Swiss Federal Supreme Court rejects Challenge to Award under China-UK BIT

Switzerland

In a decision dated 17 April 2025 (4A_46/2024), the Swiss Federal Supreme Court (FSC) dismissed a request by China to set aside an arbitral award on jurisdiction rendered in a pending investor-state arbitration under the 1986 China-UK Bilateral Investment Treaty (China-UK BIT). This marks the second decision by the FSC concerning jurisdictional issues in investment treaty arbitrations in less than three months (see our article on the FSC's decision on the Spain-Venezuela BIT here). In the recently published April ruling, the FSC examined whether an investment treaty award could withstand scrutiny in light of alleged subsequently discovered evidence.

Background of the Dispute

The FSC's decision concerns the investment arbitration of Jason Yu Song (United Kingdom) v. China under the China-UK BIT, administered by the Permanent Court of Arbitration (PCA), with seat of arbitration in Geneva (PCA Case No. 2019-39). Details about the substance of the investment dispute, registered by the PCA in 2019, remain scarce although the FSC's decision sheds light on the case.

China has faced relatively few investment arbitrations with reports indicating that it has been a respondent in nine such cases. This includes one pending arbitration, Eugenio Montenero v. China, initiated in 2021 by a Swiss investor under the 2009 China-Switzerland BIT. The Swiss investor's case concerns a shareholding investment in a musical festival company incorporated in Hong Kong, and the alleged refusal to authorise a jazz festival in Hainan Province, China.

As highlighted in the FSC's decision, the Jason Yu Song arbitration under the China-UK BIT involves allegations of investment treaty breaches related to a foreign investment in a local company, including the expropriation of land rights in Shanxi Province, in northern China, and a lack of compensation. China raised jurisdictional objections, and the arbitral tribunal, likely following a decision to bifurcate the proceedings, rendered an award on jurisdiction dated 30 December 2021, accepting jurisdiction and dismissing the objections.

This was followed by a request from China to the FSC on 23 January 2024 to set aside the award and refer the matter back to the tribunal for re-evaluation, pursuant to Article 119(a)(3) of the Swiss Federal Act on the Federal Supreme Court (Bundesgerichtsgesetz). At the same time, China sought to have the arbitral tribunal reconsider its jurisdictional decision, but this request was rejected on 12 April 2024. Subsequently, on 4 October 2024, China filed another request with the FSC to set aside the award (4A_528/2024), citing an allegedly relevant criminal judgment dated 4 June 2024 from the Intermediate People's Court of Yulin City, Shaanxi Province. China also requested that this new request be joined with its previous one. The FSC, however, rejected the request in a decision dated 9 October 2024, as the pending proceedings involved different factual and legal circumstances.

Federal Supreme Court Decision

The applicant, China, argued in its initial request before the FSC that it had subsequently discovered three crucial pieces of evidence, which it was unable to present during the arbitration, and that their consideration would have led to a different jurisdictional award. The FSC rejected the request.

The FSC's decision was based on Article 190a(1)(a) of the Swiss Federal Act on Private International Law (Bundesgesetz über das Internationale Privatrecht) (PILA), which allows a party to challenge an award if it discovers significant facts or crucial evidence that it could not present in the arbitration despite due diligence. Such requests exclude facts and evidence that arose only after the award and, under Article 190a(2) of the PILA, are subject to a 90-day deadline. The FSC clarified that a request can be made not only against a final or partial award, but also against an interim award.

The applicant relied on the following: (i) witness testimony dated 9 October 2023, which it claimed would demonstrate that the same witness provided incorrect testimony in the arbitration; (ii) an email from the investor to two individuals, dated 12 December 2021; and (iii) a document entitled “Undertaking”, signed by these two individuals. The latter two documents were said to prove that the investor engaged in abusive treaty shopping by acquiring British nationality for the purpose of initiating an arbitration under the China-UK BIT.

Insofar as the request was based on the documents (ii) and (iii) above, the FSC rejected it on formal grounds. The court noted that the applicant failed to establish compliance with the 90-day deadline, since it only stated that these documents “appeared” within the deadline while remaining deliberately vague about the precise circumstances of the alleged discovery.

Regarding the new witness testimony at (i) above, the FSC found it compliant with the deadline, since – although its date post-dates the award – it concerns facts and circumstances that pre-date the decision.

As for the merits of the testimony, China argued that the new witness evidence proves that the investor had acquired the investment in the company illegally. This argument is based on the legal doctrine of 'investment illegality', which holds that foreign investments not made in accordance with host state laws are not entitled to protection under international investment law. The doctrine has been applied by tribunals that have rejected jurisdiction in investment arbitrations based on this principle.

The investor primarily argued that the alleged new testimony does not fall under Article 190a(1)(a) of the PILA, as it does not qualify as a fact or evidence that existed or was created prior to the award (unechtes Novum) – a technical argument that the FSC adopted in its reasoning when dismissing the request. Referring to the wording of the PILA provision, the FSC also noted that it had clarified in earlier decisions that challenges based on evidence arising after the arbitral award are inadmissible.

Comment

In these circumstances, the FSC adopted a formal approach and refrained from engaging with the merits of the challenge. As a result, it was not necessary for the FSC to address issues of international investment law, such as the doctrine of investment illegality. China’s second request to set aside the award due to an alleged new criminal judgment is still pending, however, and it remains to be seen whether the FSC will need to engage with substantive legal issues in the future. This case highlights a tendency of parties in investment arbitrations for Switzerland as the seat of arbitration and demonstrates that the FSC is becoming an increasingly important court in Europe for addressing such matters.

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