SWITZERLAND: An Introduction to Arbitration

ARBITRATION IN SWITZERLAND – AN INTRODUCTION 

The arbitration-friendliness of Switzerland is the result of a long tradition, reaching back to 1872, when the famous Alabama case was submitted to an arbitral tribunal sitting in Geneva. Today, Switzerland remains one of the most popular places for arbitration globally.

I- Overview of Switzerland’s resources 

Switzerland provides a neutral and stable framework for resolving disputes. It is a politically neutral country that hosts dozens of international organisations and many dispute settlement institutions, such as the Swiss Arbitration Centre (“SAC”), the Court of Arbitration for Sport (“CAS”) and the Arbitration and Mediation Centre of the World Intellectual Property Organization (“WIPO”).

The country also offers a pool of multilingual arbitrators, among the most frequently appointed in the world.

Switzerland is one of the preferred venues for hosting international arbitration hearings. The country has excellent infrastructure to welcome arbitration users. The Swiss Arbitration Hub – an online platform set up in 2021 by the Swiss Arbitration Association – is designed to assist them in finding the service providers best suited to their needs.

Thanks to its arbitration-friendly legal framework and its Supreme Court’s pro-arbitration approach, Switzerland is consistently ranked among the most popular arbitral seats in the world. It is the most preferred seat in ICC arbitrations (with Geneva ranked in third place and Zürich listed in fifth position).

In addition, Swiss law is among the top three chosen laws on the merits, perhaps because Swiss substantive law is easily accessible in several languages (including English) and has been drafted with the intention of being understandable for lawyers and non-lawyers alike. It provides a liberal and predictable legal framework.

II- Focus on Switzerland’s arbitration legal framework

Swiss law regulates domestic and international arbitration in separate statutes. Chapter 12 of the Swiss Private International Law Act (“PILA”) governs international arbitrations, while Part 3 of the Swiss Code of Civil Procedure (“CCP”) governs domestic arbitrations. Both Chapter 12 PILA and Part 3 of the CCP are innovative arbitration laws. For international arbitration, Switzerland’s strength lies undoubtedly in the PILA.

Over thirty years ago, Switzerland was one of the first nations to adopt a modern law of international arbitration, which emphasises the principle of party autonomy. Chapter 12 PILA has also rightly been praised for its simplicity and efficiency, serving as a model for many other rules and statutes. It is well-suited for complex commercial disputes, investor-state arbitrations as well as sports disputes.

Another key feature of the PILA is that it provides limited grounds for a potential challenge of an arbitral award. Moreover, Switzerland is a “one stop only” jurisdiction where challenges to awards rendered in the country are handled by a single court, i.e., the Swiss Federal Supreme Court (“SFSC”), which ensures consistency of the decisions.

Moreover, by law, an arbitral award rendered in Switzerland has the same legal force as a state court judgment. As a result, a debtor can raise only limited defences to oppose enforcement.

III- Latest trends and developments 

2021 prompted modernisations and clarifications that will allow Switzerland to remain at the forefront of international arbitration worldwide.

A. Revision of the PILA 

On 19 June 2020, Switzerland revised Chapter 12 of the PILA. The new provisions entered into force on 1 January 2021. The amended PILA codifies case law developed by the SFSC and incorporates a few innovations that accommodate the needs of international business.

One key innovation is the possibility to file submissions in English in setting aside proceedings before the SFSC. Prior to 2021, parties had to file their submissions in one of Switzerland’s official languages (German, French, Italian or Romansh).

The ability to file a challenge in English makes international arbitration in Switzerland even more accessible, especially for law firms abroad. In view of the strict formal and procedural requirements in setting aside proceedings, it may however be advisable for international law firms to seek advice from Swiss practitioners specialised in the field.

The amended PILA further extends access to arbitration by introducing the possibility to include an arbitration clause in a unilateral legal instrument, such as a trust, deed, will or by-laws.

Notably, the revised PILA explicitly allows arbitral tribunals seated outside of Switzerland to have direct access to Swiss courts for assistance in connection with the production of evidence and the enforcement in Switzerland of interim and provisional measures.

B. Revision of the Swiss Rules 

Originally enacted on 1 January 2004, the Swiss Rules of International Arbitration (“Swiss Rules”) have been drafted with the objective of being efficient, flexible and cost-effective.

Based on the UNCITRAL Arbitration Rules, the Swiss Rules underwent a first revision in 2012 and a second light revision in 2021. The revised Swiss Rules, which apply as of 1 June 2021, continue to place paramount importance on party autonomy and flexibility, while aiming to modernise the proceedings and reinforce the role of the arbitration institution.

The revised Swiss Rules keep abreast with the digital era. Unless the arbitration institution or a party request otherwise, Notices of Arbitration and Answers to Notices of Arbitration may be filed electronically. Moreover, the arbitral tribunal is expressly empowered to hold hearings by video conference. Parties who wish to exclude remote hearings may consider including an express provision in that regard in their arbitration agreement.

Several changes also focus on facilitating multi-party and multi-contract arbitration. The revised Swiss Rules provide for a detailed procedure to decide on requests for joinder, intervention and on the so-called cross-claims (typically a claim by one respondent against another).

Finally, the revised Swiss Rules vest the arbitration institution with a more prominent role. The SAC – which succeeded in 2021 to the Swiss Chamber’s Arbitration Institution (“SCAI”) – holds the deposits paid by the parties, notifies the award, and may make prima facie decisions on jurisdictional objections raised within fifteen days after the receipt of the Notice of Arbitration.

C. Decisions from the SFSC 

As in previous years, the success rate of applications to the SFSC for the setting aside or revision of awards remains very low. Statistically, only around seven percent of challenged awards have been set aside (the rate in sports arbitration is slightly higher) and there are only three reported cases where an award was directly revised. The chances of success of a challenge based on public policy remain negligible, at around one percent.

Within the last twelve months, the SFSC took some much-commented arbitration-related decisions:

•In decision 4A_530/2020, the SFSC confirmed that an arbitral tribunal could refuse to reschedule a hearing, without violating a party’s right to be heard. The SFSC considered that the alleged difficulties in finding a lawyer and gathering evidence during the COVID-19 pandemic were, in this case, a pretext to try to delay the proceedings, an intention which is not protected by the right to be heard.

•In decision 4A_516/2020, the SFSC upheld an award in which the tribunal had awarded compensation in Syrian pounds although the requested relief was in US dollars. The SFSC held that the award did not contradict public policy and considered that the applicants had no legitimate interest in having the award set aside as they had not demonstrated that they would obtain a more favourable decision if the case were remanded to the arbitral tribunal after a finding of extra petita. This confirms the very high threshold that needs to be met for an award to be set aside in Switzerland.

•In decision 4A 332/2020, the SFSC also upheld the award rendered by an arbitral tribunal that had refused to repeat the procedural steps taken prior to the resignation of one of the arbitrators. The SFSC considered that, in the circumstances at hand, this was not contrary to public policy.