REUTERS | Denis Balibouse

Definition of “investment”: an intriguing obiter dictum of the Swiss Supreme Court with unknown consequences

A few months ago, Naomi Briercliffe (a talented former colleague of mine) and Stephanie Grace Hawes posted on this blog a very interesting and thought-provoking analysis of what they consider to be the most appropriate standard of review when jurisdictional challenges to investment treaty awards are filed before national courts.

In their post, Naomi and Stephanie considered two decisions, rendered by the Court of Appeal of Singapore and the Swiss Supreme Court respectively, in the context of setting aside applications filed against treaty awards on jurisdiction.

After presenting the standard of review applied by these courts (that is, de novo review, entailing a fresh examination of all of the factual and legal issues (Court of Appeal of Singapore), and full power of review, but limited to the legal arguments relating to the jurisdiction of the arbitral tribunal (Swiss Supreme Court)), the two authors argued that the approach of the Swiss Supreme Court was to be preferred to that of the Singaporean courts.

While I share the authors’ view that a de novo review probably goes too far and is likely to expose the challenge process to potential abuse, there is one important element that remains almost unaccounted for in Naomi and Stephanie’s post, and which does, in my opinion, raise certain challenges and legitimate concerns.

At the root of these concerns is an obiter dictum of the Swiss Supreme Court, the impact and practical significance of which remains unclear. For the purpose of this discussion, I begin by summarising the context in which the decision of the Swiss Supreme Court was made.

Recofi v the Socialist Republic of Vietnam

In 2013, Recofi (a French corporation), initiated arbitration proceedings against Vietnam. It was claiming outstanding contractual payments, following the conclusion of a series of contracts relating to the supply of food products and other basic commodities, with both private and state-controlled Vietnamese companies. Recofi alleged that the France-Vietnam bilateral investment treaty (BIT) explicitly recognised “claims to money or to any other performance of an economic value” as “investments”, and that numerous awards confirmed a broad interpretation of the term investment.

The arbitral tribunal declined to exercise jurisdiction for lack of an “investment” under the applicable BIT. The tribunal held that the mere fact that monetary claims are included in the non-exhaustive list of protected investments under Article 1(1) of the France-Vietnam BIT is a necessary, but not a sufficient condition for establishing the existence of a qualifying investment. After considering the object and purpose of the BIT, the arbitral tribunal held that, in order to benefit from the protection of the BIT, the assets falling within the scope of the BIT had to be invested in the territory of the host state, and in accordance with applicable national laws and regulation. In light of those principles, the arbitral tribunal found that Recofi had not participated in any food program in Vietnam and  that it had failed to prove that any such program ever existed.

Recofi filed an application before the Swiss Supreme Court to have the award set aside. The Swiss Supreme Court rejected the application and upheld the award.

With reference to Article 31 of the Vienna Convention, the Supreme Court embarked on an analysis of Article 1(1) of the France-Vietnam BIT (defining investment) and concluded that the claimant’s activities did not constitute an investment in the sense of the applicable BIT.

In its reasoning, the Swiss Supreme Court rejected Recofi’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, BIT provisions should be interpreted on the basis of the individual BIT in question, and not by reference to other (non-binding) decisions.

Surprisingly, the Swiss Supreme Court added the following obiter comment in its decision, just after confirming that it would examine the issue of the arbitral tribunal’s jurisdiction with full power of review:

“… 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”.

This (intriguing) obiter dictum, which shows an (unusual) degree of deference and regard to an arbitral tribunal’s findings, has received very little attention in the (Swiss) arbitration community so far. However, it might have a far-reaching impact on the evolution of Swiss case law when challenges to investment treaty awards on jurisdiction are brought before the Swiss Supreme Court, as explained below.


As a general rule, in the context of setting aside proceedings of arbitral awards, the Swiss Supreme Court is bound by the factual findings of the arbitral award under review. As a result, the Swiss Supreme Court (unlike other state courts) does not review the arbitral tribunal’s findings of fact. The Swiss Supreme Court has consistently reiterated that its mission is not to re-try the case, but only to consider whether any of the statutory grounds for setting aside the award exists. There is, however, one exception to that general rule: the Supreme Court can review the findings of fact when those findings are tainted by a ground for setting aside within the meaning of Article 190(2) of the Swiss Private International Law Act. For instance, the petitioner can seek to show that the findings of fact have been established by the arbitral tribunal in violation of the petitioner’s right to be heard or in violation of public procedural policy.

In the context of setting aside proceedings brought against an arbitral award on jurisdiction (as that was the case in the Recofi matter), the Swiss Supreme Court has nevertheless full power to review the legal arguments relating to the jurisdiction of the arbitral tribunal, but faces the same limitations as those described above with respect to the findings of fact by the arbitral tribunal. Put differently, the review of the Swiss Supreme Court is not limited or precluded in any way by, for instance, the findings (or reasoning) of the arbitral tribunal. This principle was consistently reaffirmed by the Swiss Supreme Court in prior decisions.

In the obiter dictum in Recofi, the Swiss Supreme Court appears to have opened the door to the possibility of departing from that principle. In other words, according to the Swiss Supreme Court, despite its unlimited discretion to assess the jurisdiction of arbitral tribunals, it would not, without reasonable cause, interfere with the jurisdictional decisions of leading expert arbitrators who rendered a unanimous decision, in particular with regard to the undetermined legal notion of investment.

Not only does this statement seem to go against the principle that the Swiss Supreme Court should have complete and full power to review the arbitral tribunal’s decision on jurisdiction, it raises other queries: how would the Supreme Court define “leading expert” arbitrators in future decisions? What if the decision is not made unanimously? Mirroring that last observation, would the Supreme Court adopt a different approach if a dissenting opinion is filed by one of the arbitrators?

This issue will inevitably crop up again in future cases, and there is considerable uncertainty as to whether the Supreme Court will confirm, clarify or simply rescind (expressly or implicitly) that statement. In my opinion, the third option (rescission of that obiter observation would have the (clear) advantage of being in line with the legal principles that apply in the context of setting aside proceedings on jurisdiction. It would also avoid creating a difference of approach in respect of treaty and commercial awards on jurisdiction. A clarification of that statement at least would be welcomed.

Schellenberg Wittmer Sebastiano Nessi

One thought on “Definition of “investment”: an intriguing obiter dictum of the Swiss Supreme Court with unknown consequences

  1. Excellent post! Another thing that caught my attention is the Swiss Supreme Court’s indication that “in the absence of an internationally accepted definition of investment, BIT provisions should be interpreted on the basis of the individual BIT in question, and not by reference to other (non-binding) decisions”. However, then it obiter gives great deference to the arbitrators’ decision, when the fact is that investment arbitrators always refer to other decisions to inform their reasoning. In Recofi it might have been the same. It is as though the Swiss Court is saying “you can’t define investment by looking to other decisions outside the BIT in question” and then adds that they highly trust the arbitrators’ experience and therefore should not second-guess their decision. However, the fact is that the arbitrators might have looked to other decisions outside the BIT in question to decide.

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