Revision of the Swiss International Arbitration Law
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.
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.
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.
This Homburger Bulletin expresses general views of the authors at the date of the Bulletin, without considering the facts and circumstances of any particular person or transaction. It does not constitute legal advice. This Bulletin may not be relied upon by any person for any purpose, and any liability for the accuracy, correctness or fairness of the contents of this Homburger Bulletin is explicitly excluded.