to compel/invoke arbitration against a Signatory .... Karrer Decl. ¶ 26. Defendants' expert, Dr. Phillipe Schweizer, does not reach any contrary conclusion. He reviews five decisions of the Swiss Federal Tribunal, each of which addresses attempts by a signatory to invoke an arbitration clause against a nonsignatory. Schweizer Aff. 3-5. The rule that emerges from these cases, and the declarations offered by the experts of both sides, is that a nonsignatory may be required to arbitrate in certain circumstances where it acts in bad faith. As Schweizer summarizes, [a] person who adopts a certain mode of behavior, which clearly reflects his objective intentions, recognizable as such by his contractual partners and by third parties, may not, as a rule, subsequently avail himself of the fact that the perceptions he has created do not correspond to his true intentions .... Id. at 6. Schweizer describes this as the principle of good faith. 10 Id. 50 Schweizer has offered no authority in which a nonsignatory has attempted to invoke an arbitration clause, much less succeeded in doing so. Moreover, it is noteworthy that Schweizer does not directly conclude that defendants could invoke the arbitration clauses in this case. He concludes, referring to the non-signatory natural and legal persons here—that is, defendants—that it is difficult to imagine an arbitral tribunal convened in Switzerland, declining jurisdiction with regard to these same persons, supposing that they challenged the jurisdiction of an arbitral tribunal over them. Schweizer Aff. 5-6. In other words, a Swiss arbitral tribunal would not decline jurisdiction over defendants, if defendants were to challenge the tribunal's jurisdiction in an arbitration brought by plaintiffs. 51 Defendants argue that the decisions cited by Schweizer—which address whether a signatory can invoke an arbitration clause against a nonsignatory—imply that a nonsignatory can likewise invoke an arbitration clause against a signatory. See Defs.' Supp. Br. at 22-23 (referring to the issue of whether a signatory could compel a nonsignatory to arbitrate as a more difficult issue than that presented here). These decisions, however, do not support defendants' conclusion. First, and rather conspicuously, defendants' expert does not draw such a conclusion about Swiss law. Second, the rationale underlying the decisions—which Schweizer describes as the principle of good faith—does not require plaintiffs to arbitrate in the instant case. There is no evidence that plaintiffs acted in bad faith or in any way manifested an intent to enter into a contract with the Uzans as individuals. In contrast, the District Court's opinion is replete with findings that defendants repeatedly acted in bad faith. See, e.g., Uzan II, 274 F.Supp.2d at 505 (applying the doctrine of unclean hands to bar defendants from equitable relief). In these circumstances, defendants have no basis for invoking a principle of good faith. 52 In sum, even accepting Schweizer's affidavit at face value, it does not materially advance defendants' position. 53 We therefore conclude that under Swiss law, which governs the agreements at issue, defendants, as nonsignatories, have no right to invoke those agreements. We accordingly affirm the District Court's denial of defendants' motion to compel arbitration. 11 54