9 October 2017

Substantive pleadings

"US Spotlight" blog series: demystifying Swiss arbitration for the US litigator (Volume 3 of 10)

This blog series provides the US litigator with a practical understanding of Swiss arbitration. It compares a Swiss arbitral proceeding under the Swiss Rules of International Arbitration ("Swiss Rules"), though other rules, e.g., the International Chamber of Commerce ("ICC") Rules, are often used, with a dispute in US Federal District Court ("USDC").

Substantive pleadings
Several weeks after the organizational conference, the substantive dispute will be reduced to writing in earnest with the claimant filing its Statement of Claim ("SOC"). Art. 18 Swiss Rules. Approximately six to eight weeks later, respondent will file its Statement of Defence ("SOD"). While these pleadings are in some ways similar to substantive pleadings at the disposal of the American practitioner in USDC, the US lawyer evaluating them for the first time will be struck by some significant differences. American lawyers often tailor pleadings to comport with a specific litigation tactic: Will the plaintiff bring every conceivable fact and allegation forward with its FRCP 3 complaint, or plead more cautiously, lie in wait during discovery, and later amend? Will the defendant take on every one of the plaintiff's allegations in the answer, or try to cut away at the plaintiff's case by way of one, or several consecutive, motion(s), such as a FRCP 12(f) motion to strike or a FRCP 12 (e) motion for a more definite statement? Will the defendant exhaust its procedural defenses — in perhaps an attempt to exhaust the plaintiff's stomach for costly litigation — by bringing FRCP 12(b)(1) and/or FRCP 12(b)(2) motions to dismiss the action for lack of jurisdiction, venue, pursuant to FRCP 12(b)(3), or process, pursuant to FRCP 12(b)(4) and (5)? Such lengthy procedural wrangling is generally not a significant aspect of a Swiss arbitral proceeding. This can be unsettling to the American practitioner. When the SOC is filed, the parties are destined to go to battle on the merits without room for delay or any possibility that technical stratagem will be heavily implemented to avoid addressing key issues.
Indeed, the SOC and SOD will exhaustively address every major issue in dispute. The SOC, Art. 18 Swiss Rules, for example, may look at first blush to the American practitioner as a hybrid FRCP 3 complaint and FRCP 56 motion for summary judgment. All of claimant's arguments will be pled, and supported by both a comprehensive recitation of the facts and the relevant supporting law. The damages will be quantified and prayers for relief spelled out. Art. 18(2)(d) Swiss Rules. Documents and witness statements may be liberally introduced as evidence in support of the claimant's contentions. Art. 25(3) Swiss Rules and Art. 18(3) Swiss Rules. The SOD, Art. 19 Swiss Rules, is an equally robust responsive pleading, and may rely on all evidence introduced by claimant and any evidence that the defendant introduces. While there are elements of the SOD that may appear similar to a 12(b)(6) styled motion to dismiss for failure to state a claim upon which relief can be granted, there is no such stand-alone 12(b)(6) like motion in Swiss arbitral proceedings. The SOD is a more comprehensive pleading that addresses the substance of the claimant's factual allegations in detail on an allegation by allegation basis. It also may be the last chance for respondent to raise an objection to the jurisdiction or proper constitution of the tribunal. Art. 21(3) Swiss Rules.
The process of bringing forth, and responding to, substantive arguments then repeats itself with the filing of a reply and rejoinder, which may take on alternate titles such as a "memorial" and "memorandum", considered "further written statements", though such further written statements are not guaranteed and may be disallowed if the tribunal deems that both parties have received equal treatment by the filing of the SOC and SOD. Art. 22 Swiss Rules and Art. 15(1) Swiss Rules. As a practical matter, the tribunal usually allows for a reply and re-joinder, though sometimes these are only given orally.
The Swiss Rules contemplate amendments to the SOC and SOD, though, unlike in US litigation, amendments are exceedingly rare. Art. 20 Swiss Rules. Given the more limited role of discovery in Swiss arbitration, the parties are less likely to uncover new, significant facts during the proceedings. Further, amendments are not employed for tactical leverage, e.g., there is no SOC analog to the purposefully opaquely pled complaint, and tribunals employ a higher hurdle for granting leave to amend.
While in theory each subsequent substantive pleading is meant to respond to the substantive pleading of the counterparty that immediately preceded it (see, e.g., Art. 19(2) Swiss Rules), in practice a party often recycles arguments to emphasize points, or holds back key arguments and/or facts and introduces them for the first time in its final substantive pleading. This is often done, for example, at the rejoinder stage, when claimant has run out of opportunities to file substantive pleadings. While "tactics" may be more liberally employed by the American practitioner in USDC, Swiss arbitration is by no means devoid of them. Overall, however, a sense of transparency, and respecting the bedrock principles of equal treatment and the right to be heard, pursuant to Art. 15(1) Swiss Rules, and obligation to act in good faith, pursuant to Art. 15(7) Swiss Rules, tend to prevail. As such, the process follows a predictable timeline focused on the key issues in dispute with few clever attempts to get ahead by pursuing narrow, procedural arguments.

Our Dispute Resolution Team would be happy to discuss any further questions you may have.

Author: Jim Nickovich

Prior volumes: Volume 1, Why Swiss Arbitration? Getting started; Volume 2, The organizational conference

What's up next: Volume 4: Evidence, publication date, 23 October 2017

Categories: Litigation and Arbitration

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