International Arbitration 2021

Last Updated August 17, 2021

Switzerland

Law and Practice

Authors



GABRIEL Arbitration is an independent dispute resolution boutique law firm specialising in international arbitration with its office in Zurich, Switzerland. The team presently consists of Dr Simon Gabriel, founder and partner; Dr Axel Buhr, partner; Dr Johannes Landbrecht, of counsel; and Andreas Schregenberger, senior associate. Clients benefit from first-class dispute resolution services, fewer conflicts of interest and competitive pricing. The firm's lawyers are particularly experienced in disputes concerning joint ventures and consortia, energy-related issues, international sales contracts, licensing contracts, and post-M&A issues. In terms of industries, the team is experienced in disputes on commodity trading, pharmaceutical products, construction projects, production of hi-tech equipment, and oil and gas.

Switzerland is one of the leading places of arbitration worldwide. The local hubs are Geneva (in the French-speaking part of Switzerland) and Zurich (in the German-speaking part). There is also some international arbitration activity in Lausanne (the seat of the Court of Arbitration for Sport, CAS), Lugano (in the Italian-speaking part), and Basel (a pharmaceutical hub in the German-speaking part of Switzerland).

The importance of Switzerland as a place of arbitration stems from Switzerland's traditional neutrality, its cultural diversity as reflected by the four official languages of the country and, most importantly, the quality and integrity of the legal profession.

Switzerland as a place of arbitration is often chosen together with Swiss substantive law because the latter has influenced the making of the laws of some countries in South-Eastern Europe and beyond, the most prominent among them being Turkey. Swiss substantive law is, therefore, in many cases both neutral and familiar to both parties in a dispute – this being an advantage that few substantive laws have. Other advantages of Swiss substantive law are its flexibility and the high priority of parties' agreements.

Furthermore, Switzerland also has a tradition of efficiently administering small and mid-size disputes, with the Swiss Rules of International Arbitration stipulating that disputes up to a value of CHF1 million are dealt with in expedited proceedings within six months. The expedited proceedings are increasingly also chosen by parties in larger disputes when time is of the essence.

Moreover, Switzerland promotes efficient international arbitration because an arbitral award that was rendered by a tribunal with its seat in Switzerland can only be set aside for very limited reasons, and only the Swiss Federal Tribunal (the highest Swiss judicial authority) is competent to hear such a case. There is even the possibility to exclude any challenge proceedings (see 11.2 Excluding/Expanding the Scope of Appeal).

Finally, the recently enacted "revision light" of the Swiss lex arbitri contained in the 12th Chapter of the Private International Law Act (PILA), which entered into force on 1 January 2021, confirms and even strengthens the uniquely liberal and arbitration-friendly tradition of Switzerland (see 2.2 Changes to National Law). On the institutional side, the conversion of the former Swiss Chambers' Arbitration Institution (SCAI) to the Swiss Arbitration Centre and the revision of the Swiss Rules of International Arbitration (the "Swiss Rules"), which entered into force on 1 June 2021, will help maintain Switzerland's standing as a major arbitration venue (see 1.4 Arbitral Institutions).

To begin with, it goes without saying that the ongoing COVID-19 pandemic has had a considerable impact on arbitration proceedings in Switzerland both on the procedural and on the substantive side.

At least in the beginning of the pandemic, in-person meetings were impossible for several months and many hearings were postponed as a result. Against this background, the increased use of technical tools to conduct hearings has generally gained more attention from the parties. In this respect, tribunals often require the parties to liaise with each other for the agreement on a cyber protocol for virtual examinations. However, particularly in bigger cases with more than ten participants, there was, and is, often still a certain reluctance to depart from the traditional in-person hearing format. With increasing progress in the combating of COVID-19 worldwide, hearings are also generally more and more held in-person again.

From a substantive perspective, the COVID-19 pandemic has generated a considerable caseload based on force majeure clauses and/or questions as to whether a party was excused from performing its obligations that were otherwise due under the contract. In many cases, this led to new and delicate issues.

There has been no exceptional increase (or decrease) of arbitration proceedings in any particular industry in Switzerland. As previously mentioned, the caseload based on force majeure clauses and similar issues has increased in some industries along the supply chain, however, as a result of the COVID-19 pandemic.

Key industries that usually appreciate arbitration as a dispute resolution method are the pharmaceutical industry, the construction industry and commodity traders, as well as exporters and importers of technical equipment.

The financial industry in Switzerland is not yet a frequent user of arbitration and it will be interesting to follow the developments in this regard.

The leading arbitration institutions are the International Chamber of Commerce (the "ICC Rules") and the Swiss Arbitration Centre (Swiss Rules); ie, the successor of the former SCAI.

In May 2021, the Swiss Arbitration Centre was established by the Swiss Arbitration Association (ASA) and the cantonal chambers of commerce that formerly constituted SCAI. As a one-stop shop, the Swiss Arbitration Centre aims to make Swiss arbitration more accessible for international users, who sometimes found the previous dualism confusing.

In June 2021, the revised Swiss Rules entered into force (replacing the version of 2012). Being based on the UNCITRAL Arbitration Rules, the Swiss Rules provide for an arbitration procedure that combines international best practices with useful innovations and a comparatively light institutional framework. Only a few substantial amendments were made and the key features of the Swiss Rules remain the same ("light touch administration", multiparty proceedings, expedited proceedings and emergency arbitration). Key changes include the following.

  • Multiparty proceedings – the consolidation and joinder provision in the former Article 4 of the Swiss Rules was one of the most prominent features of the Swiss Rules. The revised Swiss Rules reinforce this feature as they now contain detailed provisions in Article 6 on "Cross-Claim, Joinder, Intervention", governing situations where additional claims are raised among the parties, against additional parties, or by an additional party, or where a third party requests to participate in the arbitration without raising claims. The provision on consolidation is now contained in Article 7 of the revised Swiss Rules.
  • Streamlining of proceedings – in order to enhance the efficiency of arbitration proceedings under the revised Swiss Rules, Article 19.2 of the revised Swiss Rules now provides that as soon as practically possible after receiving the file, the arbitral tribunal shall hold an initial conference with the parties to discuss the organisation of the proceedings. At that conference or promptly thereafter, the arbitral tribunal shall prepare a procedural timetable including the time limits for submissions and the dates of any hearings, as well as an estimate of the time required by the arbitral tribunal for its main decisions (Article 19.3 of the revised Swiss Rules).
  • Paperless filings and remote hearings – under the revised Swiss Rules, the filing of hard copies for the Notice of Arbitration and the Answer to the Notice of Arbitration is no longer required (Articles 3.1 and 4.1 of the revised Swiss Rules). Moreover, while this has become a common and accepted practice throughout the past year during the COVID-19 pandemic, Article 27.2 of the revised Swiss Rules now explicitly provides that hearings can be held remotely by videoconference or other appropriate means.
  • New model clause – the revised Swiss Rules provide for a new model arbitration clause. For the sake of clarity, it should be noted that arbitration clauses referring to the former SCAI remain valid and binding, and arbitration proceedings initiated pursuant to such arbitration clauses will be administered by the Swiss Arbitration Centre. However, it is recommendable that new contracts include the new model clause.

Finally, users benefit from a new, single internet portal providing services, information and links that can be accessed at www.swissarbitration.org. This new platform replaces the separate websites of ASA and of SCAI and includes information from the Swiss Arbitration Academy and the Swiss Arbitration Hub. These four organisations have joined under a new brand, "Swiss Arbitration", to emphasise their close co-operation for the benefit of arbitration users worldwide. The Swiss Arbitration Academy provides training for arbitration practitioners and the Swiss Arbitration Hub provides services and information for the organisation of hearings in Switzerland.

The Swiss Federal Tribunal is the only state court in Switzerland competent to hear challenges of arbitral awards (see 11. Review of an Award). On the cantonal level, state courts may intervene in the composition of the arbitral tribunal under limited circumstances (see 4.3 Court Intervention) and grant interim relief upon request (see 6.2 Role of Courts), both in supportive function to international arbitration proceedings.

That said, there are no commercial courts (neither on a federal nor on a cantonal level) specifically designated to deal with international commercial disputes (or arbitrations) in Switzerland. In this context, however, the Swiss legislature currently envisages a minor revision of the Swiss Civil Procedure Code (CPC). A first draft of an expert committee was circulated to interested bodies for consultation in 2018 and a revised draft was released in 2020 (the "Final Draft"). As part of the amendments in the Final Draft, the Swiss cantons will be entitled to designate their commercial courts as competent to specifically decide international commercial disputes under certain conditions, including the respective consent by the parties. Subject to further amendments in the legislative process, the revised CPC may enter into force some time in 2022 or later. Upon its enactment, it will have to be seen in practice whether the same types of disputes that are currently resolved by means of international arbitration will increasingly be heard before Swiss cantonal commercial courts.

International arbitration proceedings in Switzerland are governed by the PILA, which, since the revision, comprises 24 articles (Article 176 to Article 194 of the PILA, the so-called Swiss lex arbitri).

The PILA is not directly based on the UNCITRAL Model Law on International Commercial Arbitration (the "Model Law"), although it is evident that the drafters of the PILA were aware of the ideas and concepts of the Model Law, and some Swiss scholars even state that the spirit of the Model Law can be recognised in many provisions of the PILA.

On 1 January 2021, a minor revision of the Swiss international arbitration law (ie, the 12th Chapter of the PILA) (see 1.1 Prevalence of Arbitration) came into force. It will apply to arbitration proceedings initiated thereafter, whereas arbitration agreements, as such, will be subject to the revised law irrespective of when they have been concluded.

The amendments of the gentle revision aim (inter alia) to reflect existing continuous practice of the Swiss Federal Tribunal for the sake of transparency, and to make the legal framework even more arbitration-friendly. The most visible improvement is probably the possibility to file arbitration-related submissions in proceedings before the Swiss Federal Tribunal in English. This is a key development of making the Swiss Federal Tribunal as accessible to international parties as its counterparts in the English-speaking world (see 11.1 Grounds for Appeal). The revised law also contains many other improvements, but the legislator has deliberately refrained from extensive amendments. That said, no major legal changes to the Swiss international arbitration law have taken place as a result of the revision.

In the following, the most important amendments of the revised Swiss lex arbitri will be highlighted in the relevant sections.

From a formal point of view, the arbitration agreement is required to be evidenced by text (so-called text form, Article 178.1 of the PILA); therefore, arbitration agreements in emails or telefax communications are formally valid in Switzerland.

In a recent landmark decision (decision of the Swiss Federal Tribunal No 145 III 199), the Swiss Federal Tribunal confirmed that the text form requirements are congruent with those of Article II.2 of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, New York, 10 June 1958 (the "New York Convention"). It further held that, in line with Article II.2 of the New York Convention, an arbitration agreement can bind non-signatories; eg, in a scenario where a non-signatory is involved in the performance of an agreement and implicitly declares, by its conduct, that it intends to be party to the arbitration agreement. Similarly, the Swiss Federal Tribunal confirmed that an arbitration agreement can be implicitly extended and bind a non-signatory without the extension being evidenced by text.

From a substantive point of view, the minimal requirements for an arbitration agreement are as follows:

  • it provides for an agreed exclusion of the state court jurisdiction in favour of arbitral jurisdiction;
  • it relates to a defined dispute (eg, "all disputes arising out of or in connection with a certain contract"); and
  • it details a definable arbitral tribunal.

Furthermore, it should be noted from a substantive point of view that an arbitration agreement is also considered valid in Switzerland if it meets the substantive legal requirements of either the law chosen by the parties or the law that applies to the merits of the case or Swiss law (Article 178.2 of the PILA; principle of favor validitatis).

Finally, the revised law now clarifies that the rules of the Swiss lex arbitri also apply, by analogy, to arbitration agreements in unilateral legal instruments (such as last wills) or in articles of association (Article 178.4 of the PILA).

Article 177.1 of the PILA provides that every claim "of financial interest" ("vermögensrechtlich") may be referred to international arbitration. Claims that concern family status issues (eg, separation, divorce or children-related claims) are thus not arbitrable in Switzerland, and neither are insolvency matters arbitrable that have the aim of dissolving a company for lack of assets. At the same time, a company in insolvency proceedings is still bound by its arbitration agreements (unless the insolvency negatively affects the general legal capacity of an entity according to the decisions of the Swiss Federal Tribunal Nos 4A_118/2014, 138 III 714, and 4A_428/2008 – the so-called Vivendi decision).

One important point for proceedings with state involvement is that Article 177.2 of the PILA provides that a state or state-owned entity is not entitled to rely on its own law in order to argue that certain issues in dispute are not arbitrable or that it is not capable of being a party in arbitration proceedings. This provision of the PILA can be very useful for any party that contracts with state-owned entities.

The Swiss Federal Tribunal considers that (at least) the core of the arbitration agreement (ie, the exclusion of the state courts in favour of arbitration) is of a procedural nature.

If a party starts legal proceedings before state courts in a dispute that is subject to an arbitration agreement, the state court will – first of all – wait and see whether the counterparty objects to state court jurisdiction based on the arbitration agreement. If there is an objection, it will decline its jurisdiction and the claimant will need to start arbitration proceedings. However, the state court will consider the absence of any objection as tacit agreement to proceed before state courts (Article 7 of the PILA). In respect of the law applicable to the arbitration agreement, the state court will apply the principle of favor validitatis in international arbitration proceedings with seat in Switzerland (see 3.1 Enforceability).

Against this background, the (procedural) Swiss approach is slightly different from the (substantive) US approach, where courts positively order parties to attend arbitration proceedings, but the result remains the same: if a valid arbitration agreement exists and one of the parties insists on arbitration, Swiss courts will respect the arbitration agreement by declining their jurisdiction and the parties must proceed with arbitration in order to obtain a decision on the merits.

This approach is in line with Article II.3 of the New York Convention, of which Switzerland is a contracting state.

Article 178.3 of the PILA expressly provides that an arbitration agreement may be considered valid even if the remainder of the contract is invalid (the so-called doctrine of separability).

At the same time, there may be situations in which a defect of the main contract also affects the arbitration agreement. This can be the case, for example, if an unauthorised person signed a contract that includes an arbitration agreement. However, in such a situation it would be for the arbitral tribunal (and not a state court) to assess whether the arbitration agreement is valid, since the arbitral tribunal is competent to rule on its own competence (Article 186.1 of the PILA).

In exceptional cases, an arbitration agreement in a draft contract can even be valid and binding before the main contract is signed. This is the case if an intention to be bound by the arbitration agreement can be established independently of the conclusion of the main contract (see Gabriel/Wicki, Vorvertragliche Schiedszuständigkeit – Pre-contractual Jurisdiction of Arbitral Tribunals, ASA Bull. 2/2009, p 236 et seq for further information on this issue).

The parties are free to nominate and replace any arbitrator in line with the arbitration agreement. The revised law now provides that if the parties have not agreed otherwise, the tribunal shall consist of three members, whereby the parties each nominate one member and these members nominated by the parties unanimously nominate the president of the tribunal (Article 179.1 of the PILA).

However, if an arbitrator nominated by a party is not sufficiently independent and/or impartial, they may be challenged by the other party, and may be subject to removal (see 4.4 Challenge and Removal of Arbitrators).

In this respect, the revised law now provides that a prospective arbitrator must disclose any grounds that may raise doubts as to their independence and impartiality (Article 179.6 of the PILA).

If the parties' chosen method for selecting arbitrators fails, they may approach the state court judge at the place of arbitration (juge d'appui) and request that they designate an arbitral tribunal. The revised law now provides that if the parties have not determined the seat, or determined that the seat should be in Switzerland (without any further specification), the state court that was first seized by a party shall have jurisdiction (Article 179.2 of the PILA).

In this context, the revised law now specifies that if a state court is entrusted with the appointment or replacement of a member of the tribunal, it must grant that request, unless a summary examination shows that there exists no arbitration agreement between the parties (Article 179.3 of the PILA). The state court must thereby take the required measures for the constitution of the tribunal at the request of a party if the parties or the (party-nominated) members of the tribunal do not comply with their duties within 30 days (Article 179.4 of the PILA). Also, the juge d'appui may nominate the entire arbitral tribunal in multiparty cases (Article 179.5 of the PILA).

A state court cannot intervene in the selection of arbitrators unless an arbitrator is rightly challenged and thus removed for lack of independence and/or impartiality. Even in this case, it is not for the state court to designate the replacement of the arbitrator, but rather the replacement will (again) take place according to the relevant provisions in the arbitration agreement.

Article 180 of the PILA governs the challenge and potential removal of arbitrators. Reasons for challenging an arbitrator include:

  • reasonable doubts with respect to impartiality and/or independence;
  • a failure to meet characteristics provided for in the arbitration agreement; and
  • any further reasons provided for in the arbitration agreement.

In this context, the revised law now provides that if the parties have not agreed otherwise and the proceedings are still pending, a time limit of 30 days for the submission of the challenge applies, running from the point in time when a party has, or could have, learned about the respective reasons (Article 180a.1 of the PILA). Once the challenge has been submitted to the arbitrator(s), another time limit of 30 days for the challenge before the state court applies, which decides finally (Article 180a.2 of the PILA). The tribunal may proceed without excluding the challenged arbitrator until there is a decision in the challenge proceedings, unless the parties have agreed otherwise (Article 180a.3 of the PILA). Also, the revised law provides additional rules for the removal of arbitrators upon joint agreement of the parties or unilaterally; ie, by one of the parties, in the case of incapability of the arbitrator (Article 180b of the PILA).

According to Article 180 of the PILA and pertinent jurisprudence of the Swiss Federal Tribunal, arbitrators must be independent and impartial, comparable to state court judges (see, for example, the decision of the Swiss Federal Tribunal No 4A_620/2012, paragraph 3.1). The Swiss Federal Tribunal takes note of the IBA Guidelines on Conflict of Interest in International Arbitration on a case-by-case basis, but does not consider itself to be bound by any standards noted therein.

If an arbitrator does not meet the required (high) standard of independence and impartiality, any award that was rendered with their participation risks being set aside.

Any disputes of financial interest (ie, monetary value) may be referred to arbitration pursuant to the Swiss lex arbitri (for the Swiss lex arbitri, see 2.1 Governing Law and for arbitrable disputes, see 3.2 Arbitrability), as long as they are covered by a valid arbitration agreement.

The arbitral tribunal can assess whether it is competent to make a decision on the merits of a dispute (Article 186.1 of the PILA: so-called competence-competence). When making use of its competence-competence, the arbitral tribunal may render a decision on its jurisdiction even in lis pendens situations (ie, where the same matter is already pending before a state court or a different arbitral tribunal). In such lis pendens situations, the arbitral tribunal is not required to stay its proceedings, unless justified by notable circumstances (Article 186.1bis of the PILA).

The Swiss Federal Tribunal is the only judicial instance that has the power to review any decision on jurisdiction (whether positive or negative) in potential challenge proceedings, if a respective objection is brought forward by a party (Article 191 of the PILA). If not challenged, a negative ruling on jurisdiction by the arbitral tribunal becomes final, with the effect that the same matter cannot validly be submitted (again) to arbitration.

The Swiss Federal Tribunal freely assesses the accurate application of the law in this respect. At the same time, it is not in a position to review the findings of an arbitral tribunal with respect to the facts underlying the award on jurisdiction.

Only arbitral awards are subject to challenge proceedings and thus also to challenges with respect to the jurisdiction of an arbitral tribunal. At the same time, the parties are required to object to arbitral jurisdiction in their first submission on the merits. Otherwise, the jurisdictional challenge will be barred due to an assumed tacit agreement to arbitral jurisdiction (materielle Einlassung; see also 3.3 National Courts' Approach for the same requirement before state courts).

If arbitral jurisdiction is disputed in arbitral proceedings, the tribunal is generally required to decide on its jurisdiction in a preliminary award, in order to enable an early challenge in this respect (Article 186.3 of the PILA).

The Swiss Federal Tribunal has the power to review fully issues of jurisdiction with respect to the correct application of the law. At the same time, it has no power to review the arbitral tribunal's findings on the facts of the case (see also 5.3 Circumstances for Court Intervention).

According to recent statistics in 2021, only 12.3% of all jurisdictional challenges have been successful since the PILA was introduced in 1989 (see Dasser/Wojtowicz, Swiss International Arbitral Awards Before the Federal Supreme Court – Statistical Data 1989-2019, ASA Bull. 1/2021, p 19), so it appears fair to conclude that the Swiss Federal Tribunal has remained deferent to reasonable jurisdictional decisions of arbitral tribunals.

Swiss courts will deny state court jurisdiction and the party that commenced state court proceedings in breach of an arbitration agreement will have to restart the proceedings before an arbitral tribunal (see also 3.3 National Courts' Approach).

The Swiss Federal Tribunal has accepted extensions of arbitration agreements to non-signatories in the following situations:

  • if an assignment of a claim, an assumption of a debt or a transfer of a contract takes place;
  • if a third party intentionally interferes with the performance of a contract in full knowledge of the fact that this contract contains an arbitration agreement; or
  • if a contract for the benefit of a third party is concluded; the third party then also needs to respect an arbitration agreement (unless otherwise stated in that arbitration agreement).

A summary of this jurisprudence can be found in the decision of the Swiss Federal Tribunal No 4A_627/2011, paragraph 3.2 (with further references; see also 3.1 Enforceability).

In the context of situations with intentional interference by a third party, the Swiss Federal Tribunal has recently (partly) quashed an award in which an arbitral tribunal had extended the arbitration agreement of a main contractor to a subcontractor (decision of the Swiss Federal Tribunal No 4A_124/2020, paragraph 3.3.2). The key holding of the decision is that a party's officially communicated position as a subcontractor outweighs actions by that party that might otherwise be deemed sufficient to extend the arbitration agreement. This clarification is welcome and likely to be relevant in practice in light of anticipated cases related to COVID-19, which typically involve projects or supply chains with main contractors and subcontractors (see 1.2 Impact of COVID-19).

Article 183 of the PILA expressly authorises arbitral tribunals to order interim measures, unless the parties agreed otherwise in the arbitration agreement.

Interim measures in the sense of the PILA would be measures of a temporary nature that aim to maintain the status quo between the parties while a dispute is pending, safeguard the arbitral process (eg, by preserving evidence), or preserve assets in order to satisfy a subsequent award (eg, security for costs).

Even though it is not expressly excluded according to the terms of the PILA, Swiss arbitral tribunals would be very reluctant to order anti-suit injunctions as there is no legal tradition of applying this measure in Switzerland.

The arbitral tribunal may require a security from the party requesting interim measures in order to secure potential damages from the party against which the order is directed (Article 183.3 of the PILA).

Increasingly, there are also emergency arbitration proceedings in Switzerland (mostly under the ICC Rules or the Swiss Rules). In this respect, it should be noted that under the Swiss Rules, ex parte applications are also admissible before emergency arbitrators.

If a party does not voluntarily comply with an interim measures order from an arbitral tribunal, the state courts may assist in the enforcement of the order upon request of the arbitral tribunal or a party (Article 183.2 of the PILA). The revised law now provides that the state courts will also support arbitral tribunals of, and parties to, arbitration proceedings with a place of arbitration outside Switzerland (i) to implement preliminary or securing measures (Article 185a.1 of the PILA), or (ii) in the taking of evidence (in the case of a party, only upon approval by the tribunal) (Article 185a.2 of the PILA).

According to a large majority of legal commentators, arbitral tribunals are in a position to order security for costs in the sense that (typically) the impecunious claimant would have to provide security for the potential procedural costs of the respondent.

The specific requirements are – at the same time – controversially discussed by legal scholars. The majority of legal commentators still requires that the financial situation of the party against which the request is directed (typically the claimant) has deteriorated since the conclusion of the arbitration agreement. This means that any party that chooses to contract with an impecunious counterparty (eg, a shell company or special-purpose vehicle) risks that eventually no security for costs will be granted.

Articles 182 to 185a of the PILA provide a few general rules on arbitral procedure.

As a matter of mandatory procedural law, Article 182.3 of the PILA provides that, in any event, arbitral tribunals need to safeguard the parties' equal treatment as well as their right to be heard in contradictory proceedings.

The revised law now expressly stipulates that a party that continues the proceedings without objecting to an infringement against the procedural rules immediately after it took, or could have taken, notice thereof will later be precluded from invoking that infringement (Article 182.4 of the PILA).

As long as the parties are treated equally and their right to be heard in contradictory proceedings is safeguarded, Swiss law does not prescribe any particular procedural steps.

At the same time, it should be noted that the right to be heard in contradictory proceedings guarantees the following minimum standard of participation in arbitration proceedings:

  • the opportunity to submit arguments on the merits of the case in accordance with the procedural rules;
  • participation in oral hearings, if any;
  • access to records; and
  • the opportunity to comment on the arguments of the other party.

The arbitral tribunal has the power to order the individual procedural steps in the event that the parties have not reached any agreements regarding the procedure. In this respect, and as previously mentioned, the arbitral tribunal is required to treat the parties equally and grant them the right to be heard in contradictory proceedings (see also 7.1 Governing Rules and 7.2 Procedural Steps).

At the same time, the arbitrators have a duty to conduct a reasonably expedited procedure and issue the necessary orders in good time. They also have a duty to deliberate on the merits of the case and make an award on the basis of the applicable substantive law (which is applied ex officio in Swiss arbitration proceedings pursuant to the principle of iura novit arbiter). An exception applies if the parties agreed that the arbitral tribunal shall decide ex aequo et bono (Article 187.2 of the PILA).

Finally, the application of the law by the arbitral tribunal must not be surprising. However, a surprise has been acknowledged by the Swiss Federal Tribunal only in very exceptional cases, where an arbitral tribunal applied a legal act to which no party had made reference in the arbitral proceedings and the application of which could not have been foreseen by the parties (decision of the Swiss Federal Tribunal No 4A_424/2018, paragraph 5.2.3).

There are no legal requirements for legal representatives in arbitration proceedings in Switzerland, but it is highly recommended to choose a legal representative who is not only educated in Swiss law but also experienced in international arbitration. Candidates should specifically be asked about their experience in international arbitration before being instructed in an arbitration case.

For legal representation of parties before any Swiss state courts (also in challenge proceedings against an arbitral award before the Swiss Federal Tribunal), a Swiss Bar exam or an international accreditation as a lawyer in Switzerland is required.

Typically, Swiss arbitrators use the IBA Rules on the Taking of Evidence in International Arbitration (the "IBA Rules") as a source of inspiration for the taking of evidence. This means:

  • there are usually no US-style discovery proceedings, but requests for the production of specific documents that may be relevant for the outcome of the case are generally considered to be admissible (typically in the format of a so-called Redfern Schedule);
  • correspondence between clients and legal counsel is usually considered to be legally privileged and is thus excluded from any production orders;
  • documentary evidence is to be submitted together with the written submissions;
  • written witness statements are fairly common in Swiss international arbitration proceedings;
  • in the oral witness hearings, there is typically a brief direct examination (to "warm up" the witness) and then cross-examination on all relevant issues – in many cases, Swiss arbitral tribunals admit re-direct examination limited to issues covered in cross-examination and re-cross-examination limited to issues covered in re-direct examination; and
  • the tribunal often takes the prerogative to ask questions of witnesses at any time during the examinations, but experienced arbitrators will rarely interfere with the examinations of versed counsel, unless there are specific reasons to do so.

Article 184.1 of the PILA (merely) provides that it is for the arbitral tribunal to administer the taking of evidence, and Article 184.2 of the PILA provides that the arbitral tribunal or a party (upon approval by the tribunal) may seek the assistance of the state courts with respect to the taking of evidence. The state courts apply their own (domestic) law or, since the revision, may apply or consider different procedural rules as their own on request, which may, in particular, be helpful for the examination of witnesses (Article 184.3 of the PILA).

Against the background of the right to be heard, the tribunal is required to consider evidence that was offered in accordance with the procedural rules.

As previously mentioned, the arbitral tribunal may seek the assistance of the state courts with respect to the taking of evidence (see 8.2 Rules of Evidence). If relevant evidence is not under the control of either party, there may be no other option than to seek assistance from a state court, even though it is rarely seen in practice. Since the revision, the Swiss state courts will also assist arbitral tribunals and parties (upon approval by the tribunal) to arbitration proceedings with a place of arbitration outside Switzerland with the taking of evidence (Article 185a of the PILA).

However, if relevant evidence is under the control of a party, tribunals may anticipate a so-called adverse inference if the evidence is not produced, rather than seeking the assistance of the state courts.

Swiss arbitration proceedings are confidential in the sense that they are not open to the public (expressly confirmed by the Swiss Federal Tribunal in connection with the "Causa Pechstein" in decision No 4A_612/2009, paragraph 4.1).

Furthermore, it is widely acknowledged that, based on the arbitrators' agreement with the parties (receptum arbitri), arbitrators have a duty to keep any information from the arbitral proceedings confidential.

At the same time, legal scholars have controversially discussed whether, and to what extent, the parties themselves have any confidentiality duties arising out of the arbitration agreement. If the arbitration agreement (including arbitration rules potentially referred to) does not address the issue of confidentiality, it is difficult to find a legal basis for a respective duty between the parties, as the PILA is silent on this issue. Nevertheless, some Swiss commentators suggest that any arbitration agreement should be interpreted to the effect that the mere existence of arbitration proceedings is not confidential, while any materials submitted in the proceedings as well as the award should be considered as confidential.

The Swiss Rules, for example, provide for a general confidentiality provision in Article 44, whereas the ICC Rules do not.

Article 189.1 of the PILA provides that the arbitral award shall be made in the form, and according to the procedure, agreed upon by the parties.

Article 189.2 of the PILA provides that, in the absence of any agreement between the parties, the following requirements apply:

  • the award shall be made by majority vote or, in the absence of any majority, by the president of the tribunal;
  • the award shall be in written form (the signature of the president is sufficient) and show the date on which it is rendered; and
  • the award shall be reasoned (at least with respect to the most relevant arguments of the parties).

As a general rule, the arbitral tribunal may, and shall, award what is owed pursuant to the applicable substantive law. At the same time, there are some limits that must be considered.

First, any arbitral award rendered in Switzerland must remain within the boundaries of Swiss public policy (the so-called ordre public). Any legal consequences that are not in line with Swiss public policy must not be awarded, and such an award would be at risk of being set aside by the Swiss Federal Tribunal. There are indications that punitive damages might be considered as infringement of Swiss public policy by the Swiss Federal Tribunal (see, for example, the decision of the Swiss Federal Tribunal No 122 III 463, paragraph 5.c.cc).

Second, as previously mentioned (see 3.2 Arbitrability), only claims "of financial interest" are arbitrable in Switzerland, so an arbitral tribunal must not award remedies for claims that fall outside the definition of arbitrability.

The issue of the recovery of legal costs is a matter of procedural law and is thus governed by the arbitration agreement (including reference to any institutional rules). If the arbitration agreement is silent on the allocation of legal costs but both parties request to be compensated for their legal costs, it appears reasonable to accept an implied agreement that legal costs should be allocated. If the parties do not request compensation of legal costs, the issue of the allocation becomes moot, as the tribunal must not award any position that was not requested by either of the parties.

Generally, Swiss tribunals allocate legal costs in proportion to the success of the parties on the merits of the case. Further circumstances (such as the procedural behaviour of the parties) are sometimes considered as well.

The so-called American Rule, where each party bears its own costs, is only applied if agreed upon by the parties or if the proportion of the success on the merits is close to 50/50.

In Switzerland, an arbitral award may be challenged before the Swiss Federal Tribunal. The available grounds are expressly noted in Article 190.2 of the PILA and can be summarised as follows:

  • incorrect designation and/or composition of the arbitral tribunal;
  • inaccurate decision on arbitral jurisdiction;
  • the decision either does not cover all of the parties' requests for relief (infra petita) or goes beyond the requests for relief of the parties (ultra petita or extra petita);
  • infringement of the principles of the right to be heard and/or equal treatment; and
  • infringement of Swiss public policy.

The challenge application must be submitted to the Swiss Federal Tribunal within 30 days of the date of receipt of the award (Article 190.4 of the PILA), and must specifically demonstrate that at least one of the above reasons for challenge applies to the award at issue. Since the revision, the briefs in appeal proceedings can be submitted in the English language (Article 77.2bis of the Federal Tribunal Act) (see 2.2 Changes to National Law). The Swiss Federal Tribunal invites the counterparty and the arbitral tribunal to submit comments (unless a challenge is considered as evidently inadmissible or unfounded by the Swiss Federal Tribunal), and typically decides within a timeframe of four to six months in total.

Since the revision, the PILA formally includes the exceptional legal remedy of the so-called revision against binding awards based on earlier jurisprudence of the Swiss Federal Tribunal (see decisions of the Swiss Federal Tribunal Nos 122 III 492 and 134 III 286), which is generally only available on limited grounds that are discovered after an award was rendered. Such limited grounds include (i) discovery of new material facts, (ii) criminal behaviour that affected the award, and (iii) discovery of new circumstances that give rise to doubts as to an arbitrator's independence or impartiality (Article 190a.1 of the PILA).

A request for revision must be submitted within 90 days of the discovery of such new facts, whereby such request has, in any event, to be submitted within ten years of the award coming into legal force, with the exception of criminal behaviour that affected the award (Article 190a.2 of the PILA). As with appeal proceedings, the briefs can be submitted in the English language (Article 77.2bis of the Swiss Federal Tribunal Act).

Finally, the revised law now provides for the right of a party to request from the arbitral tribunal the correction of typos, the explanation of unclear or ambiguous considerations and the rendering of an additional award on any claims not dealt with (Article 189a.1 of the PILA).

If no party is domiciled in Switzerland, the parties may exclude (fully or partially) any challenge or revision proceedings (Article 192 of the PILA). As is the case with the arbitration agreement, such exclusion must be evidenced by text (so-called text form, Article 178.1 of the PILA) (see 3.1 Enforceability). However, the parties may not exclude a revision on the ground of criminal behaviour that affected the award (Article 192.1 of the PILA) (see 11.1 Grounds for Appeal).

If the parties wish to expand the scope of review of a higher instance, they have the possibility to agree on an appeal mechanism before a second arbitral tribunal, but the Swiss Federal Tribunal will review challenges only as defined in Article 190.2 of the PILA.

The Swiss Federal Tribunal does not review the merits of the case, unless it is indispensable in order to review issues of (i) arbitral jurisdiction or (ii) substantive public policy.

Switzerland has signed and ratified the New York Convention (without reservations; see also 3.1 Enforceability).

Enforcement of an arbitral award does not require a separate recognition procedure in Switzerland. Rather, the competent court will examine as a preliminary question within the specific enforcement procedure whether the requirements of the New York Convention are fulfilled.

The applicable state court jurisdiction and the details of the enforcement procedure are provided for in Articles 335 et seq of the CPC and the Swiss Debt Enforcement and Insolvency Act.

Swiss courts are rightly considered to be arbitration-friendly and there are rarely any public policy concerns that would impede enforcement of an arbitral award.

In particular, neither the mere possibility to challenge a foreign award nor the mere filing of an appeal at the foreign seat constitutes a ground for refusal under Article V.1.e of the New York Convention (see decision of the Swiss Federal Tribunal No 135 III 136, paragraph 2.2). Rather, it is, in line with Article IV of the New York Convention, up to the discretion of the competent state court to decide whether the enforcement proceedings should be stayed until ongoing set-aside proceedings at the foreign seat are resolved.

Collective arbitration procedures do not exist and requests for representative relief cannot be submitted to arbitration in Switzerland.

Subject to a very limited number of exceptions, claimants are not entitled to submit any claims but their own to arbitration. Likewise, Swiss awards strictly entitle and bind the parties to the arbitration only.

All qualified Swiss lawyers who are registered to represent parties in state courts must comply with Switzerland's professional rules, including its ethical provisions. The entirety of their contentious and non-contentious legal work (whether in or out of court) must comply with these professional rules. This includes, as a general rule, any work as arbitrator or counsel in arbitration proceedings, including cases with a place of arbitration outside Switzerland.

International soft law (such as the IBA International Principles on Conduct for the Legal Profession or the IBA Guidelines on Party Representation in International Arbitration) is often viewed with scepticism (with the exception of the IBA Guidelines on Conflicts of Interest in International Arbitration, which are also used by the Swiss Federal Tribunal as guidelines, as mentioned above; see 4.5 Arbitrator Requirements).

Third-party funding is not specifically addressed by Swiss statutory laws or Swiss arbitration law. However, the possibility of third-party funding and its limitations have been confirmed and analysed by the Swiss Federal Tribunal numerous times (decisions of the Swiss Federal Tribunal Nos 131 I 223 and 2C_814/2014).

Third-party funding must not prevent Swiss lawyers from acting in line with the professional rules. As in all other cases, Swiss lawyers must act independently, keep client-related information confidential, and avoid conflicts of interest. In addition, Swiss lawyers must comply with the following limitations for success fee arrangements, which have been recently highlighted by the Swiss Federal Tribunal (decision of the Swiss Federal Tribunal No 4A_125/2018):

  • the fees that are not performance-related must cover the lawyer's costs and include a reasonable profit margin;
  • the performance-related fees must not be higher than the fees that are not performance-related; and
  • the success fee arrangement must be made either at the beginning or after the completion of the case. During the proceedings, lawyers must not enter into success fee arrangements with their clients.

Consolidation is not specifically addressed by Swiss arbitration law. Consolidation of compatible proceedings is possible, and usually governed by institutional rules (eg, by Article 7 of the revised Swiss Rules).

Arbitration agreements can extend to non-signatories only in the limited number of situations described in 5.7 Third Parties.

As a general rule, awards cannot be enforced against any party but the award debtor. Piercing of the corporate veil at the enforcement level is only possible in very exceptional cases that must typically include an abuse of corporate structures.

GABRIEL Arbitration

Gabriel Arbitration AG
Rämistrasse 6
CH-8001 Zurich
Switzerland

+41 44 206 20 80

+41 44 206 20 81

s.gabriel@gabriel-arbitration.ch www.gabriel-arbitration.ch
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Trends and Developments


Authors



Walder Wyss is a leading Swiss full-service law firm, operating with more than 240 lawyers through six offices across all the linguistic regions of Switzerland (Zurich, Geneva, Basel, Bern, Lausanne, Lugano). The firm has one of the largest dispute resolution teams in Switzerland, combining specialists of various nationalities and working languages. Walder Wyss’s arbitration practitioners, teaming up with specialists of other fields within the firm, represent parties in all types of contractual and commercial matters, with a particular focus on complex, high-value, cross-border disputes. Many also regularly sit as arbitrators. The firm has extensive expertise in both institutional arbitration under all major rules (eg, Swiss Rules, ICC, LCIA, SIAC, WIPO and DIS Rules) and ad hoc proceedings (including under the UNCITRAL rules). Its arbitration specialists serve in various functions in arbitral institutions and professional organisations, including ICC Switzerland, the ICC Commission of Arbitration and ADR, the Board of the Swiss Arbitration Association (ASA), the Arbitration Court of the Swiss Arbitration Centre, the German Arbitration Institute (DIS), and the International Advisory Body of the Vienna International Arbitral Centre (VIAC).

Switzerland Cements Its Position as a Top-Five Seat of Arbitration

Switzerland is, without question, one of the world’s leading arbitration hubs. Over 1,000 international arbitrations are estimated to be initiated in the country every year. A state-of-the-art legal framework, combined with the high quality and consistency of the judgments rendered by the Swiss Federal Supreme Court (the “Supreme Court”), which has exclusive jurisdiction to decide on challenges to Swiss awards, are likely to have contributed to Switzerland’s success as an arbitration destination. 

In the past decade, Switzerland has steadily ranked amongst the top three places of arbitration in ICC arbitrations. Recent data shows this trend to be unbroken. The 2020 ICC Dispute Resolution Statistics name Switzerland as the most preferred seat. Similarly, the 2021 International Arbitration Survey published by Queen Mary University of London includes Geneva amongst the five most sought-after seats, with Zurich just outside the leading ten, cementing Switzerland's prime ranking.

The popularity of the Swiss seat comes in combination with a marked preference of contracting parties for Swiss substantive law. Similar to other years, Swiss law was one of the three most frequently selected lex contractus in the ICC cases registered in 2019 and 2020. Moreover, for years, Swiss arbitrators have consistently been under the three most preferred nationalities of appointments or confirmations, which is a further testament to the trust placed by users and the ICC Court alike in the Swiss arbitration tradition.

In addition to its long-standing reputation for international commercial arbitration, Switzerland is by far the most important place for the resolution of sports-related disputes, due to an ever-increasing caseload of the Court of Arbitration for Sport in Lausanne (CAS). In 2020, CAS registered 948 new cases (by comparison, the ICC registered 929 cases under its Arbitration Rules in 2020).

The latest trend points towards an increasing importance of Switzerland as a place for investor-state disputes. This is confirmed by the Supreme Court’s caseload, which in recent years has seen an increasing number of challenges to awards in investor-state disputes. This trend is expected to intensify in the coming years. With its political neutrality and stability, an excellent legal framework and the possibility to challenge any award directly before the country’s highest judicial authority, Switzerland is ideally suited for this type of dispute.

A Modernised Swiss Arbitration Act Further Enhances the Attractiveness of the Swiss Lex Arbitri

The Swiss law of international arbitration – Chapter 12 of the Private International Law Act (PILA) – dates back to 1 January 1989 and has stood the test of time. Chapter 12 is appreciated as an innovative, clear and concise law that grants parties the greatest possible autonomy and flexibility in the constitution of the arbitral tribunal as well as in the conduct of the proceedings, whilst providing for minimum due process guarantees, which, if need be, will be enforced by a swift and well-functioning state court system.

After more than 30 years since its enactment, however, the time had come for a light touch-up of Chapter 12, which came into force on 1 January 2021. The updated law incorporates central elements of the Supreme Court's case law and clarifies open questions with a view to increasing legal certainty and clarity. The amended Chapter 12 further strengthens party autonomy by accepting arbitration clauses in unilateral legal instruments and ensuring the enforcement of arbitration agreements that fail to indicate a seat within Switzerland. Finally, Chapter 12’s user-friendliness has been considerably improved. In particular, cross-references to other laws are now reduced to a minimum, so that Chapter 12 may serve to a large extent as a self-standing lex arbitri.

The following summary provides an overview of the most important changes, whilst also mentioning the key features that remain unchanged.

English submissions in proceedings before the Supreme Court

The most significant practical novelty brought by the revision is the possibility to file English-language legal submissions in annulment or revocation proceedings before the Supreme Court. Under the previous practice of the Supreme Court, it was already possible to produce exhibits in English with the consent of the other parties. By contrast, the legal submissions, as such, had to be filed in one of the national languages (German, French, Italian, Romansh). The revised law goes a step further by allowing the use of English in arbitration-related legal submissions, which will spare English-speaking parties the time and costs involved with translation work. These practical advantages are not to be underestimated in view of the short time limit for the filing of a challenge.

This innovation has no influence on the language of the proceedings and judgments; as before, these will be a national language. Moreover, in view of the many procedural pitfalls involved with annulment or revision proceedings in arbitration matters, it will remain advisable for applicants to instruct Swiss local counsel.

Scope of application

Switzerland has two arbitration acts: domestic cases are governed by Part 3 of the Civil Procedure Code (CPC) and Chapter 12 of the PILA applies to international proceedings (but the parties are free to opt out of the applicable lex arbitri in favour of the other). According to the revised Article 176(1) of the PILA, Chapter 12 applies to Swiss-seated arbitrations if “at least one of the parties to the arbitration agreement, at the time of its conclusion”, was not based in Switzerland. This rule deviates from the previous case law principle according to which the situation of the parties to the proceedings was determinative. In the event of multiparty contracts involving parties from within and outside Switzerland, it therefore remained uncertain whether a future dispute would involve at least one non-Swiss party within the meaning of Article 176(1) of the PILA. With the new wording of this provision, the parties will have clarity on the applicable lex arbitri already when entering into their arbitration agreement.

Arbitration clauses in unilateral legal instruments

A new Article 178(4) of the PILA provides that the provisions of Chapter 12 shall apply by analogy to an arbitration clause set out in a unilateral legal act (eg, testament, deed of foundation or trust) or articles of association.

Modernised and uniform form requirements

Under the amended Article 178(1) of the PILA, an arbitration agreement shall be valid “if made in writing or in any other manner that can be evidenced by text”. The previous, outdated references to exchanges by telegram, telex and facsimile have been deleted. The shorter and modern wording is flexible enough to cover not only current means of communications (eg, emails) but also future new means that allow an agreement to be established by text.

As a further improvement in user-friendliness, the same requirement now applies to other agreements in the arbitration context that are subject to a specific form; ie, agreements to opt out of Chapter 12 and apply the CPC instead (Article 176(2) of the PILA) or an advance waiver of the right to the annulment or revision of an award (Article 192(1) of the PILA).

Constitution of the arbitral tribunal

The rules and procedures for the appointment, challenge, revocation and replacement of arbitrators are now exhaustively governed in Chapter 12 of the PILA; all previous references to corresponding provisions in the CPC have been repealed.

As before, Article 179(1) of the PILA is based on the primacy of party autonomy by providing that the arbitrators shall be appointed and replaced in accordance with the agreement of the parties. In practice, such agreement is often made by reference to (institutional or ad hoc) arbitration rules that govern the constitution of the tribunal, including the challenge and replacement of arbitrators, in an exhaustive manner. 

In this context, a second sentence of Article 179(1) of the PILA now expressly states that, unless the parties have agreed otherwise, a three-member tribunal shall be appointed, whereby each party shall appoint one arbitrator, and the two arbitrators thus appointed shall appoint the presiding arbitrator. This rule is in line with the default solution provided by the Model Law. The same rule was already applicable where an arbitral tribunal was constituted with the assistance of the courts at the seat of the arbitration, by virtue of a reference to similar provisions in the CPC. By contrast, it was unclear whether it extended to cases in which the arbitrators were to be appointed or replaced without the involvement of the courts. By incorporating the rule in Article 179(1), the revised Chapter 12 answers this question in the affirmative.

Articles 179(2) to (5) of the PILA allows for the assistance of the courts (juge d’appui) in cases where the arbitrators cannot be appointed and replaced as agreed by the parties or foreseen by the default rule of Article 179(1). As before, the state courts at the seat have exclusive jurisdiction. However, the revised Article 179(2) introduces a novelty by providing for the jurisdiction of the state court first seized if the parties “have not designated a seat or have merely agreed that the seat of the arbitration shall be in Switzerland”. Under the old law, a majority of authors considered such arbitration agreements ineffective where the parties to ad hoc proceedings had failed to agree on the constitution of the arbitral tribunal, as it was impossible to determine the courts having jurisdiction under Article 179(2) of the PILA. If the parties had merely agreed on arbitration, without any reference to Switzerland, Chapter 12 was not applicable in the first place, as it requires a Swiss seat (see Article 176(1) of the PILA).

The revised law sets out to strengthen party autonomy by ensuring that the consent to arbitration will prevail with the help of the Swiss courts even where the parties have not designated a Swiss city. With respect to agreements that merely provide for “arbitration”, it remains to be seen whether the courts will require at least some prima facie indications that the parties intended to arbitrate in Switzerland. Alternatively, one may think of an interpretation providing for the jurisdiction of the Swiss courts (similar to the one granted to the juge d’appui under Article § 1505 Nr. 4 of the French Code of Civil Procedure) whenever a party is exposed to a risk of denial of justice. However the provision is understood, it will be for the arbitral tribunal appointed with the assistance of the state court to determine its seat (see Article 176(3) of the PILA).

Article 179(5) of the PILA is inspired by the 1992 Dutco decision of the French Court of Cassation by allowing the competent Swiss state court to appoint all arbitrators in a multiparty setting (the same rule previously applied due to a reference to an identical CPC provision). The application of this rule is not mandatory; it will be for the appointing court to decide whether an appointment of all arbitrators by the court is warranted under the circumstances.

Article 179(6) of the PILA now expressly requires a potential or appointed arbitrator to disclose promptly any circumstances that may give rise to justifiable doubts as to their independence or impartiality. This rule incorporates established case law.

Articles 180–180b of the PILA deal with the challenge and revocation of arbitrators. The revision has brought no major change but incorporates to a large extent the rules that previously applied by references to relevant CPC provisions or according to case law.

Duty to investigate potential arbitrator conflicts

It is a firmly established principle of Swiss case law that any objection to a procedural irregularity must be raised at the earliest opportunity. If a party fails to do so, the objection is deemed to be waived and cannot be raised in annulment proceedings, as it would be incompatible with the principle of good faith if a party were to keep its objections in reserve to raise them only in the event that the award goes against it.

This principle is now enshrined in a new Article 182(4) of the PILA, stating that “[a] party that proceeds with the arbitration without immediately raising an objection to a violation of procedural rules which it knew or, exercising due diligence, ought to have known, may not subsequently raise such objection”. This clarification in the law is to be welcomed, as non-Swiss parties and counsel may not be familiar with the requirement of an immediate objection. In practice, countless challenges to awards have failed due to a failure to raise a prompt and clear objection.

Assistance in favour of non-Swiss arbitrations

A new Article 185a of the PILA breaks new ground as it provides for the assistance of the Swiss courts in the enforcement of interim measures ordered by an arbitral tribunal sitting abroad, and in the taking of evidence in favour of an arbitration pending abroad. This provision deviates from the rule that Chapter 12 is only applicable to Swiss-seated proceedings. It allows easy and quick access to state enforcement and evidence preservation measures by dispensing with the need to go through the channels of international mutual legal assistance.

Remedies against arbitral awards

The revised Chapter 12 does not touch upon the grounds for challenge to an award. Article 190(2) of the PILA continues to provide for an exhaustive list of narrowly worded grounds for annulment, which ensure compliance of the arbitration with fundamental due process guarantees, and nothing more. In its abundant case law on Article 190, the Supreme Court has taken a decidedly arbitration-friendly stance by making it clear that it is unwilling to accept challenges that aim for a review of the merits of the arbitrators’ decision under the guise of a purported due process violation. On average, only about 7% of challenges are successful. This trend has remained steady since the enactment of Chapter 12. As in previous years, the time required by the Supreme Court to decide on a challenge is on average below six months.

To enhance the user-friendliness of Chapter 12, Article 190(4) reminds parties that the time limit for the challenge is 30 days from the notification of the award (see Article 100(1) of the Supreme Court Act). In addition, a new addition to Article 77(1) of the Supreme Court Act clarifies a previously open question by stating that challenges to awards are admissible irrespective of the amount in dispute.

Furthermore, a new Article 189a of the PILA now expressly acknowledges the right to interpretation or correction of the award, and the right to request an additional award.

Moreover, in accordance with established case law, which had filled a gap in the previous law, a new Article 190a provides that a party may request the revocation (called “revision”) of an award that is tainted by particularly serious flaws, including where a party was unable to discover grounds for challenge of an arbitrator before the arbitration proceedings were terminated and no other remedy is available. A request for revocation must be filed within 90 days from the discovery of the grounds for challenge and no later than ten years from the day on which the award became final and binding. The sole judicial authority to revoke an award is the Supreme Court. If the application is allowed, the Supreme Court does not decide on the merits of the dispute itself but refers the case back to the arbitral tribunal that made the award, or to a new arbitral tribunal to be constituted in accordance with the applicable rules. The same rule applies in challenge proceedings.

A New Swiss Arbitration Platform Brings Together the Leading Players in the Field

On 1 June 2021, the Swiss Arbitration Association (ASA) launched a global first: an online platform providing access to an entire jurisdiction. www.swissarbitration.org is an entry portal for everything related to commercial and investment arbitration with a link to Switzerland: organisations, services, know-how, resources, events, people and references. Organised and maintained by ASA, it serves as a one-stop shop for practitioners and users worldwide.

Besides ASA and the Swiss Arbitration Centre, the successor of the Swiss Chambers’ Arbitration Institution (SCAI), the new platform also includes the independent Swiss Arbitration Academy and the Swiss Arbitration Hub, ASA’s platform for hearing logistics. Other leading arbitration- and ADR-related organisations active in Switzerland are also represented and can be accessed through the website. In the future, additional organisations may be admitted on the platform to further strengthen the offerings of Swiss arbitration.

The Swiss Rules – in a Revised Edition – Are Now Administered by the Swiss Arbitration Centre in Co-operation with the Swiss Arbitration Association

Taking effect at the end of May 2021, SCAI has been converted into a Swiss limited liability company and renamed Swiss Arbitration Centre Ltd (the “Swiss Arbitration Centre”, or “Centre”). ASA has taken the lead as majority shareholder. The conversion does not affect the validity of existing arbitration or mediation agreements referring to SCAI or any cantonal Chambers of Commerce.

In the second half of 2020, the Swiss Arbitration Centre took advantage of its reorganisation to make a detailed review of the Swiss Rules and explore where changes were necessary. The 2021 revision of the Swiss Rules takes into account past practical experience with the Rules, the suggestions received from users, and recent international developments. The resulting changes may be grouped into five main areas.

New provisions on multiparty and multicontract arbitration

The provisions on multiparty and multicontract arbitration have been refined. Most importantly, the new Article 5 provides for a gatekeeping test for multicontract claims. Where claims are made under more than one arbitration agreement, the arbitration will proceed unless the court determines that the arbitration agreements are “manifestly incompatible”. This is only an “entrance” test that, if passed, allows claims to proceed to the arbitral tribunal. However, the arbitral tribunal retains the power to rule on any objections regarding whether claims can be determined together. It is for the arbitral tribunal to determine the appropriate criteria as they are not defined in the Swiss Rules. However, tribunals will usually seek to establish whether there was express or implied consent of the parties, given the consensual nature of arbitration. 

The revised Swiss Rules also contain more detailed provisions on cross-claims, joinder and intervention; eg, situations where a respondent raises a claim against another co-respondent, or joins an additional party, or where an additional party seeks to intervene in the proceedings by raising claims against an existing party. While all these scenarios were already possible under the old Rules, the new provisions provide more guidance regarding the process as such and the role of the Centre. As a result, a new Article 6 states that cross-claims, joinder and intervention require the submission of a separate notice of claim. Before the constitution of the arbitral tribunal, the notice is to be submitted to the Secretariat. After constitution of the arbitral tribunal, cross-claims, joinder and intervention are still possible in principle if allowed by the tribunal (“after consulting with all parties, taking into account all circumstances”). In practice, in view of the parties’ right to participate in the constitution of the arbitral tribunal, the joining of an additional party at this stage will normally only be possible if that party accepts the tribunal as constituted. 

Finally, the revised Swiss Rules in Article 6(4) now expressly refer to the possibility of a third person participating “in a capacity other than an additional party”, subject to the tribunal’s permission. This refers to the participation of a third person that is neither a claimant nor a respondent but intervenes in support of one of the parties. The third person may wish to intervene upon its own initiative or because of a third-party notice. With such notice, the respondent requests the participation of the third person in order to extend the effects of the award to it. The goal is for the Swiss Rules to leave room – in appropriate and limited circumstances – for this form of participation. The arbitral tribunal will have to consider all circumstances, including the consensual nature of arbitration.

Adaptation to technological developments

The Swiss Rules contain responses to technological developments. The parties can now opt for paperless filing of the Notice of Arbitration and the Answer, and the arbitral tribunal may decide to hold hearings remotely after consulting with the parties (Articles 3(1) and 27(2)). Furthermore, at the initial conference, the arbitral tribunal and the parties are to discuss data protection and cybersecurity to the extent needed (Article 19(2)).

Stronger role of the Centre

Several new provisions strengthen the role of the institution. As a result, all deposits will now be held by the Secretariat and there is no longer the possibility for deposits to be held by the arbitral tribunal (Appendix B Section 4.1). Furthermore, the Secretariat is now to receive electronic copies of all communications (Article 16(2)). Finally, awards will be notified by the Secretariat and no longer by the arbitral tribunal (except for emergency arbitration) (Article 34(5)).

Requirements for independence and impartiality of arbitrators

Further changes have been made in the area of independence and impartiality. The requirements of disclosure of the arbitrators have been clarified and adjusted to modern arbitration practice (Article 12). This includes that an arbitral tribunal may oppose the appointment of a new representative where this would risk jeopardising the impartiality or independence of the arbitral tribunal (Article 16(4)).

Promoting efficiency

Finally, several amendments were made to further promote efficiency. As soon as practicable, the arbitral tribunal shall hold an initial conference with the parties and prepare a procedural timetable. The timetable not only includes the time limits for the parties but also an estimate of the time required by the tribunal for its main decisions (Articles 19(2) and (3)). An express provision invites the tribunal to take into account in the allocation of costs whether a party contributed to the efficient conduct of the proceedings and the avoidance of unnecessary costs and delays (Article 40(1)). A new provision emphasises that the parties may, at any time during the arbitration proceedings, agree to resolve their dispute by mediation or any other forms of ADR (Article 19(6)). 

With these changes, the Swiss Rules have managed to adapt to modern trends while keeping the flexibility of the previous Rules.

COVID-19 Has Led to Further Flexibility and Options in Swiss Arbitration

Due to the COVID-19-pandemic, many arbitrations came to a halt in the first half of 2020, with parties asking for a stay of their deadlines to make submissions, and postponement of the hearings. While this led to some delays initially, arbitrators and parties soon considered the option of holding hearings virtually instead of in-person, thus allowing arbitrations to proceed. The Swiss arbitration law, which is well known for its flexibility, did not stand in the way of holding such virtual hearings for arbitrations seated in Switzerland, and would not hinder enforcement of arbitral awards on this ground as long as the parties’ right to be heard has been warranted. Furthermore, the Swiss Rules even before the 2021 revision allowed the arbitral tribunal to direct that witnesses or expert witnesses be examined through means that do not require their physical presence at the hearing (including by videoconference), thus not requiring express consent of the parties.

Likewise, the ICC Rules, which govern many of the arbitrations seated in Switzerland, were also understood not to hinder virtual hearings if appropriate considering the circumstances. The Swiss Rules and the ICC Rules, following the experiences born from the COVID-19-pandemic, now contain specific provisions on virtual hearings in their revised versions issued in 2021.

Experience with virtual hearings in arbitrations seated in Switzerland has been largely positive. Parties have come to appreciate the efficiency of virtual hearings and that arbitrations were able to proceed despite the impossibility of holding hearings in-person. Recent experience, however, has shown that particularly in larger cases, parties wish to go back to in-person hearings if the situation so permits, since they feel that in-person hearings are better suited for the examination of witnesses due to the immediate impression that witnesses leave on the arbitral tribunal if they are in the same room. If virtual hearings are held, an important lesson from the experience gathered during the pandemic is to ensure that all witnesses are familiar with the technical details and that a test run be held before the hearing to prevent technical disruptions as best as possible.

As a further consequence of the pandemic, the authors have observed a rise in disputes involving force majeure claims or defences. Under Swiss law, there is no statutory definition of "force majeure". Therefore, parties benefitted from having express force majeure clauses in their contracts defining the consequences of the occurrence of a force majeure event on the parties’ contractual relationship.

Limits of the Duty to Investigate Potential Arbitrator Conflicts

In the past decade, the Supreme Court has had to decide on average on about 36 challenges to awards each year, in addition to occasional applications for revocation of awards. The high caseload entails frequent opportunities for the Supreme Court to decide on unsettled issues, thus adding to an already very rich and nuanced body of case law.

For the purpose of this report, the decision in Sun Yang v WADA and Fédération Internationale de Natation (FINA) is singled out. In this landmark ruling made on 22 December 2020 (Judgment 4A_318/2020, published in part in the official reporter, 147 III 65), the Supreme Court, for the first time, clarified the scope of the duty to investigate potential arbitrator conflicts, referred to as "duty of curiosity". 

On 28 February 2020, a CAS panel chaired by Italian Judge Franco Frattini unanimously found that Chinese swimmer Sun Yang had violated Article 2.5 of the FINA Doping Control Rules by his conduct during an unannounced doping control and suspended the athlete for eight years. On 15 June 2020, after expiry of the time limit to challenge the award under Article 190 of the PILA, Mr Sun applied for revocation of the CAS award, requesting its annulment and the removal of Mr Frattini.

In support of his application, Mr Yang submitted that he had learned from an internet article published on 15 May 2020 that Mr Frattini had repeatedly made unacceptable tweets with regard to Chinese nationals in 2018 and 2019 (ie, both before and during the CAS arbitration), which raised legitimate doubts as to his impartiality in a dispute involving a Chinese athlete. In the tweets, Mr Frattini criticised the slaughter of dogs and cats during the annual festival in Yulin, China, and accused the individuals involved of torture, using several violent terms.

The World Anti-Doping Agency (WADA) and CAS took the view that the right to challenge Mr Frattini had lapsed, as the athlete could, and should, have discovered the tweets during the arbitration had he made appropriate internet searches. Mr Yang explained that his counsel had conducted a Google search when Mr Frattini was appointed on 1 May 2019. According to Mr Yang, none of the tweets in question appeared when his counsel Googled the words "Franco + Frattini", "Franco + Frattini + sport", or "Franco + Frattini + Court of Arbitration for Sport". CAS argued, inter alia, that Mr Yang should have searched using "Frattini" and "China", which would have been sufficient to make some of the tweets appear on the first page of the search results. WADA further submitted that the athlete should have examined the "leading social networks such as Facebook, Twitter, Instagram".

The Supreme Court for the first time clarified that the "duty of curiosity" has its limits. The parties to an arbitration can be expected to conduct investigations, especially via the internet. They can be expected to use the main search engines and consult sources that can provide information about potential conflicts, such as the websites of those involved in the arbitration (institution, parties, counsel and their law firms, as well as the arbitrators and their firms, etc). However, a party cannot be expected to perform a systematic and thorough screening of all available sources relating to an arbitrator. Thus, the fact that information is freely accessible on the internet does not ipso facto mean that a party that was not aware of it has failed in its duty to investigate potential arbitrator conflicts. In this respect, the circumstances of the case will remain decisive. Similarly, the Court did not exclude that a party may be required to examine various social networks but stressed that it might be appropriate not to be too demanding in this respect, so as to avoid very extensive, if not unlimited, time-consuming investigations.

In this case, it was undisputed that Mr Frattini’s Twitter account appeared amongst the first results when his first name and surname was entered into the search engine, but it was not established that such a search would have made it possible to display the controversial tweets. The Supreme Court found that Mr Yang had not failed in his duty to investigate potential conflicts by not detecting the tweets published by Mr Frattini almost ten months before his appointment and drowned in a mass of messages on his Twitter account. Moreover, Mr Yang could not be blamed for not including "China" in the Google search, as there was nothing to suggest that Mr Frattini might have preconceived ideas about athletes of Chinese origin. The Supreme Court also held that a party cannot be required to continue its internet searches throughout the arbitration, let alone to scan the messages published by the arbitrators on social networks during the proceedings. On the merits, the Supreme Court held that the violent terms used by Mr Frattini in his tweets, although issued in a particular context and targeting individuals appearing in photos and videos, went beyond a critique of behaviour that was perceived as brutal, in that they referred to the skin colour of the persons involved. As such, they were inadmissible and raised justified doubts as to his impartiality.

This judgment is to be welcomed. Whilst previous decisions have, in the authors' view, gone too far in the interpretation of the duty to investigate potential arbitrator conflicts, the Sun Yang ruling adopts a balanced and nuanced approach by making it clear that the scope of this duty depends on the individual circumstances and may not generally go so far as to require the parties to screen systematically and thoroughly all information accessible on the internet relating to an arbitrator, let alone to continue to do so during the arbitration. That said, in individual cases, it may be difficult for a party to assess where exactly the limits of the duty lie.

Conclusion

Switzerland maintains its position as a globally leading seat. The recent modernisation of its legal framework will enhance its attractiveness as an arbitration hub. The authors particularly expect to see it gain further popularity as a preferred seat for investor-state disputes.

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Law and Practice

Authors



GABRIEL Arbitration is an independent dispute resolution boutique law firm specialising in international arbitration with its office in Zurich, Switzerland. The team presently consists of Dr Simon Gabriel, founder and partner; Dr Axel Buhr, partner; Dr Johannes Landbrecht, of counsel; and Andreas Schregenberger, senior associate. Clients benefit from first-class dispute resolution services, fewer conflicts of interest and competitive pricing. The firm's lawyers are particularly experienced in disputes concerning joint ventures and consortia, energy-related issues, international sales contracts, licensing contracts, and post-M&A issues. In terms of industries, the team is experienced in disputes on commodity trading, pharmaceutical products, construction projects, production of hi-tech equipment, and oil and gas.

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Walder Wyss is a leading Swiss full-service law firm, operating with more than 240 lawyers through six offices across all the linguistic regions of Switzerland (Zurich, Geneva, Basel, Bern, Lausanne, Lugano). The firm has one of the largest dispute resolution teams in Switzerland, combining specialists of various nationalities and working languages. Walder Wyss’s arbitration practitioners, teaming up with specialists of other fields within the firm, represent parties in all types of contractual and commercial matters, with a particular focus on complex, high-value, cross-border disputes. Many also regularly sit as arbitrators. The firm has extensive expertise in both institutional arbitration under all major rules (eg, Swiss Rules, ICC, LCIA, SIAC, WIPO and DIS Rules) and ad hoc proceedings (including under the UNCITRAL rules). Its arbitration specialists serve in various functions in arbitral institutions and professional organisations, including ICC Switzerland, the ICC Commission of Arbitration and ADR, the Board of the Swiss Arbitration Association (ASA), the Arbitration Court of the Swiss Arbitration Centre, the German Arbitration Institute (DIS), and the International Advisory Body of the Vienna International Arbitral Centre (VIAC).

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