Swiss Federal Supreme Court dismisses second Challenge to Award under China-UK BIT
In another decision dated 26 June 2025 (4A_528/2024), published on 21 July 2025, concerning an investment treaty arbitration, the Swiss Federal Supreme Court (FSC) dismissed China's second request to set aside an award on jurisdiction rendered under the 1986 China-UK Bilateral Investment Treaty (China-UK BIT).
In this second ruling on the same matter, the FSC again examined whether an investment treaty award could withstand scrutiny in light of alleged new evidence – this time, a judgment from a Chinese criminal court (Criminal Judgment). In its assessment, the FSC had to determine whether the Criminal Judgment demonstrated that the investment underlying the investment arbitration had been made illegally – an issue which, if known during the arbitration, might have led the arbitral tribunal to dismiss the treaty claims for lack of jurisdiction (reflecting the doctrine of "investment illegality" in international investment law). The FSC also referred to the European Convention on Human Rights (ECHR) and the International Covenant on Civil and Political Rights (ICCPR) regarding the applicability of the Swiss legal framework for the review of arbitral awards. This article discusses the background and key findings of the FSC's decision.
Background of the Dispute
As reported previously (see the article on China's first challenge here), the FSC's series of decisions concerns the investment arbitration of Jason Yu Song v. China under the China-UK BIT, administered by the Permanent Court of Arbitration (PCA) and seated in Geneva (PCA Case No. 2019-39). Unlike in many ICSID arbitrations, the award in Jason Yu Song is not publicly available. Some factual details of the investment arbitration, however, have emerged as a result of the FSC's rulings on the matter.
The arbitration involved claims under the China-UK BIT of an alleged expropriation of land rights in Shanxi Province, in Northern China, and a lack of compensation. As confirmed in the FSC's second ruling on the case, the arbitral tribunal, in a final award dated 24 January 2025, found that China had breached the expropriation clause in Article 5 of the China-UK BIT and ordered the state to compensate the investor in the amount of USD 26,045,613.90 plus interest.
As outlined in the FSC's first decision (4A_46/2024), China raised jurisdictional objections, which the arbitral tribunal dismissed in its award on jurisdiction dated 30 December 2021, thereby accepting jurisdiction.
On 23 January 2024, China requested that the FSC set aside the jurisdictional award and refer the matter back to the arbitral tribunal for re-evaluation, pursuant to Article 119(a)(3) of the Swiss Federal Act on the Federal Supreme Court (First Request). China had previously requested that the arbitral tribunal reconsider its jurisdictional award, but the tribunal rejected the request on 12 April 2024. On 4 October 2024, China filed another request with the FSC to set aside the jurisdictional award (Second Request), citing the Criminal Judgment dated 4 June 2024 from the Intermediate People's Court of Yulin City, Shaanxi Province. China also requested that the two applications before the FSC be consolidated, but the court rejected this request on 9 October 2024, since the requests concerned different factual and legal circumstances.
As discussed in our earlier article on the matter (see here), the FSC rejected the First Request. China argued that it had newly discovered three pieces of evidence (an email, a document, and the testimony of a witness who also testified in the arbitration), which it was unable to present during the arbitration, and that the consideration of the evidence would have led to a different jurisdictional award. This request was based on Article 190a(1)(a) of the Swiss Federal Act on Private International Law (PILA). China argued that the new evidence demonstrated the investor's involvement in improper treaty shopping by acquiring the British nationality to initiate arbitration under the China-UK BIT, and that the investment was made illegally, thereby depriving the arbitral tribunal of jurisdiction.
The FSC dismissed the First Request on formal grounds. It held that the subsequently discovered evidence was either time-barred, as China failed to demonstrate compliance with the 90-day deadline set by Article 190a(2) of the PILA, or did not qualify as a fact or evidence existing or created prior to the award (unechtes Novum), as required by Article 190a(1)(a).
Federal Supreme Court's Second Ruling
In its Second Request, China submitted, based on Article 190a(1)(a) and (b) of the PILA, that it had obtained another crucial piece of evidence after the award – this time, the Criminal Judgment. The FSC also rejected this request, upholding its earlier decision that the jurisdictional award withstands scrutiny under Swiss law.
The application under Article 190a(1)(a) of the PILA concerning the newly obtained Criminal Judgment was not time-barred. As with the First Request, however, the FSC rejected China's application, holding that the Criminal Judgment did not constitute a fact or piece of evidence that pre-dated the award, as required under this provision. The Criminal Judgment was issued on 4 June 2024, whereas the award on jurisdiction was dated 30 December 2021.
This left the FSC to consider China's separate application under Article 190a(1)(b) of the PILA, which requires that criminal proceedings have established that an arbitral award was tainted by a felony or misdemeanor – even if no party was ultimately convicted by a criminal court, and regardless of whether the criminal offence was committed by a party to the arbitration or a third party.
In its legal assessment, the FSC confirmed that criminal judgments issued by foreign courts can fall within the scope of the provision, provided that the requirements of Article 6(2) and (3) of the ECHR and Article 14(2)-(7) of the ICCPR – concerning the human rights to "equality before the courts" and "a fair trial" – have been met. The FSC's decision does not further address these requirements.
Turning to the substance of the Second Request, the FSC noted that, in reviewing the findings of the Criminal Judgment under Article 190a(1)(b) of the PILA, there must be a causal link between the offence established in the underlying criminal proceedings and the arbitral award subject to revision. Specifically, the criminal offense must have had a direct or indirect impact on the award to the detriment of the applicant.
Against this legal standard, the FSC assessed China's argument that the Criminal Judgment proves the investor illegally acquired the investment underlying the investment arbitration – namely, the "shares" in the local investment vehicle. The term "investment" is defined in Article 1 of the China-UK BIT for jurisdictional purposes of the treaty's ratione materiae application and includes shareholdings. China argued that the arbitral tribunal confirmed that shares obtained illegally do not qualify as an investment under Article 1 of the BIT, and that claims of investment illegality must be grounded in circumstances such as a shareholding acquired through fraud or bribery. In China's view, the Criminal Judgment demonstrated that this is the case and false testimony was given during the arbitration. Had the arbitral tribunal been aware of the forgery of the seals, the false testimony, and the established illegality in the acquisition of the shares, it would have classified all four share transfers as illegal and dismissed the claims for lack of jurisdiction. Additionally, China argued that the tribunal would have declined jurisdiction even if not all of the share transfers had been illegal.
The FSC disagreed with the final argument that, for the purposes of an arbitral tribunal's jurisdiction, the legality of an investment under the China-UK BIT should be considered holistically or in a unified manner. In this respect, the FSC found that China, in submitting the Criminal Judgment, was only able to prove that one of the four share transfers – representing 10% of the shareholding investment – was illegal and subject to criminal liability. In the FSC's view, no sufficient causal link could be established between the proven criminal offence and the jurisdictional award, contrary to the requirements of Article 190a(1)(b) of the PILA.
Comment
Unlike its decision on the First Request, the FSC did not dismiss the Second Request for review of the award on formal grounds but engaged with the substance of the matter. The recent decision is confined to the specific legal framework under Swiss law and does not directly address the doctrine of investment illegality as developed in international investment law or investment arbitration jurisprudence. The ruling is final. As Switzerland's highest court, the FSC's decisions are not subject to further challenge through ordinary legal remedies under Swiss law.
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