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Part IV Selected Issues for Further Study, A Financial Transactions, 2 Mass Claims and Dormant Swiss Accounts

From: Arbitration of International Business Disputes: Studies in Law and Practice (2nd Edition)

William W. Park

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2021. All Rights Reserved. Subscriber: null; date: 15 April 2021

(p. 671) Mass Claims and Dormant Swiss Accounts*

  1. A.  Claims to Dormant Swiss Bank Accounts: Ambiguity in the Scope of Arbitration 671

A.  Claims to Dormant Swiss Bank Accounts: Ambiguity in the Scope of Arbitration

What is a “non-Swiss” account?

In 1997 an independent committee representing both Jewish groups and Swiss bankers established in Zürich a Claims Resolution Tribunal (CRT)1 to resolve disputes over dormant Swiss bank deposits, some of which belonged to victims of Nazi persecution.2 These assets had generated class actions in New York,3 as well as considerable acrimony in Swiss-American commercial relationships.4

The CRT was set up to hear claims to accounts opened by “non-Swiss” persons that had been inactive since the end of the Second World War and published by the Swiss Bankers Association.5 Presumably Swiss account holders and their heirs would have no reason to (p. 672) resist Switzerland’s judicial system, while non-Swiss might prefer the enhanced neutrality offered by arbitration.

The meaning of “non-Swiss” account holder is not self-evident. In English the Rules of Procedure6 refer to “accounts opened by non-Swiss nationals or residents,” using the disjunctive “or” in a way that seems to include foreign nationals wherever resident, as well as Swiss citizens living abroad.7 By contrast, the French text of the Rules refers to accounts opened by persons having neither Swiss nationality nor Swiss residence (“comptes ouverts par des personnes n’étant pas de nationalité suisse, ni résidentes en Suisse”), thus including in jurisdiction only accounts of foreigners living outside Switzerland. Under the German version of the Rules the only disqualifying factor seems to be Swiss nationality, since jurisdiction extends to “Konten betreffen, die von nichtschweizerischen Bankkunden eröffnet wurden,” which would allow jurisdiction over accounts of foreigners regardless of where they lived.

Ambiguities were ultimately resolved by the CRT’s interpretation of the Rules of Procedure to cover claims to accounts opened either by non-Swiss nationals or by non-Swiss residents. Thus arbitrators have power to hear claims to accounts of foreigners whether residing inside or outside Switzerland, as well as accounts of Swiss nationals residing outside Switzerland.8 Any doubt concerning the nationality or residence of an account holder is to be resolved in favor of arbitral jurisdiction.9

The arbitration clause

Since arbitration is consensual, anyone seeking CRT arbitration with respect to a dormant account must agree explicitly to arbitrate, even if the claim falls within the general jurisdictional boundaries established by the Rules of Procedure. The arbitration clause, or Claims Resolution Agreement, is drafted narrowly to cover “claims to the account,” rather than claims “related to” the account. It is uncertain, therefore, whether requests for damages for alleged account mismanagement fall within the scope of CRT jurisdiction, or instead require a special ad hoc submission to arbitration.

One intriguing jurisdictional feature of CRT arbitration is its treatment of disputes relating to the arbitral process rather than the underlying claim. Like the Russian matryoshka, in which one doll opens to reveal another doll nestled inside, the Claims Resolution Agreement contains an arbitration clause within an arbitration clause. Claims against CRT arbitrators (alleging, for example, bad faith or corruption) must themselves be submitted to arbitration under the Rules of the International Chamber of Commerce (ICC).

This duty to arbitrate about the arbitration is subject to prior exhaustion of any right of recourse against the award under Swiss law. Thus a dissatisfied loser must first seek annulment of a contested award under Article 190 of the Schweizerisches Bundegesetz über das (p. 673) Internationale Privatrecht (IPRG), whose grounds for vacatur include, inter alia, an arbitrator’s denial of due process and violation of public policy.

Regardless of how one interprets the scope of arbitral jurisdiction, it may sometimes be necessary to ascertain who ultimately makes this determination. Loan workouts in the United States have led courts to consider who has the final word on an arbitrator’s jurisdiction.

Footnotes:

Adapted from “Jurisdictional Issues in Financial Arbitration”, from Klaus Peter Berger (ed.), Festschrift für Otto Sandrock zum 70. Geburtstag 745–59 (Verlag Recht und Wirtschaft, 2000).

1  The Independent Committee of Eminent Persons (ICEP) chaired by Paul Volcker (formerly of the U.S. Federal Reserve Board) created a Swiss foundation (Stiftung), which in turn appoints arbitrators. The Rules of Procedure for the Claims Resolution Process were issued on 15 October 1997. See generally, Hans Michael Riemer, Georg von Segesser and Brigitte von der Crone, Claims Resolution Tribunal for Dormant Accounts in Switzerland, 14 Int’l Arb. Rep. 19 (February 1999); Amance Dourthe-Perrot, Le Tribunal arbitral pour les comptes en déshérence en Suisse, Rev. Arb. 21 (1999).

2  See Daniel Girsberger, Das Internationale Privatrecht der Nachrichtenlosen Vermögen in der Schweiz (1997); Urs Zulauf, Bankgeheimnis und Historische Forschung, 1994 Zeitschrift für Schweizerisches Recht 105; Detlev Vagts, Switzerland, International Law and World War II, 91 Am. J. Int’l L. 466 (1997).

3  The $1.25 billion settlement of these actions was announced on 12 August 1998 (Transcript of Settlement before Hon. Edward R. Korman, CV-96-4849, CV-96-5161, and CV-97-0461), with the final settlement documents signed early in 1999. For the background of the class actions, see Anita Ramasastry, Secrets and Lies?: Swiss Banks and International Human Rights, 31 Vanderbilt J. Transnat’l L. 325 (1998).

4  See Swiss Are Warned of New York Sanctions, International Herald Tribune, 3 July 1998, 5; La Résistance au boycott américain s’amplifie, Le Temps, 31 July 1998; Trade War between United States and Switzerland, N.Y. Times, 31 July 1998, A-13.

5  Article 1(i) of the Rules of Procedure defines accounts as dormant if inactive since 9 May 1945 and refers to account lists published on or after 23 July 1997. In addition, Article 1(ii) of the Rules gives the CRT power to hear claims to accounts held by Swiss intermediaries for victims of Nazi persecution. While residence is relevant to the definition of “non-Swiss” accounts, only citizenship comes into play in defining accounts of intermediaries, described as “Swiss nationals,” “ressortissants suisses” or “Schweizer Bürgern.”

6  Article 35 of the Rules of Procedure provides that the Rules’ English version “shall prevail and be applied by the Claims Resolution Tribunal.”

7  This interpretation would extend jurisdiction not only to the accounts of Germans living in Berlin, but also to the accounts of Americans in Geneva and Swiss in Paris.

8  At its Plenary Session of 22 October 1998 the CRT exercised interpretive power under Article 42 of the Rules of Procedure.

9  The CRT applied similar principles of jurisdictional generosity to mispublished accounts, which by inadvertence were made public even though active since the Second World War or opened by Swiss citizens living in Switzerland.