A. v. B. Holding AG

At a glance

Parties

A. (individual resident in Brazil) v. B. Holding AG (Zug, Switzerland)

Case no.

Bundesgericht No. 4A_663/2018

Court

Swiss Federal Supreme Court (Bundesgericht), First Civil Law Division

Underlying award(s)

Two ICC Final Awards of 21 November 2011 (ICC Case Nos. 16176 and 16513)

Treaty

New York Convention 1958, Art. V(2)(b)

Court

Judges Kiss (Presiding), Klett, May Canellas; Clerk Curchod

Sector

Share purchase; solar and renewable energy group

Outcome

Appeal dismissed so far as admissible (27 May 2019). Recognition and enforcement of both ICC awards in Switzerland upheld.

Amount

Awards: USD 9,437,865.73 plus BRL 3,562,227.32 plus USD 1,380,713 in costs (ICC 16176); USD 100,000,000 plus BRL 14,415,312.10 plus USD 2,636,426 in costs (ICC 16513), with interest. Attachment for CHF 113,366,720; debt enforcement for CHF 13,800,000. Court costs CHF 100,000 and party costs of CHF 120,000, both payable by A.

The dispute

A. was the sole shareholder of Grupo D. Companies. Under a share purchase agreement of 4 August 2007 he sold the group to B. Holding AG, a Zug-based holding company of the C. group, for USD 327,416,756. Disputes over the sale led B. Holding to start two ICC arbitrations against A. and his guarantor E. Ltda. On 21 November 2011 both tribunals, presided over by F., a partner of the New York firm G. LLP, issued awards in B. Holding's favour. F. later resigned after A. challenged his independence. B. Holding obtained an attachment of A.'s escrow account in Zurich and sought recognition, enforcement and definitive lifting of A.'s objection (definitive Rechtsöffnung) in Switzerland. A. argued that enforcement would breach Swiss public policy under Art. V(2)(b) of the New York Convention for two reasons: (i) G. LLP's ties to companies linked to the C. group created an appearance of bias in F.; and (ii) most of the USD 100 million in damages were punitive damages.

Key holdings

1. Under Art. V(2)(b), only a flagrant disregard of the independence and impartiality of the arbitral tribunal justifies refusing exequatur. Not every circumstance that creates an appearance of bias is enough. The relevant cases are mainly those that clearly fall within the Red List of the IBA Guidelines. E. 3.4.2
2. In large international law firms, the arbitrator's firm and the party's corporate group cannot each be treated strictly as one unit. The actual relationships must be assessed case by case, in line with General Standard 6(a) of the IBA Guidelines. E. 3.5
3. G. LLP's work for I. Corporation from 2003 to 2011 was no ground for disqualification under Red List item 2.3.6. I. Corporation became an affiliate only when its 15.9% stake in the C. group's parent became known on 3 October 2011, the day the awards were sent to the ICC. In that transaction G. LLP advised only a third party, the US Department of Energy. F.'s resignation is not evidence of bias, because the test is objective. E. 3.6, 3.6.1
4. G. LLP advised J. S.E. as buyer of K. SA, a C. group subsidiary. Possible collegial contact between deal lawyers in an M&A transaction does not create an appearance of bias. E. 3.6.2
5. While the arbitrations were pending, C. Solar paid G. LLP USD 6.5 million in fees for work G. LLP did for the Department of Energy. These payments must be viewed critically, and F. breached his disclosure duties. But the relationship was purely financial, gave C. Solar no right to instruct the firm, and created no significant dependence. There was therefore no flagrant breach of impartiality, and enforcement does not violate Swiss public policy. E. 3.6.3, 3.7
6. The Brazilian Superior Tribunal de Justiça refused recognition on the ground of Brazilian public policy. That refusal is irrelevant, because Art. V(2)(b) refers to the public policy of the country where enforcement is sought. The Court left open whether A. had forfeited his right to raise the bias objection. E. 3.7–3.8
7. The punitive damages objection was inadmissible. It rested on the premise that the actual loss was only USD 18 million, and the lower courts' binding findings do not support that premise. The Court did not decide whether awarding punitive damages violates Swiss public policy. E. 4

Procedural history

1. 4 August 2007A. sold Grupo D. Companies to B. Holding AG under a share purchase agreement for USD 327,416,756.
2. 21 November 2011Final Awards issued in ICC Cases 16176 and 16513 in favour of B. Holding.
3. 26 January 2012Presiding arbitrator F. resigned after A.'s challenge; the ICC accepted the resignation on 23 February 2012, and Yves Derains was confirmed as the new president on 29 March 2012.
4. 29 October 2012The reconstituted tribunal rejected the "Reversal Request" filed on 5 April 2012. US courts later rejected the challenge to the awards (S.D.N.Y. and Second Circuit), and the US Supreme Court declined to hear the case.
5. 9 January 2013The Zurich District Court ordered an attachment for CHF 113,366,720, executed on 11 January 2013. A payment order for CHF 13,800,000 followed on 16 January 2013, and A. objected to it.
6. 19 April 2017The Brazilian Corte Especial do Superior Tribunal de Justiça refused recognition of both awards on the ground of Brazilian public policy.
7. 20 November 2017The Zurich District Court granted recognition, enforcement and definitive Rechtsöffnung (application filed 26 February 2015).
8. 5 November 2018The Zurich High Court (Obergericht) dismissed A.'s appeal.
9. 27 May 2019The Federal Supreme Court dismissed A.'s appeal so far as admissible.

Tribunal, counsel and experts

Decided by

• May Canellas Judge, Swiss Federal Supreme Court

For the claimant

Bernet Arbitration, Dispute Management

For the respondent

Martin Burkhardt · Francesca Weibel

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Keywords

• New York Convention Article V(2)(b)
• public policy
• ordre public
• recognition and enforcement
• arbitrator independence
• appearance of bias
• IBA Guidelines on Conflicts of Interest
• Red List 2.3.6
• duty of disclosure
• law firm conflicts
• corporate group affiliates
• punitive damages
• ICC arbitration
• share purchase agreement
• Rechtsöffnung
• attachment
• Brazil refusal of recognition
• solar energy

Summary generated with AI from the published documents — refer to the award for the authoritative text.