1. Introduction
A careful analysis of the emergence of the principle of jura novit curia and its development throughout the ages has always been essential for its modern understanding. However, as the subject matter of this paper is confined to the application of this principle in international arbitration, there are only a few relevant introductory remarks to illustrate the historical continuity and the complexity of this legal phenomenon, which has always been in the state of flux.
The principle appears to have a clear origin in Roman law. This apparent clarity is misleading, as it does not in fact date back to classical Roman law [1] and is not so ancient as it seems. It was formulated by glossators commenting on Roman sources in the early medieval period [2] based on the Justinian Codex [3], using the scholastic dialectical method [4]. It, further, evolved and served as a tool of the political and legal centralization during the feudal fragmentation in the Middle Ages [5]. Nevertheless, its application had always been rather nominal until the Age of Enlightenment arrived.
To date, most civil law jurisdictions follow the principle of iura novit curia which means both court’s right and duty to know the law. Although the court does not know the law other than its own, the ex officio application of the principle appertains not only to “national law”, but also, artificially, to “foreign law”, where the latter is regarded as a matter of law (jura aliena novit curia). It is recognized that the principle guarantees the constitutional provisions on the rule of law (Rechtsstaatsprinzip) and social state (Sozialstaatsprinzip) in a number of civil law countries [5, p.104, 185, 187].
In contrast, common law countries have never adopted this approach. The adversarial system is a pillar of their civil procedure. Moreover, the courts are not obliged to apply foreign law ex officio. Foreign law is a matter of fact or a fact of a peculiar kind which must be proven by the parties.
Furthermore, it is acknowledged that not only different legal systems, but also “different individual judges within the same system take widely different approaches as to the appropriate method for acquiring and proving the content of the applicable law” [6]. This statement actually relates not only to the content-of-law enquiry [7]. It is therefore unsurprising that this “problem is manifestly amplified” in international arbitration [6], where the scope of the application of the jura novit curia principle could be considerably wider: substantive and procedural law (of the seat of arbitration and/or place of enforcement), rules of law (e.g., lex mercatoria), conflict of laws, soft law, rules of arbitration etc. Interestingly, arbitrators are not bound by the conflict-of-laws rules of the seat. Whereas a judge applies jura novit curia twice – first to the conflict-of-laws rules of the lex fori and then to the lex causae, in accordance with voie indirecte method, an arbitrator additionally invokes the principle of jura novit curia to find applicable conflict-of-laws rules. This activity may be described as the “primary conflict-of-laws issue”. On this stage an arbitrator conducts a legal analysis of facts and potentially applicable conflict-of-laws rules.
Despite decades of heated debates, the key question whether the principle of jura novit curia is applied in international arbitration, is left open or without a clear answer [7, p.281]. Are arbitrators entitled to apply law ex officio? Are they obliged to do so? Who bears the burden of proof of the applicable law? Should the arbitral tribunal look beyond the parties’ submissions? Does it have the right to take the initiative in addressing legal issues and find new legal arguments? What if relevant rules or contract provisions are not provided by the parties? Does the legal nature of this principle remain the same when applied in international arbitration?
The answers we have remain somewhat blurred due to the dearth of regulation and a variety of approaches in different countries. However, the certainty regarding these questions is vital for three groups of interests: private (interests of the parties to arbitration to receive a fair award rendered on the correct legal grounds); public (interests of the states where an award is rendered or enforced as well as any other third state connected to a dispute); and interests and values of transnational legal order (the interest in preserving the legitimacy, reputation of arbitration, trust in it as an efficient mechanism of resolution of complex disputes).
It demonstrates that the current paradigm is not efficient and has arguably reached a doctrinal stalemate. The so-called “transplantation” of the jura novit curia principle into the “corpus” of international arbitration necessitates a departure from the conventional view on the principle of jura novit curia. The duty to apply the law ex officio does not fit the needs and character of international arbitration (at least, it is clear that an arbitrator is not capable of knowing all possible applicable laws that he or she might have to deal with). This idea underpins the sui generis theory of the transnational jura novit curia principle which could provide an adequate answer to the most debated questions raised above [8]. The proposal is that we should take a more holistic approach to the problem, staying receptive to the specifics of a particular legal order, as the word “transnational” does not mean “non-national” [9].
Due to this proposition the sui generis theory could embrace and explain national adaptation theory as well as voluntary theory. The national adaptation theory emanates from national approaches (lex arbitri) to the application of the jura novit curia principle which could impose a duty on arbitrators to apply the law ex officio [10]. The voluntary theory assumes that the source of the application of this principle could be rooted in party autonomy and/or an arbitrator’s discretion to form and conduct an arbitral proceeding [11] due to its flexibility (due to its flexibility due to the flexibility of arbitral proceedings, the parties are free to grant arbitrators the power to apply law ex officio and/or raise new legal arguments sua sponte).
The opponents argue that the “[i]mplementation of the maxim jura novit curia is singularly alien to the international arbitral process … and may even be characterized as unethical if not as a serious procedural irregularity” (autonomous theory) [5, p.189, 209]. However, the reality is less straightforward, as the case law of a number of jurisdictions still relies on the principle of jura novit curia, e.g., the Swiss approach.
In addition to the theoretical split in the doctrine of international arbitration, the problem is compounded by the scarcity of regulation and impossibility of unification. Most arbitration laws and rules are silent on whether and to what extent the principle is applied in international arbitration. As a consequence, there is no one-size-fits-all solution: one jurisdiction’s orthodoxy constitutes another’s heresy. Arbitration practitioners are navigating myriad approaches adopted in different countries without having a clear roadmap.
Moreover, as uniquely put by Professor W. Park, “Many trees have been felled to make paper for articles on how to find facts, [but] … less attention has been paid to the arbitrator’s truth-seeking function with respect to legal norms” [12]. One could argue that the legal phenomenon at issue is rather of a technical nature or constitutes a matter of academic curiosity. Reality, however, is different, as illustrated by one of the Swiss Supreme court decisions, where the arbitral tribunal’s reliance on a contract provision, which neither party expected to be relevant, was the central issue of the annulment proceedings [13].
Thus, the analysis of this problem is of paramount importance for doctrinal integrity and legal certainty in international arbitration. The paper focuses on the specifics of the application of the jura novit curia principle in international arbitration seated in Switzerland. Although the Swiss legal system recognises the principle as part of its lex arbitri [14], there are still quite a few procedural traps, which, if overlooked, may make an award susceptible to being set aside.
2. Is the jura novit curia principle applicable in international arbitration in Switzerland?
Swiss arbitration laws contain no specific provisions related to the application of the jura novit curia principle in arbitral proceedings. Neither the norms on domestic arbitration (Articles 353–399 of the Code of Civil Procedure) nor those on international arbitration (Chapter 12 of the Private International Law Act, hereinafter — “PILA”) [15] expressly address the principle. The arbitration rules are silent on this matter as well.
The formula of how to apply the principle could be found in the case law of the Swiss Supreme court which demonstrates that jura novit curia is deeply embedded in the Swiss legal order. For example, there are a number of the Supreme court’s judgements which steadily reproduce the following language [13, p.477]:
“As a general rule, pursuant to the adage jura novit curia, state courts or arbitral tribunals may freely assess the legal bearing of the facts, and may decide on the basis of rules of law other than those invoked by the parties. As an exception, they must be asked for their views when the court or the arbitral tribunal intends to base its decision on a rule or legal consideration which has not been invoked during the proceedings and the pertinence of which the parties could not anticipate” (translated by Loizou S.) [13, p.477; 16];
and
“The principle jura novit curia, which is applicable in arbitral proceedings, requires the arbitrators to apply the law ex officio, without limiting themselves to the legal arguments advanced by the parties. Therefore, they may uphold arguments not advanced [by the parties], as these would constitute neither a new nor a different claim, but merely a new qualification of the facts of the case” [13, p.477; 17].
As mentioned, this position is ubiquitous in Swiss case law with regard to jura novit curia issues, and the approach has remained remarkably consistent. Indeed, it has evolved over decades, and similar passages are readily found in earlier decisions of the Supreme court (see, e.g., no. BGE 120 II 172 of 19 April 1994 [18]). The similar wording appears in more recent decisions nos. 4A_324/2025 of 20 January 2026 [19], 4A_223/2024 of 17 February 2025 [20], 4A_374/2021 of 23 November 2021 [21].
The Swiss approach not only recognises the arbitrators’ right to conduct independent research on legal issues, but goes further, proclaiming that an arbitral tribunal is bound to apply law ex officio (national adaptation theory). This statement is articulated in the German-language decision no. 4P.260/2000 of 2 March 2001 [22], which contains key legal considerations in this respect.
First, the Supreme court held that both state courts and arbitral tribunals have the duty to apply the law to the facts “von Amts wegen” (i.e. ex officio) without being limited to the legal arguments presented by the conflicting parties: “According to the case law of the Federal Supreme court, both state courts and … arbitral tribunals are obliged to assess the legal consequences of properly pleaded and established facts ex officio (bolding added. – R.D.M.), without being bound by the legal submissions of the parties” (translated. – R.D.M.). Moreover, the Supreme court further emphasized that judges and arbitrators should endeavour to ensure legal clarity in relation to the subject matter of the dispute and to examine an “asserted legal consequence from all relevant legal perspectives” (translated. – R.D.M.). The arbitrators are to scrutinise the legal grounds put before them: “the principle of “[j]ura novit curia”entails not merely a right, but indeed a duty to examine all legal bases of the claim (bolding added. – R.D.M.)” (translated. – R.D.M.).
Second, the Supreme court held that the parties may, under the principle of party autonomy, impose limitations on the application of the jura novit curia. In the absence of any evidence to that effect, the arbitrators enjoy wide discretionary powers in legal issues.
Notably, the principle is not only applied to the substance of the dispute, but also to jurisdictional matters under the doctrine of competence-competence. On 7 June 2021, the Supreme court, considering the application to set aside a CAS award, held that “the arbitral tribunal was fully entitled to examine certain regulatory provisions not relied upon by the parties in order to rule on its own jurisdiction” [23].
To sum up, Swiss case law consistently upholds the jura novit curia principle. The legal system has almost fully embraced the civil law concept of jura novit curia, imposing a duty on arbitrators to apply the law or rules of law ex officio. This raises a further question: to what extent may arbitrators exercise their powers in legal matters?
3. The interplay of the principle of jura novit curia and the right to be heard in Swiss-seated international arbitration
The application of the jura novit curia principle in international arbitration can be analysed from two different perspectives: recognition and/or enforcement of foreign awards and annulment proceedings in Switzerland.
Under Article 194 PILA, recognition and enforcement of foreign awards are exclusively regulated by the New York Convention of 10 June 1958 on the recognition and enforcement of foreign arbitral awards (hereinafter — “NYC”) [24]. According to the survey conducted in 2018, there were no reported cases of foreign awards, being denied recognition in Switzerland for violation of fair hearing under Article V of the NYC [25]. It demonstrates the adoption of a unique approach to the construction of the NYC provisions in connection with the jura novit curia principle. By the same token, the successful annulment proceedings under Article 190(2)(d) PILA (Article 190(2)(d) PILA provides that an award can be challenged if the arbitral tribunal has violated the parties’ right to be heard) are registered in very few cases in juxtaposition with the French approach, based on the contradiction principle (Fr.: principe de la contradiction) [14, p.130-147].
In the light of the above, it appears that the jura novit curia principle has priority over the right to be heard. To verify this statement, the author analyses the relevant case law on annulment proceedings, which clearly reflects the Supreme court’s considerations when granting or dismissing pertinent applications invoking Article 190(2)(d) PILA.
3.1. Does the principle jura novit curia prevail over the right to be heard?
The right to be heard limits the application of the jura novit curia principle in international arbitration. However, Switzerland has adopted a highly restrictive approach to the right to be heard: it primarily relates to the establishment of the facts, and the right of the parties to be consulted on legal questions is recognised in a limited manner.
3.1.1. In the French-language decision no. 4A_254/2010 dated 3 August 2010 [26] the Swiss Supreme court dismissed the application to set aside the arbitral award on the basis of the violation of the right to be heard and, thus, confirmed the well-established approach that, as a rule, the principle of jura novit curia prevails. The factual background of the case and the complexity of its legal analyses play a pivotal role for determining the Swiss approach specifics. For this reason, they are considered in detail below.
The dispute arose out of a business consultancy agreement (hereinafter — “Agreement 2001”) between a Belgian company (A.) and a Spanish company (B.) which contained an arbitration clause providing for ICC arbitration. Under the Agreement 2001 B. was to facilitate the execution of an agreement for the construction of a storage facility for liquid gas between A. and C. In January 2003, A. performed its obligations under the construction agreement. A few weeks later an affiliate of A. (A.A.) entered into a business consultancy agreement with the Dutch company (D.) (hereinafter — “Agreement 2003”). It was apparent that the Agreement 2003 was executed to replace the previous Agreement 2001 as both agreements were signed by the same person on behalf of B. and D.
The dispute arose between B. and A. with respect to A’s failure to pay the agreed commission under the Agreement 2001. Pursuant to the arbitration clause contained in the Agreement 2001, B. initiated ICC arbitration with its seat in Switzerland. A. raised objections submitting that A. was not an appropriate Respondent and also challenged B.’s standing to sue. The alleged reason was that the rights and obligations under the Agreement 2001 had been transferred to A.A. and D. The sole arbitrator in the partial award made the following conclusions. First, the Agreement 2003 was a mere sham agreement. Second, the Agreement 2001 was still in force. Third, the true intention of the parties as to the transfer of their rights under the Agreement 2001 could not be determined from the case file. On 15 March 2010, the arbitrator awarded the commission to B.
A. filed an application with the Swiss Supreme court to set aside both final and partial arbitral awards, appealing to the violation of the parties’ right to be heard (Article 190(2)(d) PILA). A. explained that the arbitral tribunal had qualified the Agreement 2003 as a sham agreement proprio motu (i.e. on its own motion), and that this legal concept was not adduced by the contending parties in their submissions. In addition, A. underscored that neither party had challenged the validity of this Agreement. Owing to this fact they could not have foreseen that the arbitrator would recognise the Agreement 2003 as invalid. A. insisted that there was no doubt that if the arbitrator had given the parties an opportunity to present their views on this matter, the outcomes of the dispute would have been different.
The Swiss Supreme court dismissed the application and upheld the priority of the jura novit curia principle over the right to be heard. The Supreme court delineated the scope of the application of the latter and stated unambiguously that it covers primarily the right to present the facts of the case and with regard to questions of law the principle of jura novit curia prevails [27]: “In Switzerland, the right to be heard primarily relates to the establishment of the facts. The right of the parties to be consulted on legal questions is only recognised in a limited manner”. This exception applies only if two prerequisites are met cumulatively. First, an arbitrator renders an award on legal provisions not pleaded by the parties. Second, their application comes as a surprise to the parties. Otherwise, an arbitral tribunal is not obliged to invite the parties to comment on new legal arguments raised sua sponte (i.e. on its own motion).
In the present case, although the Supreme court recognised that the new legal ground at issue had never been pleaded by the parties, it emphasized that, in accordance with the extensive case law, a “judge” was required to apply the concept of sham agreements ex officio [28]. Moreover, it found that parties’ submissions contained references to a similar legal concept. As a consequence, the parties could have foreseen the application of Article 18 of the Code of Obligations, governing sham agreements under Swiss law.
However, the diametrically opposed position of the Supreme court was reflected in decision no. 4A_400/2008 of 9 February 2009 based on a CAS award [29]. In this case it found that the parties had been taken by surprise by the application of the Swiss Federal Law on Employment and Labor Leasing (hereinafter — “LSE”) [30], although the Swiss law was subsidiarily applicable. The Supreme court ruled that the arbitral tribunal had wrongfully applied the LSE because it was a specific legal source of Swiss employment law.
Interesting conclusions can be drawn from these two decisions. First of all, “the more fundamental a certain legal concept is, the higher the threshold for the application of such legal concept to come as a surprise to the parties” [31]. To be precise, the concept of sham agreements is of fundamental nature in Swiss law as opposed to the LSE provisions. The author leans towards the idea of regarding it as one of the foreseeability factors in Swiss case law.
Further, an attentive mind could find that it was somewhat unusual and surprising that in decision No. 4A_254/2010 the Supreme court referred to the rule, which initially was developed for the Swiss judges, and on its basis imposed a duty on arbitrators to apply Article 18 of Code of Obligations ex officio. Indeed, there is no evidence that this rule is relevant in international arbitration, except the Supreme court’s rulings. Non-Swiss parties are, as a rule, not aware of these nuances of the Swiss arbitration law. Thus, it is crucial to identify and study such a phenomenon. It is not unique. For example, English “presumption of similarity” [32] was initially applicable in litigation. However, it was afterwards transferred to the realm of international arbitration via case law. The author proposes to term this legal phenomenon “itinerant legal concept”. Its inherent feature is latency, as it is not self-evident, but always a construed inference that they 1) are applicable in international arbitration and 2) play a pivotal role in the application of jura novit curia.
3.1.2. Further evidence of the jura novit curia priority can be found in decision no. 4A_554/2014 dated 15 April 2015 [33], where this rule was formulated in a more distinctive manner. As outlined by the Supreme court, “parties have no right to be heard on the effect of the law (bolding added. – R.D.M.) to the extent that the arbitration agreement does not limit the tribunal’s mandate” (translated. – R.D.M.).
In this case, the parties had agreed in the terms of reference that the ordre public of France governed the conduct of the arbitration seated in Switzerland. The key element of the French ordre public was asserted to be the principle of contradiction (Fr.: principe de la contradiction), enshrined in Article 16 of the Code of Civil Procedure [34]. It limits the arbitrators’ power to render an award on the basis of new legal grounds without giving the parties an opportunity to comment. However, the arbitral tribunal applied the jura novit curia principle and did not forewarn the parties that it intended to invoke a doctrine of tacit renewal sua sponte under French applicable law.
The challenging party claimed that the French ordre public was binding pursuant to the terms of reference and, as a consequence, the parties’ right to be heard set out in Article 190(2)(d) PILA had been violated. The Supreme court explained that the issues of whether the principe de la contradiction was part of the French ordre public and whether the arbitral tribunal was bound to apply it, were not decisive in this case. Even if the parties had indeed agreed to limit the arbitral tribunal’s powers and exclude the application of the jura novit curia principle, this did not clearly follow from the terms of reference. The Supreme court pointed out that the parties should have relied on the provisions concerning the scope of the jurisdiction (Art. 190(2)(b) of PILA) or the principle of ne eat judex ultra petita partium (Art. 190(2)(c) of PILA). The provisions of Article 190(2)(d) PILA on the right to be heard are not an appropriate legal ground for challenging an award, rendered in breach of the agreement on the application of jura novit curia.
In this case the Supreme court showed greater fidelity to the established approach, expressly stating that the parties have no right to be heard on the effect of the law. Moreover, the Supreme court demonstrated that imprecise terms excluding the application of the jura novit curia principle are construed to the detriment of such an agreement.
3.1.3. In case no. 4P.100/2003 of 30 September 2003 [35] the Supreme court held that an “arbitrator, no more than a state judge, is not required to invite the parties to comment on the legal principles on which they intend to base their decision (bolding added. – R.D.M.)” (translated. – R.D.M.).
3.1.4. Decision no. 4A_146/2023 of 4 September 2023 confirms that, as a rule, jura novit curia prevails and state courts as well as arbitral tribunals freely assess the legal bearing of facts: “as long as the arbitration agreement does not limit the task of the arbitral tribunal to the legal arguments raised by the parties, they do not have to be heard specifically as to the scope to be given to the rules of law (bolding added. – R.D.M.)” [36] (translated. – R.D.M.).
On the basis of the foregoing, it is logical to conclude that the Swiss approach entails a “rebuttable presumption of the jura novit curia priority” over the right of the parties to be heard. Few legal tools could be appropriate to challenge and overturn it: an agreement on limitation of the application of the jura novit curia principle and the foreseeability test.
3.2. Balancing jura novit curia and the right to be heard in Switzerland: the foreseeability test in practice
The right of the parties to be consulted on legal issues is recognised in a limited manner and requires the presence of surprise effect [37]. What factors are relevant in determining whether the parties could have anticipated an application of a particular legal provision? The definition of what is foreseeable produces difficulties as it is assessed on the case-by-case basis.
3.2.1. The most illustrative application of the foreseeability test in practice was found in the French-language decision of 15 July 2013, case no. 4A_188/2013 [37], which sheds light on how to construe foreseeability: the mere fact that neither party have referred to the proportionality principle does not mean that they could not have anticipated that an arbitral tribunal would resort to it in its award.
The dispute arose out of a share purchase agreement concluded on 13 March 2009 (hereinafter — “Agreement”), under which the buyer acquired all shares of a Geneva-based bank (hereinafter — “Bank”) from the sellers. The purchase price was composed of several elements, including 100% of the value of the final goodwill calculated as a percentage of the assets under management (hereinafter — “AuM”). Following the acquisition, the buyer terminated certain fiduciary loans (that the Bank had granted prior to the sale), thereby removing them from the AuM calculation. The AuM was an indispensable component of the purchase price, payable to the sellers in accordance with the earn-out mechanism.
The buyer initiated arbitration under the auspices of the Geneva Chamber of Commerce and Industry. The claim was for the recovery of the costs of the reorganization measures the buyer had to take and the loss suffered due to the fact that the sellers had misrepresented the situation of the Bank, having included the fiduciary loans in the AuM. The sellers (Respondents) by way of the counterclaim argued that the buyer (Claimant) had artificially reduced the final goodwill and, consequently, the purchase price of the Bank as a result of the termination of the fiduciary loans. On this basis, the sellers sought the payment of the outstanding element of the purchase price, pointing out that the fiduciary loans in question formed part of the contractual definition of AuM and should, therefore, have been included in the final goodwill calculation. The arbitral tribunal consisting of three members granted the claim and the counterclaim in part.
The Claimant filed an appeal in civil matters requesting for a stay of enforcement. It sought the partial annulment of the award and the remand of the case to the arbitral tribunal for a new decision. It argued that the arbitral tribunal based its award on a legal ground not raised by the parties without giving them an opportunity to comment in advance. In particular, the arbitral tribunal had concluded that the Claimant should have terminated the fiduciary loans in accordance with the principle of proportionality, which neither party had referred to.
The Swiss Supreme court rejected the appeal. It confirmed the priority of the jura novit curia [38] and clarified the extent to which this principle prevails: “As an exception, they must be asked for their views when the court or the arbitral tribunal intends to base its decision on a rule or legal consideration which has not been invoked during the proceedings and the pertinence of which the parties could not anticipate (bolding added. – R.D.M.)” (translated. – R.D.M.) [39].
However, foreseeability is ultimately a matter of judicial assessment. Courts in different jurisdictions may reach opposite conclusions, when face with the same circumstances, as to whether the parties could reasonably have foreseen an arbitral tribunal’s reliance on a certain legal argument [40]. The way in which the foreseeability is construed is a key.
In that case, the Supreme court dug into the case details to assess foreseeability and ruled that the reference to the proportionality principle could not have come as a surprise to the parties, albeit this principle was not advanced by them during the arbitral proceedings.
First, the Supreme court underscored that the computation of the final goodwill and the determination of the final purchase price of the shares were “at heart of the dispute”. Accordingly, the issue whether or not the Appellant was entitled to terminate the fiduciary loans without their amount being included in the AuM was decisive for the resolution of this dispute. It was “self-evident that all problems concerning the conditions and modalities of such termination naturally fell within the scope of the arbitrators’ analysis”. Therefore, the parties could have foreseen that the arbitrators would focus on this issue and examine legal grounds for the unilateral termination proprio motu.
Secondly, an equally important factor is the specialization of the legal representatives. The Supreme court noted that the Appellant was assisted by the specialists trained in banking law, hence, “could not exclude at the outset that the Arbitral Tribunal would subject the exercise of the right to terminate the fiduciary loans to certain conditions in view of the [Agreement] and in particular to … the principle of proportionality given that it is a right that alters the legal relationship” (translated. – R.D.M.). It was predictable that the arbitrators would attempt to correct this imbalanced situation where the Appellant had taken advantage of the unilateral termination and, as a result, reduction of the purchase price.
And last but not least, the Supreme court stated that the principle of proportionality did not appear as a deus ex machina: this principle was derived from the construction of Clause 3.7 of the Agreement. Hence, the considerations of the arbitral tribunal “were not at all unpredictable” and the award contains a lengthy explanation in this respect.
The Supreme court also admitted that under the guise of an alleged infringement of its right to be heard the Appellant seeks to obtain a substantive review of the award, which is not admissible, and rejected the appeal.
This judgement contains a perfect example of how to construe the foreseeability: restrictively and subject to the circumstances of the case. In particular, one could take into account the following factors: specialization of the legal representatives and connection of the legal provisions raised by arbitrators with central legal issues of a dispute. The establishment of one of these factors boosts the level of predictability in the eyes of the Swiss courts.
3.2.2. In decision no. 4A_300/2021 of 11 November 2021 the Swiss Supreme court held that the arbitral tribunal’s reference to the Bulgarian insolvency law did not contravene the legitimate expectations of the parties, although the Bulgarian law was not initially applicable to the dispute. The following factors were utilized to establish the foreseeability: 1) the parties raised no objections to the application of the Bulgarian law, and 2) they had discussed the potential consequences of the insolvency proceedings in Bulgaria [41].
3.2.3. Further evidence of the restrictive approach to the right to be heard is found in decisions no. 4A_424/2018 of 29 January 2019 [42] and no. 4A_618/2020 of 2 June 2021 [43]. Having established the infringement of the right to be heard, the Supreme court still refused to set aside the award because the outcome of the case would remain unchanged, even if the right of the challenging party had not been violated.
3.2.4. The Supreme court’s position in earlier case no. 4P.100/2003 of 30 September 2003 [44] is rare and of high value for this analysis as the Supreme court invoked the proviso of “no-surprise” and set aside the award pursuant to Article 190(2)(d) PILA.
Notwithstanding the references to contractual provisions found in the statement of claim and in the case files, the Supreme court held that the parties could not have foreseen that the arbitral tribunal would apply these contractual provisions. At first glance, the Supreme court’s reasoning appears to contradict its case law, but this difference is deceptive. It accentuates the importance of in-depth examination of the foreseeability assessment. This decision does not alter, but rather completes the landscape of the Swiss approach to the principle of jura novit curia.
The dispute arose from a licensing agreement for cigarette production in Croatia (hereinafter — “Contract”). On 5 November 1999, the Croatian authorities declared certain contractual provisions invalid. The licensor unilaterally terminated the Contract on 16 February 2000, relying on clauses 15 (early termination) and 20 (regulatory approvals) of the Contract. The licensee claimed that the unilateral termination was not lawful and initiated arbitration under UNCITRAL Rules, with its seat in Zurich. In its award, the arbitral tribunal dismissed all claims.
The Claimant challenged the award on the basis of Article 190(2)(d) PILA, arguing that it had been taken by surprise by the application of clause 20 of the Contract. The Swiss Supreme court granted the relief sought.
The Supreme court’s considerations reveal two strands of thinking. On the one hand, the Supreme court recognised that the parties themselves had referred to clause 20 of the Contract in the statement of claim and in the Respondent’s contract termination letter. Moreover, it confirmed that the scope of application of the jura novit curiaprinciple extends to the construction of the Contract and of the authorities’ decision dated 5 November 1999. In particular, the construction of the latter document triggered the application of contractual clause 20. As a consequence, one could argue that there was no space for surprise effect.
On the other hand, the Supreme court admitted that the parties were still not able to anticipate the application of contractual clause 20. It pointed out that the Respondent’s position as to the Contract termination was confined to three legal remedies: 1) the nullity of the entire Contract under article 20(2) of the Swiss Code of Obligations; or 2) force majeure (clause 15(C) of the Contract); or 3) the doctrine of rebus sic stantibus. The Claimant’s legal arguments did not contain any statements similar to those made by the arbitral tribunal. In contrast, the Claimant structured its objections around the same legal remedies relied upon by the Respondent. It claimed that the Respondent was not entitled to unilaterally terminate the Contract as:
- article 20(2) of the Swiss Code of Obligations was not applicable to the issues in question;
- the Croatian authorities’ declaration on invalidity of certain contractual provisions did not fall within the force majeure clause contained in clause 15(C) of the Contract;
- the Claimant maintained that the doctrine of rebus sic stantibus is an inappropriate legal remedy as those contractual provisions which had been declared invalid were not of a material character.
The arbitral tribunal ignored the legal grounds substantiated by the parties and invoked clause 20 of the Contract. This clause provided that the parties were liable for obtaining all necessary regulatory approvals. The arbitral tribunal construed it in such a way that the declared invalidity of several contractual provisions constituted the failure to fulfil the requirements of clause 20. Under clause 15 of the Contract, the parties were entitled to unilaterally terminate the Contract if the provisions of clause 20 were breached. On this basis, the arbitral tribunal found that the Respondent had lawfully exercised its right to terminate the Contract and dismissed all claims.
Having considered the application to set aside the award, the Swiss Supreme court ruled that the parties’ prior references to clause 20 of the Contract should not lead ineluctably to the conclusion that the arbitral tribunal can freely render an award on its basis, not giving the parties an opportunity to address the application of this clause. Such references also did not, in and of themselves, mean that the parties could reasonably have foreseen its application and, more importantly, its decisive character for the outcome of the dispute.
Weighing up its competing considerations on each side and according appropriate weight to the latter, the Supreme court emphasized that clause 20 had nothing to do with the central legal issues raised before the arbitral tribunal. First of all, the legal remedies advanced by the parties had been at the heart of the dispute throughout the proceedings. It was clear that the arbitral tribunal’s findings deviated significantly from what had been discussed. Further, it was not apparent that the Croatian authorities decision regarding certain contractual provisions could put the entire contract into question. The Supreme court found that the prerequisites for overturning the rebuttable presumption of the priority of the jura novit curia principle were met and set aside the award on the basis of its “surprise effect” (Ger.: Überraschungsverbot).
Interestingly, although neither new rules of law nor contractual provisions other than those mentioned by the parties were applied in this case, there are, in essence, no discrepancies between this case and other Supreme court’s decisions mentioned above. Rather, this case refines the well-established approach by formulating a further decisive factor for foreseeability assessment — “centrality of legal issues”.
4. Conclusion
The analysis of the Swiss approach allows the author to draw the following conclusions.
1. The Swiss legal system is truly a good soil where the principle of jura novit curia thrives on the field of international arbitration. The Swiss lex arbitri empowers arbitrators to look beyond the scope of the parties’ legal representations and heals so-called “due process paranoia”, granting arbitrators legitimate latitude to resolve disputes on the legal grounds they find appropriate. This approach ensures arbitrator’s commitment to a correct application of the law and ultimately guarantees that arbitrators fulfill their mission in accordance with the principle of justice.
2. The analysis of the Swiss case law allows us to answer, from the Swiss perspective, some of the key doctrinal questions listed in the introduction. An arbitral tribunal is both entitled and obliged to apply the law ex officio. As a consequence, an arbitrator enjoys wide discretionary powers and can go beyond the parties’ submissions. An arbitrator is not even required to invite the parties to comment on each and every legal provision raised sua sponte.
However, the latitude enjoyed by arbitrators is not infinite. The presumption that the jura novit curia prevails over the right of the parties to be heard is rebuttable and can be overturned by the application of the foreseeability test along with the doctrine of “surprise awards” (Ger.: Überraschungsverbot).
3. In accordance with the Swiss case law there are two pillars of foreseeability assessment:
- parties’ prior references to particular legal concepts do not, in and of themselves, mean that the parties could reasonably have foreseen their application and, more importantly, their decisive character for the outcome of the dispute;
- the mere fact that an arbitrator has rendered an award based on a legal argument, raised sua sponte and not pleaded by the parties, should not lead ineluctably to the conclusion about the violation of the parties’ right to be heard.
4. In search for equilibrium between the principle of jura novit curia and the right to be heard the following factors could be taken into account (This list of factors is not exhaustive. The factors could be assessed separately or cumulatively and their evaluation is to be determined on the case-by-case basis):
- the parties’ legal representatives have expertise in the applicable law and/or specialise in a particular area of law;
- the parties’ reference to the legal concepts similar to those invoked by arbitrators proprio motu;
- “the more fundamental a certain legal concept is, the higher the threshold for the application of such legal concept to come as a surprise to the parties” [31, p.683];
- the connection of a legal provision raised by arbitrators sua sponte with the central legal issues of a dispute.
5. The Swiss case law confirms that the traditional civil law perception of this principle is not always appropriate. For example, the scope of its application in international arbitration could encompass regulatory provisions [45], “foreign” authorities’ decisions [46], contracts [46] and, as a consequence, arbitration agreements, “foreign” procedural public policy [47] etc. Moreover, it is established that this principle is applied not only to the substance of the dispute, but also to jurisdictional matters [48].
Finally, it should be noted that the limits of the application of the principle of jura novit curia in Switzerland do not confine to the right to be heard and the doctrine of “surprise effect”. One may find also other legal principles which may turn into the boundaries on the way of the application of jura novit curia. Furthermore, the Swiss approach is only one of hundreds of possible approaches adopted all over the world. This pluralism aligned with the lack of regulation put arbitral awards at risk. To ensure legal certainty and predictability in international arbitration, the parties and / or arbitrators could agree in advance on whether and to what extent the jura novit curia principle would be applicable in arbitral proceedings (for example, in an arbitration agreement, terms of reference and, in consultation with an arbitral tribunal, in procedural order no. 1) (ex ante control tools under the voluntary theory [8, p.198-199]).
However, as follows from practice, the parties hardly ever resort to the tools of the ex ante control. For this reason, it is recommended that the arbitrators exercise ex post control: their prerogative needs to be paired with the opportunity of the parties to express their opinions on the legal issues raised by arbitrators proprio motu. If the application of the principle of jura novit curia still becomes the subject matter of a judicial control, the Swiss Supreme court’s approach seems to be pragmatic and most favorable in view of efficiency of international arbitration: if the violation of the right to be heard did not affect the outcome of a dispute, an award may be upheld.
