Authored By: Siddharth Pariani
Symbiosis Law School, Pune
Case Title & Citation
Title: Marubeni Corporation & Doğuş İnşaat ve Ticaret A.Ş. v. Alstom Transport SA
Citation: Swiss Federal Supreme Court (SFSC), Cases 4A_221/2024 & 4A_223/2024, Judgment delivered on 11 April 2024[1].
Arbitral Tribunal: ICC Case No. 24881, Award rendered in February 2024; Seat of arbitration: Lausanne, Switzerland[2].
Court & Bench
The case was initially heard by a three-member tribunal pursuant to the rules of the International Chamber of Commerce (ICC)[3] under Swiss law. The tribunal was chaired by renowned international arbitration expert Prof. Gabrielle Kaufmann-Kohler. The application for annulment was subsequently heard by the Swiss Federal Supreme Court (SFSC), which acted as a five-member bench with President Martha Niquille leading it. Since the arbitration took place in Switzerland, review proceedings were limited to reasons cited under Articles 190 and 191 of the Swiss Private International Law Act (PILA)[4], where annulment of international arbitral awards made in Switzerland is permissible.
- Date of Judgment
The ICC Tribunal gave its final award on 15 February 2024. SFSC rejected both annulment applications on 11 April 2024.
Parties Involved
The claimants were Japanese trading conglomerate Marubeni Corporation and Turkish construction company Doğuş İnşaat ve Ticaret A.Ş. Both of them were consortium partners claiming damages of €29.3 million and €15.2 million respectively. The respondent is the leader consortium, which is French multinational rail transport company Alstom Transport SA. The claim had mainly been based on Alstom’s violation of Swiss law of breach of fiduciary duties. Furthermore, the Republic of Türkiye, as a third-party respondent, was itself a third-party respondent to an independent but related ICC arbitration filed in 2010.
Facts of the Case
The case was founded upon a consortium agreement dated 1985 between Alstom, Marubeni, and Doğuş to implement the Marmaray Railway Project in Istanbul, Türkiye. The partnership contract had also provided that significant decisions were to be taken unanimously by the three partners. Alstom unilaterally terminated the project contract with the Ministry of Transport in 2010 without notice to the other members. This led to the termination of the Marmaray Project and, according to the claimants’ accusation, resulted in a total loss of over €63 million.
The parties previously engaged in bilateral arbitration hearings, which led to the existing controversy:
- Phase 1 (2010–2016): ICC arbitration between Alstom and the Republic of Türkiye on state liability issues and ultimately resolved.
- Phase 2 (2015–2024): Marubeni and Doğuş brought a new ICC arbitration against Alstom (Case No. 24881) for consortium obligation violations.
The claimants had contended that Alstom’s unilateral behavior constituted a breach of its fiduciary obligations under Article 398 of the Swiss Code of Obligations. They contended that they incurred significant losses in terms of lost profits and damage to reputation. Even if the tribunal held that Alstom had indeed breached the consortium agreement, it still held that the claimants were also partially at fault, attributing 33% of delays and complexities of the project to their own actions.
Issues Raised
- Whether the Respondent, Alstom Transport SA, in acting unilaterally to cancel the Marmaray Project contract with the Republic of Türkiye without securing the unanimous agreement of the members of the consortium, has breached its fiduciary duties under Article 398 of the Swiss Code of Obligations and the provisions of the Consortium Agreement.
- Whether the Claimants, Marubeni Corporation and Doğuş İnşaat ve Ticaret A.Ş., were contributorily negligent in the execution of their contractual undertakings, specifically in respect of delay and inefficiency due to inept subcontractor management, so as to justify reduction of damages proportionate to their own blameworthiness under Article 44 of the Swiss Code of Obligations.
- Whether the arbitral tribunal’s reinstatement of questions of fact regarding the validity of the termination which had seemingly been determined in the earlier ICC arbitration between the Consortium and the Republic of Türkiye constituted a breach by re-deciding of Article 190(2)(b) of the Swiss PILA.
- Arguments of the Parties
Claimants (Marubeni Corporation & Doğuş İnşaat):
The claimants pleaded that Alstom violated its fiduciary obligations under the Swiss Code of Obligations, Article 398, by ending the contract with the Ministry of Transport of Türkiye without attempting to seek agreement from the consortium partners. They emphasized that the consortium agreement specifically assured joint decision-making in each significant project step. Due to Alstom’s unilateral act, Marubeni and Doğuş incurred cumulative losses of more than €63 million, including loss of profits and reputation within the global construction business. They also claimed that the res judicata doctrine did not apply because the 2010 hearing was in relation to independent claims against a sovereign and was unrelated to the apportionment of fault or fiduciary duty among consortium members.
Respondent (Alstom Transport SA):
Alstom insisted that it was acting within commercially reasonable limits and that the claimants themselves played a role in protracting the project through hiring inefficient subcontractors and mismanaging time schedules. This contributory negligence, Alstom argued, merited a significant diminution of damages pursuant to Article 44 of the Swiss Code of Obligations. Furthermore, Alstom had also raised a res judicata jurisdictional defense by asserting that the legal consequence of the termination was already conclusively determined in the 2010 ICC arbitration against the Turkish government[5]. It described the damages claim as speculative and evidentiarily poor, particularly since any loss of termination would be mitigated by pre-termination inefficiencies that existed in the projects on which the claimants were as or more to blame.
- Judgment
In the February 2024 final award, it held that Alstom had breached the consortium agreement in acting unilaterally without unanimous approval. The ICC tribunal allowed the claimants’ case, providing it with an award of €29.3 million against Marubeni and an award of €15.2 million against Doğuş. But it applied a 33% deduction to account for contributory negligence on the part of claimants through mismanagement and delay by subcontractors, thereby acknowledging partial fault. Alstom’s res judicata defense was rejected by the tribunal, holding that the 2010 arbitration decided matters of sovereign liability between the consortium and Republic of Türkiye and not internal consortium obligations among partners. The Swiss Federal Supreme Court then rejected Alstom’s applications for annulment in April 2024, confirming the tribunal’s jurisdiction and declaring that no errors of procedure or jurisdiction had been made under Article 190 of the Swiss PILA. The court reaffirmed its restricted scope of review in international arbitrations based in Switzerland.
Legal Reasoning / Ratio Decidendi
The decision has legal significance regarding its method of approach to fiduciary obligations, contributory fault, res judicata application, and extent of annulment review under Swiss law of arbitration.
Breach of Fiduciary Duty (Key Ratio):
The tribunal reaffirms that pursuant to Article 398 of the Swiss Code of Obligations[6], consortium members are in fiduciary duties with respect to mutual consultation, loyalty, and good faith towards one another. The ruling reaffirmed that these responsibilities are increased where one member takes a leadership or coordinating position, such as taken up by Alstom. The unanimous consent provision was read to be a binding procedural protection rather than a discretionary directive. The tribunal and the SFSC both held Alstom’s unilateral termination to be a blatant violation of this clause and the fiduciary standards it embodies. Citing BGE 142 III 265[7], the award maintained that there was a need for uncompromising adherence to intra-consortium procedures.
Contributory Negligence Standard:
Based on Article 44 of the Swiss Code of Obligations[8], the tribunal held that Marubeni and Doğuş shared some responsibility for inefficiencies in the project. Their delays in the execution of subcontractors, failure to meet internal milestones, and coordination failures substantially caused the difficulties in the project and financial losses. The 33% reduction of damages was held proportionate and in accordance with Swiss tort law[9], which anticipates courts to consider the plaintiff’s inability to avoid loss or prevent foreseeable risk. Although the tribunal did not disclose a mathematical computation for the 33% ratio, it justified the percentage based on the compounded effect of the claimants’ operational mistakes.
Res Judicata Inapplicability:
The tribunal dismissed the plea of Alstom that there was an antecedent resolution of the dispute based on the 2010 arbitration with the Turkish government. It ruled that the subject matter of the former case was totally unrelated, since it was one on sovereign breach of contract whereas the present dispute was on internal obligations between private parties. Thus, res judicata did not apply. Article 190 of the Swiss PILA[10] invalidates the abuse of jurisdiction, but only where the same dispute is already judicially resolved between the same parties and over the same legal claims. That threshold was not met here.
SFSC’s Annulment Doctrine:
The Swiss Federal Supreme Court reaffirmed the limits of judicial review of international arbitral awards seated in Switzerland[11]. Following BGE 140 III 86[12], the court confirmed that it cannot examine factual conclusions or the application of law on the part of the tribunal unless a party can establish a serious breach of procedural fairness, arbitrator bias, or obvious excess of jurisdiction. Since none of these grounds were established by Alstom, the SFSC rejected the annulment petitions in their entirety. The judgment thus reaffirmed the pro-arbitration stance of Switzerland and finality of arbitral awards rendered under ICC rules as well as Swiss law.
Impact & Observations
This case offers important lessons for both corporate governance in joint ventures and the practice of international arbitration.
Precedential Value for Corporate Law:
The court decision supports the binding nature of unanimous-consent provisions under consortium or joint venture contracts. Subcontractors in multi-national infrastructure projects must clearly outline powers of decision-making and establish procedural safeguards against one-sided conduct. The decision also offers a useful benchmark in quantifying damages in such settings, recognizing that contributory negligence can effectually subtract recoverable compensation where partners negligently fail to prevent known hazards or perform proper due diligence.
Arbitration Practice Implications:
The case reaffirms the arbitration-friendly attitude of the Swiss judiciary. By declining to set aside the award even where there were disagreements in substance, the SFSC bolstered the notion that arbitrators are better suited to determine commercially fact-laden disputes. The case also showcases enforcement uncertainties: whereas the award is valid and final in Switzerland, Alstom will seek to resist enforcement in France or Türkiye based on local public policy or procedural grounds under the New York Convention. Resistance is not rare in cross-border infrastructure disputes with state-adjacent contracts.
Critical Analysis:
The rationale of the tribunal facilitated clarity of the limits of res judicata in multi-phased arbitration proceedings and emphasized the independence of internal contractual issues from earlier state-level arbitrations. The judgment failed to give explicit reasons for the choice of the 33% reduction rate, which may be said to cause transparence and consistency problems in arbitral quantification of fault. In addition, the tribunal did not give much weight to Alstom’s argument that force majeure conditions in Türkiye justified termination of contract, a gap perhaps worthy of more scrutiny.
Cross-Border Relevance:
The ruling presents a clear template for the control of legal risks of transnational construction consortia particularly in jurisdictions transitioning between civil and common law systems. In the future, the rationale will likely shape the way that courts and arbitral institutions can deal with fiduciary failures and mitigation lapses in Europe-Asia infrastructure alliances ruled by Swiss or ICC regimes.
Reference(S):
[1] Marubeni Corp & Doğuş İnşaat v Alstom Transport SA [2024] SFSC 4A_221/2024.
[2] ICC Case No. 24881, Marubeni/Doğuş v Alstom (Award, 15 February 2024) (unreported).
[3] ICC Arbitration Rules (2021).
[4] Swiss Private International Law Act (PILA) 1987.
[5] Consortium v Republic of Türkiye, ICC Case No. 17876/GZ (Award, 2016)
[6] Swiss Code of Obligations (OR) 1911, art 398.
[7] BGE 142 III 265 (2016) (Swiss Federal Supreme Court).
[8] OR 1911, art 44.
[9] ICC Case No. 24881 (n 2), paras 304–310.
[10] PILA 1987, art 190(2)(b).
[11] ICC Case No. 24881 (n 2), dispositif.
[12] BGE 140 III 86 (2014) (Swiss Federal Supreme Court).
