Revision of the Swiss International Arbitration Law

Abstract

As little as possible, as much as necessary

The final draft bill of proposed revisions to Chapter 12 of the Swiss Private International Law Act (PILA) was approved on June 19, 2020 and is ex­pected to enter into force in early 2021. The revi­sion achieves its goal of modernization and clarifi­cation without affecting the key elements of the current law which have made Switzerland a suc­cessful and attractive place for international arbi­tration.

Overview

Since its enactment in 1989, international arbitra­tion proceedings seated in Switzerland have been governed by Chapter 12 of the PILA. This legisla­tion has proven itself over the years to be very modern and arbitration-friendly, making Switzer­land one of the most popular seats for international arbitration proceedings. The objectives of the cur­rent revision were to address the case law estab­lished by the Swiss Federal Supreme Court since 1989, to clarify some wording, and to enhance Switzerland’s standing as a modern and innovative place of arbitration. The revised rules increase le­gal certainty and integrate modernized features while maintaining their core attributes of being short, pragmatic and liberal – characteristics that have made Chapter 12 of the PILA so attractive since its inception.

What Remains Unchanged

One of the key features of Chapter 12 of the PILA is its conciseness: all provisions on international arbitration fit into just 19 articles, leaving parties and arbitral tribunals with significant independence and authority. Instead of 19, the revised Chapter 12 will have 24 short articles, thus still retaining its concise nature.

The revision has left untouched many of the tried-and-tested features of Chapter 12, including the fa­vor validitatis principle according to which an arbi­tration agreement is valid if it conforms to the law chosen by the parties or the law governing the dis­pute (the contract at issue) or Swiss law. Also un­touched are the direct appeal to the Swiss Su­preme Court and the narrow grounds of challenge that have so far resulted in 93% of all challenged awards being upheld, typically within just half a year.

The main revisions to Chapter 12 are the following:

Submissions to the Supreme Court in English

The revision introduces the right to file submis­sions to the Swiss Supreme Court in setting-aside challenges to arbitral awards and in revision pro­ceedings in English. Up to now, such submissions were required to be filed in one of the official lan­guages of the Swiss Confederation. Of all the pro­posed amendments that were adopted, this gener­ated the most debate. However, in the international context, where contracts and the common lan­guage of business are often English, this amend­ment is a positive evolution for Switzerland and will likely further contribute to its popularity as a seat of international arbitrations.

That being said, as English has not been a working language of the Swiss Supreme Court in the past, it may be advisable in most circumstances to con­tinue making submissions to the Court in German, French or Italian.

More Comprehensive to Assist Foreign Users

Since a majority of the users of Chapter 12 PILA are not Swiss (i.e. foreign parties who opt for Swit­zerland as the seat of their arbitration and foreign lawyers or arbitrators involved in Swiss-based arbi­tration proceedings), the Swiss legislator sought to make Chapter 12 more accessible for non-Swiss practitioners. All references to the rules governing domestic arbitration under the Swiss Code of Civil Procedure (CPC) have therefore been replaced with self-standing provisions in the PILA, allowing foreign users to understand and apply Chapter 12 without reference to the CPC.

Clarified Scope of Application

The revision specifies that Chapter 12 PILA ap­plies if, at the time of conclusion of the arbitration agreement, at least one of the parties to the agree­ment had its domicile, habitual residence, seat, or place of business outside Switzerland. The Swiss legislator thereby overturned a judgment of the Swiss Supreme Court in which the Court had found a lack of applicability, and therefore jurisdic­tion, based on the geographic circumstances of the parties to the arbitration proceedings.

This amendment enhances legal certainty, as the international or domestic nature of the arbitration is determined at the time parties agree to an arbitra­tion clause.

Modernized Form Requirements

Chapter 12 PILA provides that arbitration agree­ments are valid if made by any means of communi­cation which allow the arbitration agreement to be evidenced by a text. As it currently stands, the forms of text listed in Article 178 include «telegram, telex, [and] telecopier». For the sake of clarity, the revision updates this article to include e-mail or any other form of modern communication.

The revision further clarifies that Chapter 12 PILA applies to arbitration clauses created by unilateral legal acts and in company by-laws, thus making clear for example that disputes regarding wills, foundations and trusts as well as many corporate disputes may be resolved in arbitration.

Clarifications Regarding Appointment of Arbitrators

Prior to the revisions, Chapter 12 PILA provided that where the parties had not agreed on a proce­dure or rules for appointing or replacing arbitrators, the juge d’appui (the state court at the seat of the arbitration) had jurisdiction to appoint the arbitra­tors. This often led to an impasse in situations where the arbitration agreement did not specify the seat or referred only to «arbitration in Switzerland». The revision remedies this situation by providing that the court first seized is competent to appoint the members of the arbitral tribunal if there is no agreed seat. The tribunal thus constituted may then choose a seat within Switzerland or, if the parties have not designated a country, then any­where in the world.

The revision also includes an explicit provision for multiparty arbitrations in cases where the parties fail to appoint the arbitrators. In such cases, the juge d’appui will now have the authority to appoint all members of the arbitral tribunal.

Support of Foreign Arbitration Proceedings

Enforcing interim relief ordered by an arbitral tribu­nal seated outside of Switzerland and the taking of evidence in support of foreign arbitration proceed­ings can be difficult and time-consuming pro­cesses. The revision facilitates these procedures by granting arbitral tribunals and parties involved in arbitrations outside Switzerland direct access to Swiss state courts at the place where enforcement is sought (be it for enforcement of interim and pro­visional measures or for the taking of evidence). Arbitral tribunals and parties involved in foreign-seated arbitrations can thus avoid the burdensome path of seeking international legal assistance. Such requests for assistance before Swiss state courts will be dealt with by way of summary pro­ceedings.

Conclusion

It is clear from the above that the Swiss legislator has approached the revision of Chapter 12 of the PILA with an «if it ain’t broke, don’t fix it» attitude. While clarifying and modernizing the existing provi­sions, the revision brings about no major changes to the Swiss international arbitration scene – other than the additional benefits of allowing submis­sions to the Swiss Supreme Court in English, ex­panded access to arbitration for resolving disputes, and expanded access to Swiss courts if court as­sistance is needed. The revisions will further en­hance the attractiveness of Switzerland as a seat for international arbitrations.

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