REUTERS | Gleb Garanich

Definition of an “investment” in treaty cases: the Swiss Supreme Court moves in the right direction

What standard of review should the Swiss Supreme Court apply when seised with a challenge to an award on jurisdiction in an investment treaty dispute and, more specifically, when it has to review the findings of the arbitral tribunal regarding the definition of an investment?

In October 2017, I expressed my concerns on this blog about an obiter dictum of the Swiss Supreme Court in Recofi v the Socialist Republic of Vietnam, in which the Supreme Court suggested that its scope of review would be (somehow) limited when reviewing awards on jurisdiction in investment treaty cases. One year later, the Swiss Supreme Court appears to have decided to depart from that view.

Recofi v the Socialist Republic of Vietnam: an intriguing obiter dictum of the Swiss Supreme Court

In the Recofi decision, the Swiss Supreme Court rejected the investor’s argument of an internationally accepted (broad) definition of investment covering monetary claims. The Supreme Court made clear that, in the absence of an internationally accepted definition of investment, bilateral investment treaty (BIT) provisions should be interpreted on the basis of the individual BIT in question and not by reference to other (non-binding) decisions. Surprisingly however, the Swiss Supreme Court added the following obiter comment in its decision:

“…as the term investment set out in Art. 1(1) of the BIT was defined by three arbitrators, the experience in the field and the international reputation of whom both Parties recognise, the Swiss Supreme Court will not depart from the unanimous interpretation of the term given by leading experts in the field without reasonable cause”.

In my post of 19 October 2017, I expressed my concerns about this (intriguing) obiter dictum, which not only showed an unusual deference and regard to an arbitral tribunal’s findings, but was also at clear variance with the principle that the Swiss Supreme Court has full power of review when it comes to analysing the jurisdiction of the arbitral tribunal. With that obiter, the Swiss Supreme Court appeared to open the door to the possibility of departing from that principle. In other words, according to the Supreme Court itself, despite its unlimited discretion to assess the jurisdiction of arbitral tribunals, it would not, without reasonable cause, interfere with the jurisdictional decisions of “leading experts” in investment treaty arbitration who would have rendered a unanimous decision, in particular with regard to the undetermined legal notion of investment.

The Crimea cases: no apparent limitation of the Swiss Supreme Court’s scope of review

In two decisions dated 16 October 2018, and published on 16 November 2018, the Swiss Supreme Court declined the Russian Federation’s requests to set aside two interim awards for lack of jurisdiction. The Supreme Court found that the arbitral tribunal rightly held that the territorial scope of the BIT between the Russian Federation and Ukraine of 27 November 1998 (Russia-Ukraine BIT) includes Crimea as a territory over which the Russian Federation exercises de facto control. With respect to the subject matter scope of the Russia-Ukraine BIT, the court concluded that the term “investment” in Article 1(1) of the Russia-Ukraine BIT also comprises investments originally made in the investor’s home state that are only subsequently located in the host state as a result of a shift of borders (decisions 4A_396/2017 and 4A_398/2017).

With respect to the definition of an investment, the Swiss Supreme Court embarked in a very in-depth analysis of the various findings of the arbitral tribunal. Importantly, at no point did the Supreme Court appear to have considered itself to be in any way restricted in its analysis. In addition, at the very outset of its reasoning, the Swiss Supreme Court confirmed that its power of review was unlimited even when reviewing awards on jurisdiction in the context of investment arbitration proceedings.


In setting aside proceedings, the Swiss Supreme Court does not review the arbitral tribunal’s findings of fact. In other words, the Supreme Court does not act as a court of appeal when it comes to arbitral awards. For awards on jurisdiction, the Swiss Supreme Court has full power of review regarding the arbitral tribunal’s legal findings, but no power of review regarding the arbitral tribunal’s factual findings (révision au fond), with very limited exceptions, that is, if new facts are discovered or if one of the grounds for setting aside is relied on in relation to the establishment of the fact.

The author believes that there is no reason warranting that “investment awards” are treated differently than “commercial” or “sports” awards. However, in the Recofi decision, the Supreme Court opened a bit of a Pandora’s box by including an obiter dictum stating that, even though it had full power of review in relation to legal findings in awards on jurisdiction, it would not unnecessarily depart from the unanimous findings of recognised specialists (that is, the arbitral tribunal) in relation to the undefined legal notion of “investment”. This created some uncertainty as to whether the Supreme Court really would apply a different standard in investment treaty cases.

Despite the fact that the Swiss Supreme Court did not directly address this issue in the Crimea cases, it cannot be disputed that the court has made a very detailed analysis of the various legal findings of the arbitral tribunal without considering itself to be in any way restricted. Crucially, the Supreme Court did not even seek to rely on its prior obiter dictum. In those circumstances, it is not unreasonable to conclude that the Swiss Supreme Court seems to have, at least implicitly, rescinded its obiter dictum in the Recofi case. That being said, to put that debate definitively to rest (because this issue will inevitably crop up again in future cases), it would be good if the Swiss Supreme Court could expressly and explicitly clarify that its intention is not (and has never been) to create different standards of review.

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