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Part I: International Commercial Arbitration, Chapter 6:
Publication Pathological Arbitration Clauses: Another Lawyers'
International Arbitration and Nightmare Comes True
International Commercial Daniel Girsberger; Pascal J. Ruch
Law: Synergy, Convergence
and Evolution (★)

1 Introduction
Bibliographic reference Drafting good arbitration clauses is not an easy task: When entering into an arbitration
Daniel Girsberger and Pascal agreement, the parties should strive to express their consent in a precise manner with regard
J. Ruch, 'Part I: International to its essential elements, so as to leave as little ground as possible for ambiguity or alternative
Commercial Arbitration, interpretations, and to ensure the validity of the arbitration agreement. Nevertheless, as the
Chapter 6: Pathological following analysis will demonstrate, it often happens that arbitration agreements do contain
Arbitration Clauses: Another one or even several defects which may put the arbitration at risk (so-called ‘pathological’ or
Lawyers' Nightmare Comes ‘defective’ clauses). (1) The pathology of such clauses can have various causes: The chosen
True', in Stefan Michael Kroll dispute resolution mechanism may be unclear as to whether arbitration or court litigation is
, Loukas A. Mistelis , et al. favoured, the reference to an arbitration institution may be totally incorrect or inaccurate, the
(eds), International parties may have chosen several sets of arbitration rules at the same time, and so forth. (2) The
Arbitration and International following analysis of an actual case will show how burdensome the recourse to dispute
Commercial Law: Synergy, P 123 resolution can be for the party seeking an efficient resolution of its dispute, and how such
Convergence and Evolution, P 124 burdens may best be avoided. Most probably, many of the thousands of Willem C. Vis alumni
(© Kluwer Law International; who, thanks to Eric Bergsten, have acquired great knowledge on international commercial
Kluwer Law International arbitration, will be among those avoiding such problems now and in the future.
2011) pp. 123 - 139
2 A Prime Example of a Pathological Arbitration Clause and its
Consequences
2.1 Background of the Case
In early 2008, an Asset Management Facilitation Agreement (AMFA) was concluded between the
Swiss company X. Holding AG and Y. Investments N.V., a company domiciled in Curaçao (then
Netherlands Antilles). The agreement contained the following clause:
In the event of disputes concerning any aspect of the Agreement, including claim of breach,
remedy shall first be sought by communication between the parties. If such communication
fails to resolve the dispute then the parties agree in advance to have the dispute submitted to
binding arbitration through The American Arbitration Association or to any other U.S. court. (3)
The prevailing party shall be entitled to attorney's fees and costs. The arbitration may be
entered as a judgement in any court of competent jurisdiction. The arbitration shall be
conducted based upon the Rules and Regulations of the International Chamber of Commerce
(ICC 500).
The clause followed the heading ‘Arbitration’, however the contract specified that headings
were not part of the agreement and should not be U.S.ed in its interpretation.

2.2 Proceedings before the AAA

Only weeks after the conclusion of the AMFA, the parties came into conflict with each other
about the validity and the content of the agreement. In October 2008, X. Holding AG tried to
initiate arbitration proceedings before the American Arbitration Association (AAA). However,
the AAA's International Centre for Dispute Resolution (ICDR) found that the demand for
arbitration was unenforceable because of an indissoluble conflict of institutions. It held that
the referral to the rules of the ICC was not compatible with AAA arbitration.
P 124
P 125
2.3 State Court Proceedings in the U.S.
Although Y. Investments N.V. had already initiated proceedings before the Swiss state courts, X.
Holding AG in December 2008 filed a petition to compel arbitration according to § 4 of the U.S.
Federal Arbitration Act (FAA) (4) before the U.S. District Court for the Southern District of New
York (SDNY). The district court denied the petition in April 2009. It did not contradict the
finding of the AAA that the dispute could not be arbitrated before that institution. However, the
court rather focused on the interpretation of the second part of the disputed sentence ‘… or to
any other U.S. court’. It came to the conclusion that there was no enforceable agreement to
arbitrate, as this wording of the clause would clearly refer to a judicial court in the U.S.
On appeal by X. Holding AG, the U.S. Court of Appeals for the Second Circuit vacated the
aforementioned judgment in October 2009 and remanded the case to the district court for

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 further proceedings. In general terms, the court stated that despite the strong federal policy
favouring arbitration, parties could only be compelled to arbitration if an enforceable
agreement to arbitrate in the sense of a meeting of minds could be established by way of
ordinary contract interpretation. It then applied the rules of contract interpretation of New
York law to the agreement and came to the conclusion that the term ‘… or any other U.S. court’
was ambiguous, (5) as on the one hand the U.S.e of the word ‘other’ implied a connection
between ‘The American Arbitration Association’ and ‘any other U.S. court’ while on the other
P 125 hand a ‘US court’ is not necessarily an arbitral court. (6) The Court found that where a clause is
P 126 identified to be ambiguous, the fact finder should interpret the terms in light of the
apparent purpose of the contract as a whole, the rules of contract construction and extrinsic
evidence of intent and meaning. Hence, the case was remanded to the district court which in
turn ordered a procedure for the taking of evidence.

2.4 State Court Proceedings in Switzerland

As early as in August 2008, Y. Investments N.V. initiated a civil action in the Court of First
Instance (Kantonsgericht) for the Canton of Zug, Switzerland, where X. Holding AG has its
corporate domicile in accordance with its statutory charter. Unsurprisingly, X. Holding AG duly
raised the arbitration exception, in conformity with its action for performance in the United
States. The Zug court issued a decision in December 2009, i.e. after the above mentioned Order
of the U.S. Court of Appeals was rendered. (7) It held that the general principles for the
interpretation of pathological arbitration clauses as established by the Swiss Federal Tribunal
should be applied in this context: (8) Pursuant to the Federal Tribunal, even pathological
arbitration clauses, i.e. clauses which are either incomplete, ambiguous or contradictory,
should be considered enforceable as long as a will of the parties to resort to arbitration can be
established and a reasonable interpretation can be found (principle of utility). (9) For the
remaining part, under Swiss law, arbitration agreements are in principle to be interpreted
pursuant to the general rules of contract interpretation. Hence, the contract terms are to be
interpreted according to the actual common intent of the parties. If no such common intent
can be established, the principle of good faith applies, pursuant to which any declaration of
intent is to be interpreted in a way that would be reasonably understood by the addressee in
good faith. (10) In the present case, the Zug court held that no actual common intent of the
parties could be established. In particular, it considered that the clause was ambiguous as it
referred to arbitration on the one hand and to ‘any other U.S. court’, i.e. to a state court, on the
other hand. Apart from these considerations, the Zug court found that the arbitration clause
P 126 was irremediably pathological and therefore held it unenforceable in view of the indissoluble
P 127 conflict of institutions. Moreover, as the clause referred explicitly to the AAA on the one
hand and to the procedural rules of the ICC on the other hand, the court dismissed the
arbitration exception.
On appeal by X. Holding AG, the Court of Appeals (Obergericht) for the Canton of Zug upheld the
decision of the lower court. It concentrated on the interpretation of the wording ‘to binding
arbitration through The American Arbitration Association or to any other U.S. court’, holding
that neither from a general language U.S.e nor from the overall context could it be inferred
that ‘any other U.S. court’ would refer to an arbitral court, at least not exclusively. The Zug
appellate court compared this conflict to the phrase ‘a mammal or any other animal’ in which
the term ‘animal’ cannot be limited to mammals either. Additionally, the court, albeit in an
obiter dictum, considered it doubtful that the denomination of any arbitral court in the U.S.
could constitute a sufficiently defined seat of the arbitration. (11) Other than the Zug court of
first instance, the Zug appellate court did not put much emphasis on the conflict of institutions
as it considered this question irrelevant, because it had already established that there was no
valid arbitration clause in the first place.
On 25 October 2010, the Swiss Federal Tribunal confirmed the decisions of the Zug courts by
dismissing a recourse lodged by X. Holding AG. (12) It concluded that the clause in question did
not contain an unambiguous exclusion of the state court system, as there was no clear
indication that ‘to any other U.S. court’ would necessarily refer to arbitration, which, according
to the Federal Tribunal, would have been the case if the parties had U.S.ed the wording ‘US
arbitral court’ instead. The Federal Tribunal also rejected the subsidiary argument by X.
Holding AG that the reference to ‘any other U.S. court’ may be viewed as a mere confirmation of
the competence of a state court under the FAA to issue an order to compel arbitration (§ 4 FAA)
or to appoint the arbitrators (§ 5 FAA) for the event that one of the parties would fail to accept
arbitration as the appropriate means of resolving the dispute. The Federal Tribunal did not
determine the issue whether the clause had to be considered incurably pathological, but
nevertheless stated in a dictum that even assuming that it had been the wish of the parties to
P 127 resort to arbitration, it would be impossible to determine which arbitral tribunal would be
P 128 competent to deal with the dispute.

3 Analysis of the Outcome from a Swiss Perspective

3.1 General Observations
This case vividly demonstrates the detrimental consequences which may arise if an arbitration
agreement, for whatever reason, is poorly drafted. An ambiguous, incomplete or pathological
arbitration clause can lead to parallel proceedings before arbitral tribunals, arbitral
institutions and state courts in different countries, at worst with contradictory outcomes. The

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 traditionally perceived advantages of arbitration, such as confidentiality, faster proceedings
and lower costs in comparison to multi-instance state court proceedings are taken to the
absurd, which in turn can pave the way for dilatory tactics. In the present case, the court
judgments are not yet final at the time of this writing. More courts may have their say on the
matter with hardly predictable, possibly even conflicting outcomes. In this regard, not only the
unequal legal bases within the respective jurisdictions are determining factors, but also
different perspectives of the courts. In the case at hand, the Swiss courts were dealing
primarily with a civil action, while the arbitration exception was more of a sideshow on the
level of competence. The U.S. procedure however solely dealt with the question of the validity
of the arbitration agreement.

3.2 Principles on the Validity of (Presumed) Arbitration Clauses

In the case at hand, the Swiss courts were confronted with an arbitration exception by the
defendant. In such a case, the court first of all has to examine the validity of the alleged
arbitration agreement. As the disputed clause referred to an arbitral tribunal with its seat
outside Switzerland, Article II(3) of the Convention on the Recognition and Enforcement of
Foreign Arbitral Awards (New York Convention, NYC) is directly applicable (despite the wording
of its Title and its Art. I(1), which seem to limit the NYC's scope to recognition and enforcement
proceedings). (13) According to this provision, the court of a Contracting State, when seized of
P 128 an action in a matter in respect of which the parties have made an arbitration agreement,
P 129 shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that
the said agreement is null and void, inoperative or incapable of being performed. The Swiss
Federal Tribunal has held that the validity of the arbitration agreement has to be analysed in
depth. (14) In this respect, a mere prima facie consideration would therefore be insufficient
under Swiss law. (15)
The validity of an arbitration agreement is of a threefold nature. It encompasses the formal
and material validity of the agreement as well as the arbitrability in regard of the subject-
matter of the dispute and the parties to the agreement:
– The formal validity of an international arbitration agreement is regulated primarily by
Article II(2) NYC. This provision, referring to an ‘agreement in writing … signed by the
parties’ constitutes a rule of substantive law which is directly applicable within the scope
of the Convention. (16) Admittedly, Article VII(1) of the same convention seems to allow
national courts to enforce agreements which do not satisfy the formal standards of Article
II, namely by applying less demanding national standards relating to the formal validity of
arbitration agreements. However, whether this provision actually applies to the issue of
validity of an arbitration agreement, is disputable. (17)
– According to the prevailing Swiss case law and doctrine, the material validity of an
arbitration clause referring to arbitration outside Switzerland has to be determined by
P 129 analogous application of the conflict rule in Article V(1)(a) NYC, in order to avoid a conflit
P 130 négatif. (18) According to this rule, the law of the country where the award would be
made governs the arbitration agreement unless the parties have subjected the arbitration
agreement to another law. Subsidiarily, a specific Swiss conflicts rule (19) might be
applicable, in particular if the country where the award would be made cannot be
identified at the time when the arbitration exception is raised. (20) In line with the rules
provided by the law applicable to the agreement, the court then has to examine whether
the parties have agreed on the essential elements (essentialia) of the arbitration
agreement. In Swiss law as well as in most developed arbitral jurisdictions, the following
elements are considered essentialia: (i) the parties to the agreement, (ii) their intent to
submit their dispute to arbitration and (iii) the specification of the subject-matter of the
arbitration, i.e. a dispute or a legal relationship. (21) The lack of other important elements
such as the determination of the place of the arbitration, the number of arbitrators or the
applicable procedures does not lead to the invalidity of the agreement as long as it can be
repaired through interpretation or amendment. (22) In general terms, the essential core of
an arbitration agreement ‘consists of nothing more than an obligation to resolve certain
disputes with another party by “arbitration” and the right to demand that such disputes be
resolved in this fashion’. (23)
– Arbitrability requires that the subject-matter of the dispute can validly be submitted to
arbitration (objective arbitrability; ratione materiae) and that the parties to the arbitration
agreement have the legal capacity to conclude such an agreement on their own behalf or in
the name and on behalf of another person or entity (subjective arbitrability; ratione
personae).
It is important to note that the analysis is necessarily two-part. The first question is whether
P 130 the parties intended to waive the jurisdiction of the ordinary courts and to resort to
P 131 arbitration. If this question is answered in the affirmative, it has to be asked if the
agreement needs to be further interpreted or amended. (24) The court can only assume its own
jurisdiction when it comes to the conclusion that there is no valid arbitration agreement
according to the criteria laid out above; otherwise it has to refer the parties to arbitration. If
the arbitration agreement is valid in principle but otherwise incomplete or inaccurate, such
pathological elements have to be dealt with by way of interpretation or amendment. While the
second part of this test is conducted in favorem validatis, this principle does not apply to the
issue of existence of a valid arbitration agreement. (25) Hence, the first part of the analysis is

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 conducted in a more restrictive manner. (26)

3.3 Remarks on the Concrete Case

As not all facts of the case at hand are known to the authors of this article, but only those
reiterated in the published court decisions, a thorough analysis of the court proceedings is
neither possible nor appropriate. Two remarks appear to be worth making however.
First, it is noticeable that the Swiss courts refrained from applying an appropriate method
when establishing the applicable law on the interpretation of the (presumed) arbitral
agreement. Instead, they applied the lex fori, i.e. Swiss law, pointing to the fact that none of the
parties had explicitly expressed an interest in the application of foreign law. The courts
thereby referred to a principle of Swiss private international law, according to which the court
is exempt from an extensive analysis of a foreign law if none of the parties has invoked such a
law. (27) It is questionable whether the application of this principle is appropriate in the
present context. Obviously, the parties had not explicitly chosen a specific legal regime to be
applied to their dispute resolution clause. However, in our opinion, whether a hypothetical
reference to arbitration is valid, should, at least from a Swiss point of view, not be interpreted
P 131 on the basis of the lex fori (even if the parties do not address this issue), but in accordance with
P 132 the law applicable to the hypothetical arbitration agreement. That law is either the lex
arbitri, i.e. the law of the seat of the hypothetical arbitration proceedings, in our case U.S. law,
or the law applicable to the arbitration agreement, which – in the absence of a specific choice
of law applying to that agreement only – is the same law as that governing the main contract of
which the arbitration agreement forms but one, albeit separable, element. (28) This solution
would be in line not only with Swiss law (see Art. 178 (2) SPILA), but also with the conflicts rule of
Article V(1)(a) of the New York Convention, which may be applied by analogy according to the
principles laid out above. This proposed approach is supported by the fact that in the instant
case, the conflict focused on the material validity of the arbitration clause, especially on the
double reference to arbitration and state courts, as opposed to the mere formal validity of the
clause and issues of arbitrability, which remained undisputed in essence.
If this proposed approach had been applied, U.S. law (at least as the hypothetical law of the
seat of arbitration) may have governed the interpretation of the dispute resolution clause. It is
noteworthy that the solution of Swiss law may be different from that of U.S. law in this respect.
(29) While the Swiss practice tends to follow the general rule that an arbitration agreement is
unenforceable in the absence of a clear and unequivocal exclusion of the jurisdiction of the
state courts, courts in some U.S. states appear to have adopted a slightly different approach.
(30) Therefore, the question of the lex arbitri or the law applicable to the arbitration agreement
may have an impact on the outcome of the analysis.
Second, especially the Zug Court of First Instance referred to an indissoluble conflict of
competence between the AAA and the ICC as a reason for the unenforceability of the
agreement. The contract clause basically refers to the AAA as a (possible) arbitral institution
and to the rules and regulations of the ICC as the procedural framework. Indeed, the referral to
P 132 different arbitral institutions or arbitration rules within a single clause may jeopardize the
P 133 validity of the arbitration agreement. (31) However, with no essentialia at stake, the practice
of the courts both in the U.S. and Switzerland is to preserve the validity of the agreement by
way of interpretation. (32) In the present context, it does not appear impossible from the
outset that the clause might be interpreted in a way as to give priority to the denomination of
the AAA as an arbitral institution and the denomination of the ICC Rules as the procedural
framework. Therefore, unenforceability of the clause in this respect should not be assumed
prematurely and without even an attempt to solve the issue by interpretation. (33)

4 Caveats for the Drafting of Arbitration Clauses

An arbitration clause is pathological if it contains defects in form or content which themselves
may lead to lengthy and expensive litigation as to their interpretation. Such defects can relate
to inconsistency, uncertainty or inoperability (34) and may, at worst, result in the clause being
considered invalid. The aforementioned example contains at least four of the main mistakes
which should be avoided when drafting arbitration clauses.

4.1 Do Make a Clear Choice between Arbitration and Litigation

In agreeing to arbitrate a dispute, the parties renounce a number of procedural safeguards, in
particular with regard to the extent of judicial review of the sentence. Therefore, courts in
many jurisdictions tend to a restrictive contract interpretation in respect of the question if an
ambiguous clause constitutes a valid arbitration agreement. An arbitration-friendly attitude is
regularly applied only when a common intent of the parties to resort to arbitration is clearly
established. (35) A wording such as the ominous ‘to binding arbitration through The American
Arbitration Association or to any other U.S. court’ is obviously not very helpful in this respect.
P 133 Concerning an unclear choice between arbitration and state court litigation, the following
P 134 clauses have led at least to additional court procedures:
– ‘A défaut de recours à l'amiable, les deux parties déclarent la jurisdiction suisse et
l'arbitrage du Tribunal de Commerce sis à Genève.’ (36)

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 – ‘Arbitration: […] If Parties can not agree upon an amicable settlement then all disputes and
differences are to be submitted without resource [sic] to the ordinary court to Stockholm,
Sweden.’ (37)
– ‘In case of non-settlement, the dispute will be submitted for a final decision to the
arbitrators of the Geneva Court of Justice.’ (38)
– ‘Soll eine Einigung nicht erreicht werden können, dann wird der Streitfall seitens dem
Handelsgericht in Zürich, Kanton Zürich, geschlichtet unter Anwendung des schweizerischen
Materialrechts. Die Entscheidung der Schlichtung wird als endgültig und vollziehend
betrachtet.’ (39)
P 134 – ‘Tous différends découlant de la présente convention seront tranchés définitivement à
P 135 Paris, suivant le règlement de conciliation et d'arbitrage de la Chambre de commerce
internationale (ou tribunal de commerce), par un ou plusieurs arbitres.’ (40)
It is therefore advisable to avoid any unnecessary reference to the state court system when
drafting an arbitration agreement.

4.2 Do Not Let the Choice of Arbitration Appear Optional

Clauses which seem to leave a choice between arbitration and state court litigation are
particularly dangerous. The wording ‘to binding arbitration … or to any other U.S. court’ is just
one example. That the Swiss and U.S. courts have come to the conclusion that this clause did
not represent a clear and exclusive choice of arbitration is hardly surprising. Equally
dangerous is the U.S.e of the word ‘may’ in this context. Considering the linguistic U.S.age,
where a dispute may be resolved by arbitration, it may as well be resolved by other forms of
dispute resolution mechanisms.
In most cases, parties will want to make a clear choice of a specific form of dispute resolution,
namely arbitration. If an optional model is intended, which in most cases appears to be
unadvisable, the parties need to define precisely at which stage by whom and in which form a
choice between the different types of dispute resolution can or has to be executed. (41)
Otherwise, such questions may very likely become a matter of court interpretation, as in the
following example:
[D]isputes may be dealt with [through arbitration] but shall otherwise be referred to the
English Courts. (42)
Therefore, it is highly advisable to avoid any ambiguous wording which might let a choice
appear merely optional.
P 135
P 136
4.3 Do Correctly Specify One (and Only One) Institution when Opting for Institutional
Arbitration, the Rules of Which you have Consulted in Advance
If the parties to a contract opt for an arbitration clause, they have to decide between ad hoc
arbitration according to entirely self-defined procedural rules, and institutional arbitration by
referring to the procedural framework of an arbitral institution such as the ICC, the AAA, the
London Court of International Arbitration (LCIA) or the Swiss Chambers. The incorrect, unclear
or contradictory designation of an arbitral institution is among the most frequent and critical
flaws in international arbitration agreements. In the case at hand, the defective clause
referred to an arbitral tribunal of the AAA on the one hand and to the procedural rules of the
ICC on the other hand. Because of this obvious and hardly dissolvable conflict of institutions,
the courts in Switzerland as well as in the U.S. called into question the validity of the clause.
More frequently, arbitration clauses refer to institutions which do no longer exist at the time
when the dispute arises, have never existed or have nothing to do with arbitration. Among
countless examples for the drafters' baffling inventiveness, the following appear especially
illustrative:
– ‘the Arbitration Court of the International Chamber of Commerce of Zürich in Lugano’ (43)
– ‘finally settled under the Rules of Conciliation and Arbitration of the International Chamber
of Commerce of Geneve’ (44)
– ‘German Central Chamber of Commerce’ (45)
– ‘the Court of Arbitration at the Chamber of Commerce and Industry of Switzerland’ (46)
– ‘the Arbitration Court at the Swiss Chamber for Foreign Trade in Geneva’ (47)
P 136
P 137
4.4 Do Make a Precise Choice of the Seat/Place of Arbitration
The choice of the seat of arbitration is a significant element of each international arbitration
agreement, as it normally determines the lex arbitri. The legal regime of the situs constitutes
the underlying framework for the arbitral procedure and may limit the parties' autonomy to
define the procedural rules of the arbitration. In practice, however, this important question is
often not sufficiently considered or even neglected altogether. The seat of the arbitration does
not necessarily have to be identical with the physical location where the proceedings are

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 conducted, but it attaches the arbitral procedure to the legal order of a specific state. Amongst
a variety of legal consequences, (48) the choice of the seat determines the forum for judicial
intervention and support in the course of the procedure, e.g. if a party fails to nominate an
arbitrator, as well as for challenges or appeals after an award has been issued. As there are
various forums available within most states, it may be precarious if not insufficient to merely
name the state of the seat instead of a specific city. (49) This problem constituted another
deficiency of the arbitration clause in the aforementioned agreement, as it referred implicitly
to the U.S. without naming a specific seat of the arbitration. Further examples are:
– ‘arbitration in Switzerland’ (50)
– ‘Each party shall select an arbitrator and the two arbitrators shall select a third arbitrator,
all of whom shall be Members of the American or Japanese Arbitrator Society, who will
resolve the dispute.’ (51)
P 137
P 138
For these reasons, the legal seat of arbitration should be specified as precisely as possible.

5 Conclusion: Dealing With Pathological Arbitration Clauses

The question remains what can be done when counsel is confronted with a client who wishes
him or her to initiate proceedings based on a pathological arbitration agreement of the type
described in this analysis.
First, and foremost, it may be possible to convince the counterparty or counterparties to agree
to the healing of the pathology. While it is a fact of a lawyer's life that it is hard to have a
counterparty agree to anything once the dispute has arisen, it may be exceptionally possible
to convince it that a long-lasting and costly preliminary wrangle can be avoided in the mutual
interest of all parties involved, because, ultimately, justice will be done and the loosing party
will have to compensate its opponent for the unnecessary efforts to find the proper judge (or
arbitrator) to decide the dispute.
In the event that several institutions are mentioned in the arbitration clause, such as in the
instant case (AAA/ICC), it may be helpful to get in touch with these institutions or to analyse
their practice in order to avoid what occurred here, namely that the institution refused to
accept the matter.
Similarly, it will be helpful to look into the domestic law at the place of the envisioned
arbitration, or available previous court decisions of the local courts to anticipate their position
as regards accepting, compelling or refusing jurisdiction. It may even be helpful to request
preliminary measures from the courts (or from an arbitral tribunal even if not yet constituted),
i.e. in the form of an emergency arbitrator as they are now available from various institutions
such as the Stockholm Chamber of Commerce (SCC) (52) or the Singapore International
Arbitration Centre (SIAC) (53) in order to secure lis pendens and to win the forum running which
a defective arbitration agreement may entail.
P 138
P 139
Finally, it may even be advisable to seek a settlement with the counterparty in view of a
preliminary conclusion that the battle of jurisdictions will be more costly and time-consuming
than any compromise.
All this may, of course, have been avoided by wiser drafting, but then again, everything is
clearer in hindsight.
P 139

References
★) Daniel Girsberger: Prof. Dr. iur., LL.M., Attorney-at-law; Tenured Professor at the University
of Lucerne Law School
Pascal J. Ruch: Attorney-at-law; Research Assistant at the University of Lucerne Law School
1) See, e.g. Daniel Girsberger,'Pitfalls in Swiss Arbitration Agreements’, in New Developments
in International Arbitration 2008, ed. Christoph Müller & Antonio Rigozzi (Zurich: Schulthess,
2008), 81-103, with reference to various illustrative court sentences in note 1.
2) Daniel Girsberger & Michael Mráz, ‘Missglückte (“pathologische”) Schiedsvereinbarungen:
Risiken und Nebenwirkungen’, in Internationales Zivilprozess- und Verfahrensrecht III, ed.
Karl Spühler (Zurich: Schulthess, 2003), 129-165 and Emmanuel Gaillard & John Savage
(eds.), Fouchard, Gaillard, Goldman on International Commercial Arbitration (The Hague:
Kluwer, 1999), § 484, both with further examples.
S. Kröll, L.A. Mistelis, P. Perales Viscasillas & V. Rogers (eds), Liber Amicorum Eric Bergsten.
International Arbitration and International Commercial Law: Synergy, Convergence and
Evolution, 123-140. © 2011 Kluwer Law International. Printed in Great Britain.
3) Emphasis added.

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 4) According to this provision, a party aggrieved by the alleged failure, neglect, or refusal of
another to arbitrate under a written agreement for arbitration may petition any United
States district court which, save for such agreement, would have jurisdiction of a suit
arising out of the controversy between the parties, for an order directing that such
arbitration proceed in the manner provided for in such agreement.
5) Under the applicable rules, a contract term is to be considered ambiguous as to the
parties' intent, when it is ‘capable of more than one meaning when viewed objectively by a
reasonably intelligent person who has examined the context of the entire integrated
agreement and who is cognizant of the customs, practices, U.S.ages and terminology as
generally understood in the particular trade or business’ (Walk-In Med. Ctrs., Inc. v. Breuer
Capital Corp., 818 F.2d 260, 263 [2d Cir. 1987]; Hugo Boss Fashions, Inc. v. Fed. Ins. Co., 252
F.3d 608, 617 [2d Cir. 2001]).
6) Remarkably, the court noted that the outcome of the interpretation would not change to
the extent that Swiss law applied to the dispute over the enforceability of the clause. It
thereby referred to the fact that it was undisputed among the parties that Swiss law
principles on contract interpretation were similar (sic) to those of New York law.
7) Although the U.S. judgments were not binding for the Swiss courts, they did of course not go
unnoticed.
8) Among others, the Zug court referred to the landmark decision of the Swiss Federal
Tribunal of 21 November 2003, DFT 130 III 66.
9) DFT 130 III 66, cons. 3.1.
10) DFT 130 III 66, cons. 3.2.
11) More precisely, according to a significant doctrine, not least in Switzerland, the
denomination of a specific seat is seen as dispensable as long as an arbitral institution or
another instance is specified, which in turn can determine the seat of the arbitration. Cf.
Werner Wenger &Christoph Müller, in Basler Kommentar Internationales Privatrecht, ed.
Heinrich Honsell et al., 2nd ed. (Basel: Helbing Lichtenhahn, 2007), Art. 178 § 36; Gary B.
Born, International Commercial Arbitration, (Austin et al.: Wolters Kluwer, 2009), Vol. 1, 659
et seq.
12) Decision of the Swiss Federal Tribunal of 25 October 2010, no. 4A_279/2010.
13) Born, International Commercial Arbitration, (cit. supra fn. 11), Vol. 1, 203 et seq.
14) Decisions of the Swiss Federal Tribunal of 25 October 2010, no. 4A_279/2010, cons. 2 (with
further references), and of 16 January 1995, DFT 121 III 38, cons. 2b. Note that the practice
would be different if the arbitral tribunal had its seat in Switzerland.
15) Disputed, see references in Swiss Federal Tribunal of 25 October 2010, no. 4A_279/2010,
cons. 2; Stephen V. Berti, in Basler Kommentar Internationales Privatrecht (cit. supra fn. 11),
Art. 7 § 8.
16) Decision of the Swiss Federal Tribunal of 7 February 1984, DFT 110 II 54; Bernhard Berger &
Franz Kellerhals, International and Domestic Arbitration in Switzerland, 2nd ed. (Sweet &
Maxwell / Stämpfli, 2010), § 310; Jean François Poudret & Sébastien Besson, Droit comparé
de l'arbitrage international (Zurich: Schulthess, 2002), § 185.
17) Pro: Born, International Commercial Arbitration, (cit. supra fn. 11), Vol. 1, 544 et seq.; contra:
Poudret & Besson, supra note 16 at § 187.
18) Decision of the Swiss Federal Tribunal of 21 March 1995, no. 5C.215/1994; Berger &
Kellerhals, supra note 16 at § 311; Frank Vischer, Lucius Huber & David Oser, Internationales
Vertragsrecht, 2nd ed. (Bern: Stämpfli, 2000), § 1374; Gerhard Walter, Wolfgang Bosch &
Jürgen Brönnimann, Internationale Schiedsgerichtsbarkeit in der Schweiz (Bern: Stämpfli,
1991), 87; Poudret & Besson, supra note 16 at § 299.
19) Swiss Private International Law Act (SPILA; SR 291), Art. 178(2). This provision refers firstly to
the law chosen by the parties, secondly to the law applicable to the underlying conflict
and thirdly to Swiss law.
20) Berger & Kellerhals, supra note 16 at § 313.
21) Cf. Poudret & Besson, supra note 16 at § 154 et seq.
22) Cf. Berger & Kellerhals, supra note 16 at § 290; Decision of the Swiss Federal Tribunal of 21
November 2003, DFT 130 III 66, cons. 3.1.
23) Born, International Commercial Arbitration, (cit. supra note 11), Vol. 1, 655.
24) Aldo Frignani, ‘Drafting Arbitration Agreements’, Arbitration International 24 (2008): 561–
569, 568; decision of the Swiss Federal Tribunal of 25 October 2010, no. 4A_279/2010, cons.
3.1.
25) Decision of the Swiss Federal Tribunal of 8 July 2003, DFT 129 III 675, cons. 2.3; Born,
International Commercial Arbitration, (cit. supra fn. 11), Vol. 1, 1072 et seq.
26) Decision of the Swiss Federal Tribunal of 25 October 2010, no. 4A_279/2010, cons. 3.1.
27) The Federal Tribunal thereby referred to Max Keller & Daniel Girsberger, in Zürcher
Kommentar zum IPRG, ed. Daniel Girsberger et al., 2nd ed. (Zurich: Schulthess, 2004), Art. 16
§ 61 et seq.
28) Daniel Girsberger, ‘Widersprüchliche Schiedsklauseln vor Bundesgericht’, (2004)
Schweizerische Zeitschrift für Zivilprozess- und Zwangsvollstreckungsrecht (ZZZ): 533-546, 537.
29) The New York Convention offers little guidance in this regard; see Born, International
Commercial Arbitration, (cit. supra fn. 11), Vol. 1, 709 et seq.
30) Cf. Born, International Commercial Arbitration, (cit. supra fn. 11), Vol. 1, 649 et seq.;
Aleksandar Jaksic, Arbitration and Human Rights (Frankfurt am Main: Peter Lang, 2002), 138
et seq.

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 31) See, e.g., Decision of the Swiss Federal Tribunal of 21 November 2003, dft 130 III 66 and
comments in Girsberger, ‘Widersprüchliche Schiedsklauseln vor Bundesgericht’, supra note
28.
32) Born, International Commercial Arbitration, (cit. supra fn. 11), Vol. 1, 683 et seq.; Jaksic, supra
note 30 at 140 et seq.
33) See, e.g., Girsberger, ‘Widersprüchliche Schiedsklauseln vor Bundesgericht’ (cit. supra fn.
28), 539 et seq.
34) Nigel Blackaby & Constantine Partasides with Alan Redfern & Martin Hunter, Redfern and
Hunter on International Arbitration (New York: Oxford University Press, 2009), § 2.177 et seq.
35) Cf. Berger & Kellerhals, supra note 16 at § 422; Frignani, supra note 24 at 568.
36) Geneva Court of Justice, decision of 18 April 2008 (C/5783/2006); see ASA Bulletin 27 (2009),
164 et seq. (commented by Laurent Hirsch). The Court of First Instance had denied its
jurisdiction by referring to the U.S.e of the term arbitration. The Court of Justice repealed
this verdict. It held that the clause was ambiguous and needed to be examined closely as
to the intent of the parties.
37) Higher Regional Court of Stuttgart, decision of 15 May 2006 (5 U 21/06). Taking into account
the Russian and English version of the contract as well as different translations, the court
concluded that the parties had wanted to resort to an arbitral tribunal in Sweden.
38) Higher Regional Court of Hamm, decision of 27 September 2005; see ASA Bulletin 24 (2006),
57 et seq.; Stephan Wilske & Claudia Krapfl, (2006) International Arbitration Law Review, 80
et seq. In the enforcement procedure, the court confirmed that the arbitral tribunal of the
Geneva Chamber of Commerce had rightly assumed its competence despite the reference
to the state court. It held that the U.S.e of the term ‘arbitrators’ clearly showed that the
parties wanted to resort to arbitration. For the interim award of the arbitral tribunal of 27
August 1999 in the same case, see ASA Bulletin 19 (2001), 265 et seq.
39) Decision of the Swiss Federal Tribunal of 8 July 2003, DFT 129 III 675; see ASA Bulletin 22
(2004), 353 et seq. The Federal Court shared the view of the Zurich Commercial Court
(Handelsgericht) that the parties had wanted to opt for arbitration before the Zurich
Chamber of Commerce (Handelskammer) and therefore affirmed the validity of the
arbitration clause.
40) Paris Court of Appeal, decision of 25 October 2000; see (2001) Revue de l'arbitrage, 575 et
seq. (commented by Cécile Legros). The court concluded that the stipulation constituted a
valid arbitration clause, despite the cryptical reference to a state court in brackets.
41) Cf. Gaillard & Savage, supra note 2 at § 487 et seq. (on so-called ‘combined clauses’).
42) Lob Partnership Ltd. v. Aintree Racecourse Cpy Ltd., Commercial Court, Queen's Bench
Division (22 November 1999); see ASA Bulletin 18 (2000), 421 et seq. The court presumed that
this clause granted an option to the claimant to choose the type of dispute resolution.
43) Decision of the Swiss Federal Tribunal of 5 December 2008, no. 4A_376/2008; ASA Bulletin 27
(2009), 735 et seq. (commented by Matthias Scherer). Generally on the issue of the
‘dislocation’ of the ICC through a clause referring to the ICC and to a place other than Paris,
cf. Jaksic, supra note 30 at 142 et seq.; Frignani, supra note 24 at 565 et seq.
44) Interim arbitral award of 31 July 2000; ASA Bulletin 19 (2001), 276 et seq.
45) Higher Regional Court (Kammergericht) of Berlin, decision of 15 October 1999 (28 Sch 17/99);
(2002) Recht und Praxis der Schiedsgerichtsbarkeit, 13 et seq.
46) National Material Trading v. Tang Industries Inc., 1997 WL 915000 (D.S.C. 1997); YCA XXIII
(1998), 923 et seq.
47) Interim arbitral award of 29 November 1996; ASA Bulletin 15 (1997), 534 et seq.
48) Cf. Gary B. Born, International Arbitration and Forum Selection Agreements: Drafting and
Enforcing (Austin et al.: Wolter Kluwer, 2010), 64 et seq.
49) Despite the precise definition of the seat not being part of the essentialia negotii of an
arbitration agreement (cf. Born, Vol. 1 of International Commercial Arbitration, [cit. supra
fn. 11], 659 et seq.), many courts tend to be reluctant to consider such clauses valid.
50) A veritable classic. According to even recent Swiss practice, such a wording generally led to
an invalid arbitration agreement if neither a certain city nor an arbitral institution which
could define a seat were specified. Cf. interim arbitral award of 7 August 2006, ASA Bulletin
25 (2007), 755 et seq. (commented by Sébastien Besson); Geneva Tribunal of First Instance,
decision of 18 June 2008, ASA Bulletin 27 (2009), 755 et seq. (commented by Laurent Hirsch).
51) HZI Research Center Inc. v Sun Instruments Japan Co. Inc, 1995 WL 562181 (S.D.N.Y. 1995). The
clause did not define a specific place or even state of arbitration. According to the
interpretation by the district court, the clause referred to arbitration in the U.S. or in
Japan, depending on the choice of the claimant.
52) Cf. Appendix ii to the 2010 Arbitration Rules of the Arbitration Institute of the Stockholm
Chamber of Commerce (available at <www.sccinstitute.com>).
53) Cf. Schedule 1 to the siac Rules 2010 (available at <www.siac.org.sg>).

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