Revision Project of Swiss Arbitration Law
Switzerland has been, for quite some time now, one of the most important places for international arbitration in Europe. The yearly statistics of the ICC in Paris show venues in Switzerland (usually Geneva or Zurich) to be the most frequently chosen seats for arbitrations, only trailing Paris and London.
In addition, Swiss arbitrators are among those most often chosen to sit on arbitral panels (in 2015 only behind the UK and the USA).1 Moreover, the leading Swiss arbitration institution, the Swiss Chambers’ Arbitration Institution, yearly posts a number of roughly hundred new cases.
Finally, one should also mention the Swiss Arbitration Association (ASA). With its over 1,200 members, of whom more than 450 from outside Switzerland, among them leading practitioner and academics involved in international arbitration, ASA is a driving force in the promulgation and development of international arbitration. Its yearly conference in late January/early February is a must in the agenda for European (and many non-European) arbitrators, and presents high quality programmes. In addition, ASA organises training programmes for young practitioners through its very active ASA Below 40 group. Among its former presidents are eminent arbitration specialists such as Professor Pierre Lalive, Marc Blessing, Markus Wirth, Gabrielle Kaufmann-Kohler and Michael Schneider.
The Swiss Private International Law Act (PIL)
For a place of arbitration frequently chosen in international cases, it is of paramount importance to provide for a statutory background, the so-called lex arbitri, which is favorable for arbitration proceedings. Switzerland enacted regulations aimed at international arbitrations with the Swiss Private International Law Act (PIL) in 1987 (entering into force on 1 January 1989). Its 12th Chapter deals with international commercial arbitration, and it was, at the time of entering into force, praised for having succeeded in striking the right balance by regulating ‘as much as necessary but as little as possible’. This allowed arbitral tribunals to structure their proceedings in a flexible manner, unencumbered by detailed pro-visions more suitable for civil proceedings than for arbitration. The paramount principle permeating the regulations is the autonomy of arbitration, ie, the competence of arbitrators and parties to adapt the arbitration to the needs of the case.
The 12th Chapter’s main focus is on the internationality of arbitration, which means that any influence of domestic procedural rules (with which non-Swiss arbitrators or counsel are not familiar) is avoided. This liberality and autonomy is, however, not absolute, and does not provide carte blanche for arbitrary decisions; particularly the possibility to challenge international arbitral awards ren-dered in Switzerland before the Swiss Supreme Court based on the grounds listed in Article 190 PIL, which has guaranteed that the right to be heard and equal treatment of the parties are respected by arbitral tribunals. Within the boundaries set by these two principles, arbitral tribunals (in consultation with the parties) are free to structure the proceedings in the way they deem appropriate. As far as the substance of decisions is concerned, the guideline provided is the minimum requirement of non-violation of Swiss public policy (ordre public), which threshold is relatively low. This was a conscious decision at the time the PIL was drafted, because non-interference of Swiss domestic courts with the substance of international arbitral decisions was considered to be important.
Still today, the 12th Chapter is internationally recognised as an innovative lex arbitri of great quality, and its clarity and simplicity are well-recognised. It does not interfere with, but rather ideally supports, arbitrations as different as ad hoc proceedings, institutional arbitrations, sports arbitration and investment disputes, because its regulations are neutral, and thus well suited for all of these highly different types of arbitrations.
Nevertheless, after 30 years, the arbitration community (counsel, arbitrators, in-house counsel, academics) perceives the need for certain changes, either to take into account case law developed by the Swiss Supreme Court filling gaps in the statutory framework, or to satisfy the needs and desires of the users of arbitration.
The revision proposal
On the basis of a parliamentary motion filed in 2012, the Department of Justice on 11 January 2017 promulgated a draft of the revisions suggested to the 12th chapter2 (‘the Proposal’). It is the result of consultations undertaken by the Department with leading practitioners, as is elaborated in an explanatory message which explains the background and the proposed amendments.3 In addition, arbitration institutions such as the ICC, the Swiss Chambers, TAS and the WIPO Center for Arbitration and Mediation as well as the Federal Supreme Court were consulted. The Proposal is presently open to critical review by interested parties and, among others, the ASA4 and the Swiss Commission of Arbitration of the ICC (ICC Switzerland) as well as academics have used the opportunity to comment on that draft. The aim of the revision is to maintain the attractiveness of Switzerland as a place for international arbitrations. The overriding principle remains the attempt to strike a balance between autonomy of parties and arbitral tribunals on one hand, and the securing of a statutory framework safeguarding the integrity of parties’ rights in arbitration proceedings on the other hand.
Important revision points
The primary goal is to take stock of the most important case law developed by the Swiss Supreme Court in arbitration matters, and to transfer the practice developed by the Court into law. Moreover, a particular focus is put on the relationship between state courts and arbitral tribunals. While originally the drafters of the 12th Chapter were successful in keeping the influence of state courts to a large extent out of international arbitration, recent developments has shown that there are areas, such as interim measures and evidence proceedings, where the lack of the possibility to secure the help of state courts was perceived as a negative, and not in the interest of parties to arbitration proceedings.
Not all of the suggested changes are of particular interest or relevance for the international user, and therefore this contribution focuses on a number of specific proposed changes which might influence the decision of parties considering Switzerland as a place of arbitration.
Formal validity of arbitration clauses (art. 178)
The formal requirements for the validity of arbitration clauses are modified in order to bring the Swiss requirements in line with other laws, most notably article 7 of the UNCITRAL Model Law as revised in 2006, as well as provisions of German, Austrian and other laws. This change particularly brings recognition of so- called unilateral arbitration clauses – ie, clauses which are proposed by one of the parties in writing, and subsequently accepted by the other side without fulfilling the writing requirement, for example by performing the proposed contact.
The new language states that an arbitration clause must be in writing or in some other form allowing the agreement to be evidenced by a text. This form requirement is particularly fulfilled if it is only done so by one of the parties to the arbitration agreement. This possibility to consider valid an arbitration clause which was contained in a written proposal by one side, but not explicitly accepted by the other side in writing, is considerable liberalisation, and certainly the right approach. The Proposal also expressly recognises, in addition to normal two – or multiparty arbitration clauses, the validity of clauses in unilateral documents, such as wills, trusts, and foundations, if they are recognised by the law applicable to the substance of that document or institute.
Seat of the Arbitral Tribunal in Switzerland (art. 179(2))
So far, Swiss law required the determination of a seat in the form of a specific place – ie, a city. As proposed, the designation ‘Arbitration in Switzerland’ would now be sufficient, and a party starting the arbitration, in cases where the other side does not participate in the process, can address any competent judge in a Swiss canton to act as juge d’appui and to determine the seat where the arbitration agreement does not specify it. The result would be that incomplete arbitration clauses do not remain without effect, which deprives the parties of the benefit of something they clearly bargained for, namely to have a potential dispute be adjudicated in arbitration in Switzerland – which so far was the harsh consequence if the parties did not specifically define a seat.
The new provision states that if the parties have not determined the seat, or only agreed that the seat of the tribunal shall be in Switzerland, the court first seized with the matter is competent to determine the seat.
Disclosure obligations for prospective arbitrators (art. 178(4))
Another proposal concerns the duty for prospective arbitrators to disclose circumstances that might be able to create justified doubts in their impartiality or independence. Specifically, the new provision creates an obligation, incumbent on any person who is requested to serve as arbitrator, to immediately disclose the presence of circumstances which could raise justified doubts as to his/her independence or impartiality. This duty continues to apply throughout the entire proceedings.
In the same context, the proposal also states that, as far as reasons for the challenge of an arbitrator are concerned, it is irrelevant whether a party was indeed aware of such reasons, if that party could have been aware thereof if it had it exercised due care and diligence. This is another example of a change which only reflects the case law already established by the Swiss Supreme Court.
Deletion of references to Civil Procedure Code
In order to make sure that the 12th Chapter of PIL should be a standalone statutory source for international arbitration matters, the Proposal replaces references to the Swiss Code of Civil Procedure in the context of appointment, refusal, removal and replacement of arbitrators.
Appointment of arbitrators in multiparty arbitrations (art. 179(2)bis)
The Proposal now contains a provision regulating the appointment in multiparty proceedings, something which so far had only been regulated by case law developed by the Swiss Supreme Court. In case of a multiparty arbitration, the state court at the seat of the arbitral tribunal can appoint all members of the tribunal. In that context, one should point out that this rule obviously only applies if one of the involved parties does not accept the way the other parties intend to constitute the tribunal, and choses to address the mentioned state court. This is a difference to similar rules contained in institutional arbitration rules, where that procedure applies automatically in case of inability of the parties to designate the members of the tribunal.
Revision, correction and amendments (art. 189 and 190)
The Proposal clarifies the possibility to bring revision proceedings against arbitral awards before the Supreme Court if reasons for challenges are discovered after the award was rendered and, more importantly, after the 30 day period to challenge arbitral awards before the Supreme Court have expired. Specifically, a party can ask for the revision of an award if it discovers facts or decisive evidence which it was kept from producing in the proceedings (unless such facts and evidence only materialised after the end of the case), or if criminal proceedings lead to the result that a crime had an effect on the arbitration, even if there was no criminal judgment.
A request for revision must be brought within 90 days since discovering the reason for the revision, at the latest 10 years since the award was rendered or became binding. It should be noted that with regard to this revision, the same possibility exists to exclude this remedy as for the appeal against arbitral awards in cases where both parties are not domiciled in Switzerland. This possibility seems questionable; it is one thing to waive the possibility to appeal against an arbitral award which was rendered under regular circumstances; it is quite a different step to also waive the possibility to request revision even in cases where criminal acts influenced the decision.
The Proposal also specifically provides for the possibility to ask a tribunal for corrections and additions after the award was rendered, something that many arbitration rules (such as the ICC Rules and the Swiss Rules) already foresee. The new provision allows a party to request the arbitral tribunal within 30 days since receipt of the award to correct obvious mistakes or to clarify or amend specific parts of the decision; within the same deadline, the arbitral tribunal can correct, explain or amend sua sponte. Interestingly, in this context, that a request for such a correction or clarification does not have an influence on the 30 day time-limit to file an appeal against the award; when in doubt, a party will thus have to use both remedies. Only in case the arbitral tribunal revises parts of its award, a new 30 day time limit starts to bring an appeal against those (revised) parts of the award.
Assistance from state courts (art. 183 and 184)
The Proposal strengthens the possibility for parties to use the assistance of state courts in order to enforce interim measures and to obtain evidence.
The new provision provides that, if a party refuses to live up to an interim measure, issued by the arbitral tribunal, either the tribunal or the other party can request the competent state court to provide assistance, which that state court will do by applying its own law. With regard to evidentiary proceedings, the same possibility for either the tribunal or a party (with consent of the tribunal) to involve a state court at the seat of the tribunal is offered.
Both of these amendments make sense, and add more bite to the otherwise rather harmless teeth of arbitration proceedings to deal with recalcitrant parties, which at times can be incredibly frustrating.
English language for submissions to the Supreme Court (art. 77 Supreme Court Act)
A very practical change, if adapted, would be that, in the future, challenges against arbitral awards rendered in a language other than one of the official languages of Switzerland (German, French, Italian), most notably in English, can be brought with a submission to the Supreme Court in English. This is a considered and important step towards internationalisation of proceedings, including the challenges against arbitral awards.
Reception of the proposal and additional suggestions
Generally, the reaction of academics and practitioners to the draft Proposal were favorable. Particularly, commentators were satisfied that the proposed amendments do not endanger the advantages of the existing act by ‘over-regulating’ arbitration proceedings, but are (in addition to the codification of case law of the Supreme Court) limited to bring a few important improvements that will be appreciated by the arbitration community.
Among the suggestions which I personally consider helpful are the proposal of the Swiss Arbitration Association and ICC Switzerland that a positive duty to immediately raise criticism against the procedure is established, with the consequence that, if a party fails to raise procedural objections immediately, this would be considered a waiver. This would be in line with the already established practice of the Supreme Court to dismiss procedural objections if those were not raised during the course of the arbitration.
Moreover, with regard to the newly introduced revision procedure, ASA suggests language allowing for exclusion of revision by means of an expressed declaration of the parties (as such possibility exists already for appeal proceedings); not only for non-Swiss domiciled parties, but more broadly, ASA also proposes to reconsider the possibility of allowing parties domiciled in Switzerland to waive their rights to challenge the award (and a request for revision).
In connection with the proposed possibility to make filings with the Supreme Court in English, ICC Switzerland suggests that, where the appeal is submitted in English, the decision of the Supreme Court should at least be translated into English as well, in order to allow the parties to use it directly, if necessary, in the enforcement proceedings.
In addition, ICC Switzerland notes the various instances where a state court can be involved in arbitration proceedings, not only at the appointment stage, but now also in connection with interim measures and evidence. In that context, it is noted that the decentralised solution typical for Switzerland can be unsatisfactory, because state courts in Cantons with little arbitration activity might not have the necessary familiarity with the specificity of arbitration. The question is therefore asked whether it would not make sense to designate, for example, the courts in Zurich (for cases in the German speaking part of Switzerland) and Geneva (for cases in the Latin part of Switzerland), as competent for all arbitration matters.
The revision Proposal promulgated by the Swiss Department of Justice starts on the basis of an already very satisfactory existing level; the 12th Chapter of the PIL is a lex arbitri that is generally recognised as being exemplary. Still, the amendments now proposed are a considerable improvement, as is reflected by the universally positive reaction they have received in the last months. The few additional points suggested (see above) would be ‘nice to have’, but certainly not absolutely necessary. It remains to be seen whether they will find their way into a revised Proposal, and one can only hope that the Swiss Parliament will deal with this legislative act swiftly. The typical Swiss hurdle of a popular vote on new legislation will not be a problem here; it is inconceivable that any political party or movement will undertake the necessary effort to collect 50,000 signatures to bring this Proposal to a popular vote.
- Statistics ICC/https://iccwbo.org/media-wall/news-speeches/icc-arbitration-posts-strong-growth-in-2015/
- Comments/ASA http://www.arbitration-ch.org/asset/b8e06a96acaa7fccd3dd2262e4b5b31f/ASA%20Comments%20Chapter%2012%20PILA.pdf
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