Source: http://www.inhouselawyer.co.uk/practice-areas/international-arbitration-3rd-edition/switzerland-arbitration-3/
Timestamp: 2019-04-19 12:51:55+00:00

Document:
This country-specific Q&A provides an overview of the legal framework and key issues surrounding arbitration law in Switzerland.
In Switzerland, international arbitration is governed by chapter 12 of the Swiss Private International Law Act (PILA) which entered into force on 1 January 1989. An arbitration is deemed international, if at least one party to the arbitration agreement had its domicile or habitual residence outside Switzerland at the time of the conclusion of the arbitration agreement. Since 1 January 2011, Domestic arbitration is governed by the 3rd title of the Swiss Civil Procedure Code (CPC). However, parties to an international arbitration dispute may declare the provisions on domestic arbitration of the CPC to apply in lieu of the provisions of the PILA (art. 167 para 2 PILA). Equally, the parties to a domestic arbitration are granted the possibility to agree on the provisions of the PILA to apply instead of the CPC (art. 353 para 2 CPC).
While great emphasis is placed on party autonomy in adapting the arbitral proceedings to their needs, Swiss arbitration law contains several mandatory requirements, namely the provisions on arbitrability (art. 177 PILA and art. 353 CPC), the provisions stipulating the lack of independence or impartiality as grounds to challenge an arbitrator (art. 180 para 1 (c) PILA and art. 367 para 1 (c) CPC), the provisions requiring the arbitral tribunal to ensure equal treatment of the parties and compliance with their right to be heard (art. 182 para 3 PILA and art. 373 para 4 CPC), as well as the provisions providing for assistance by the state courts at the seat of the arbitral tribunal (art. 185 PILA and art. 356 CPC) are among the mandatory rules.
Switzerland ratified the New York Convention in 1965 without making any reservations to the general obligations of the convention. With the PILA having entered into force on 1 January 1989 the reciprocity reservation of Switzerland was withdrawn and the New York Convention applies erga omnes.
Switzerland is a party to the Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States of 1965 (ICSID Convention), as well as to the Geneva Protocol on Arbitration Clauses of 1923 and the Geneva Convention on the Execution of Foreign Arbitral Awards of 1927.
Almost thirty years after its entering into force, on 11 January 2017, the Swiss Federal Council presented a draft partial revision of chapter 12 of the PILA and invited interested parties for consultation on such draft until the end of May 2017. The final legislative proposal will be submitted to the Swiss parliament for approval.
As the chapter 12 of the PILA is still considered to be a modern legislation by the Swiss Federal Council, legal scholars and practitioners, the draft provisions of chapter 12 of the PILA do not aim at fundamentally reforming the rules on international arbitration in Switzerland. In particular, the draft does not constitute a complete revision of the existing legislation. The declared overall objective of the partial revision is for Switzerland to maintain its attractiveness for international arbitration.
Against this background, the revision is directed at (i) implementing and converting into law the developments in international arbitration of the last roughly 25 years driven by the case law of the Swiss Federal Tribunal, (ii) strengthening the party autonomy (iii) and making the provisions of chapter 12 of the PILA more user-friendly. The revised draft chapter 12 of the PILA includes, inter alia, new codified provisions on the revision, rectification, explanation and correction of awards, the possibility to make submissions to the Swiss Federal Tribunal in English, and a relaxation of the form requirements regarding the conclusion of the arbitration agreement.
None of the rules of the aforementioned institutions have been amended in 2018.
A valid arbitration agreement in international arbitration must meet minimum requirements of form and substance. In terms of formal requirements, the arbitration agreement must be made in writing, by telegram, telex, facsimile or any other means of communication allowing it to be evidenced by text. Strictly speaking, signature or exchange of the arbitration agreement is not required as long as the parties' agreement can otherwise be evidenced based on written documents. The revised chapter 12 of the PILA is expected to provide for a relaxation of these formal requirements, allowing for an arbitration agreement to be validly concluded even if only one party fulfils the aforementioned formal requirements.
As regards content requirements, such arbitration agreement must stipulate the parties' intent to resolve a determined or determinable dispute by way of arbitration, thereby excluding the jurisdiction of the state courts.
The same conditions apply to arbitration agreements in domestic arbitration pursuant to art. 357 and 358 CPC.
With regard to the criteria on substance, an international arbitration agreement is deemed valid if it displays the legal requirements for a mutual party intent concerning the essential aspects either based on (i) the law chosen by the parties to specifically govern the arbitration agreement, or (ii) the law governing the subject matter of the dispute (i.e. in general the underlying contract), or (iii) Swiss law.
In international arbitration, art. 177 para 1 PILA and the case law of the Swiss Federal Tribunal provide for a broad definition of disputes deemed arbitrable as any dispute of financial interest, i.e. any claim that ultimately pursues an economic purpose, may be subject of an arbitration procedure. Thus, also monetary claims in family and inheritance law, monetary claims relating to intellectual property and competition as well as antitrust law are deemed arbitrable in Switzerland. Thus, solely matters concerning the legal status (e.g. marriage, separation, divorce, matrimony, paternity, adoption etc.) and some matters relating to insolvency law (opening of bankruptcy proceeding, arrest etc.) are deemed non-arbitrable in international arbitration.
In contrast thereto, the definition of arbitrability in Swiss domestic arbitration is more restrictive than its understanding in Swiss international arbitration. Pursuant to art. 354 CPC, a dispute may only be submitted to an arbitral tribunal if the parties are free to dispose over the rights and duties in question. In particular and contrary to the situation in international arbitration, labor law disputes in a domestic context are solely arbitrable if the respective arbitration agreement was concluded a minimum of one month after the end of the employment relationship (art. 341 para 1 Swiss Code of Obligations). In addition, labor law rights confirmed by the Swiss Code of Obligations as non-waivable will also not be deemed arbitrable in a domestic context.
The notion of arbitrability in Switzerland did not undergo any major changes throughout the last few years. The interpretation of arbitrability continues to be broad, particularly in international arbitration. Also the partial revision of the PILA will not change this situation.
In general, there are no restrictions on the appointment of arbitrators, apart from the requirements of independence and impartiality. As an exception to the foregoing, in domestic arbitration only the conciliation authority may be appointed as arbitral tribunal in matters relating to the lease and usufructuary lease of residential premises (art. 361 para 4 CPC).
Although the IBA Guidelines on Conflict of Interest in International Arbitration have no statutory value, the Swiss Federal Tribunal indicated that the IBA Guidelines on Conflict of Interest in International Arbitration may serve as valuable instrument when verifying the independence and impartiality of arbitrators. Furthermore, the Swiss Federal Tribunal has ruled that the co-arbitrators and the chairperson are subject to the same degree of independence.
In case the parties have not agreed on a procedure for challenging an arbitrator (including by means of referring to institutional rules of arbitration), the competent court at the seat of the arbitral tribunal shall take a final decision (art. 180 para 3 PILA). We noted no noticeable increase in the number of challenges.
At least with regard to arbitral tribunals seated in Switzerland, Swiss court practice has established principles favouring arbitration over state court litigation. As per the "negative effect" of Kompetenz-Kompetenz, if the jurisdiction of the state court seized is contested based on the existence of an arbitration agreement, the state court ought to refer the matter for review to the arbitral tribunal stipulated in the arbitration agreement in question, unless the arbitration agreement on its face appears to be invalid and incapable of being performed by the parties (art. 7 PILA). Thus, if an arbitration agreement provides for an arbitral tribunal seated in Switzerland, a state court seized by a party will only summarily examine whether the alleged arbitration agreement is invalid and/or not covering the dispute.
In accordance with art. 181 PILA and art. 372 CPC arbitral proceedings are deemed commenced from the moment one of the parties seizes the arbitral tribunal designated in the arbitration agreement or, in the absence of such designation in the arbitration agreement, when one of the parties initiates the procedure for the constitution of the arbitral tribunal or requests to conduct conciliation proceedings agreed upon by the parties to precede the commencement of arbitral proceedings.
There are no procedural provisions relating to limitation periods under the Swiss arbitration laws. Swiss law does not qualify limitation periods as procedural but rather as a matter of substance and limitation periods are therefore subject to the lex causae. Hence, the law applicable to the substance of the contract in dispute determines the duration of a limitation period as well as the procedural actions that will toll limitation periods.
After an arbitral tribunal has been established, it is up to the arbitral tribunal to deal with a defaulting party. As Swiss law requires the arbitral tribunal to treat parties equally and to ensure the parties’ right to be heard, the arbitral tribunal must ensure that the parties – including non-participating parties to a proceeding – are properly servswitzed and informed. If these conditions are met, a default award is generally considered valid and enforceable.
State courts cannot order parties or third parties to arbitrate or issue subpoenas to third parties.
a.	If not complied with voluntarily by the relevant party, interim relief issued by an arbitral tribunal requires the involvement of the state courts to be enforced.
b.	The arbitral tribunal has no competence and thus no basis to issue binding and enforceable orders against third parties, e.g. banks in case of freezing orders, since the latter will normally not be part of the arbitration agreement.
c.	As interim relief is generally connected with matters of urgency it will often need to be given ex parte, without hearing the counterparty. In contrast to state courts and unless the specific applicable institutional rules of the arbitration expressly provides otherwise (as the Swiss Rules do – in contrast to e.g. the ICC Rules), arbitral tribunals are likely not grant interim relief ex parte, but only once the counterparty is heard.
In general, representatives and arbitrators in arbitral tribunals do not need to be lawyers or admitted to the bar. Parties may, however, only be represented by attorneys authorised by Swiss Law or a treaty in appeal proceedings before the Swiss Federal Tribunal.
According to Swiss law, lawyers are required to observe various professional rules such as duty of diligence, independence, avoidance of conflict of interest, and the attorney-client-privilege. Violation of these rules may result in disciplinary action by the cantonal supervisory authorities. In addition, the Swiss Bar Association stipulated various professional standards which should be observed by its members.
As a principle, according to art. 190 para 1 PILA, an award rendered by an arbitral tribunal with its seat in Switzerland is final and thus enforceable from its notification.
As regards the validity requirements of arbitral awards rendered by an arbitral tribunal with its seat in Switzerland, art. 189 para 1 PILA stipulates that the awards shall be rendered in conformity with the rules of procedures or the form agreed upon by the parties. Subsidiarily, in case of absence of such agreement para. 2 of art. 189 PILA provides for the arbitral tribunal to render the award by a majority or, in the absence of a majority, by the chairman alone. The award must be in writing, supported by reasons, dated and signed. The chairman's signature suffices.
The recognition and enforcement of foreign arbitral awards in Switzerland is governed by the New York Convention (art. 194 PILA). Foreign awards are recognized and enforced in Switzerland on the basis of the New York Convention, regardless of reciprocity.
Moreover, it is important to note that Switzerland does generally not foresee a separate procedure for the mere recognition of an award. Rather, the court seized will examine within the enforcement procedure or as a preliminary question whether the foreign award can be recognized. In fact, an independent request for recognition may only be granted under exceptional circumstances, if a party is able to demonstrate that it has a legitimate interest in having this issue determined.
Both, domestic and foreign awards are recognised and enforced in adversarial proceedings, i.e. following the filing of a motion for recognition and enforcement by the applicant, the defendant is invited to submit an answer to such motion.
Since recognition and enforcement proceedings are summary and the ground for objection as well as the evidence available to the defendant are limited, the estimated timeframe for the recognition and enforcement of an award is rather short, i.e. between a few days and some weeks.
A domestic award rendered by an arbitral tribunal with its seat in Switzerland is final and thus enforceable from its notification, equally to a decision rendered by a Swiss state court (art. 190 para 1 PILA and art. 387 CPC).
Foreign arbitral awards are recognised and enforced in Switzerland as per the New York Convention (art. 194 PILA). In accordance with art. IV para. 1 (a) and (b) of the New York Convention, a party requesting the recognition of a foreign award must thus submit (i) a duly authenticated original award or a duly certified copy thereof, and (ii) the original of the arbitration agreement or a duly certified copy thereof. In practice, however, the authentication of the award will only be required if the party resisting enforcement disputes its authenticity.
In addition, as per art. IV para. 2 of the New York Convention, the filing of a certified translation of the aforementioned documents is required if said award or arbitration agreement was not issued in an official language of the country in which the recognition of the award is requested. Thus, in Switzerland the translation of the award and the arbitration agreement into one of the official languages of Switzerland (German, French and Italian) is necessary. However, according to the Swiss Federal Tribunal, such language does not need to be the administrative language of the canton in which recognition of the award is sought – it is, however, advisable.
In general, according to the Swiss Federal Tribunal, and against the backdrop of the principle of favorability (favor recognitionis), the state courts are required to adopt a pragmatic, flexible and not formalistic approach when determining if a foreign award is recognizable and enforceable in accordance with the New York Convention. In general, arbitral awards will only be denied enforcement if one or more of the defences stipulated in art. V of the New York Convention is established.
It is important to note that in general, there is no need for a separate exequatur for the mere recognition of an award in Switzerland. In fact, an independent request for recognition may only be granted under exceptional circumstances, provided that a party is able to demonstrate that it has a legitimate interest in having this issue determined, without at the same time seeking the enforcement of the award.
In Switzerland an arbitral award is, in principle, deemed final, which is why appeals against arbitral awards do – as a rule – not have suspensive effect. In practice, however, when an appeal is filed, the parties are nevertheless asked not to commence enforcement proceedings. Both in international and domestic arbitration an arbitral award, whether final or partial, may only be appealed to the Swiss Federal Tribunal (art. 191 PILA and art. 389 para 1 CPC), i.e. the principle of one instance of appeals applies, such instance being the highest court in the country. In domestic arbitration, pursuant to art. 390 para 1 CPC, the parties are given the option to agree that the arbitral award shall first be appealed to the cantonal high court at the seat of arbitration.
Swiss Law provides for only a very restricted number of grounds on which arbitral awards may be appealed. In international arbitration the grounds for appeal provided by art. 190 para 2 PILA are: (i) the irregular composition of the arbitral tribunal, (ii) an incorrect decision on jurisdiction, (iii) the fact that the arbitral tribunal rendered a decision beyond the claims made by the parties or did not answer all claims raised, (iv) the violation of equal treatment of the parties or their right to be heard, and (v) a violation of the (procedural or substantive) principles of public policy.
In domestic arbitration arbitral awards may be appealed on two additional grounds pursuant to art. 393 CPC, namely (i) if the arbitral award is arbitrary in its result due to it being based on findings that are obviously contrary to the facts as stated in the case file or because it constitutes an obvious violation of law or equity, and (ii) if the costs and compensation fixed by the arbitral tribunal are obviously excessive.
Appeals to the Swiss Federal Tribunal are governed by the Federal Tribunal Act (the CPC governs the procedure for appeals to the cantonal court if so chosen by the parties in domestic arbitration). In both proceedings the appeal must be filed in writing within 30 days of notification of the award.
Chances of success with appeals against arbitral awards are remote. Based on available statistics, the chances of success to appeal an arbitral award on all available grounds other than jurisdiction range around 7%, while appeals on grounds of lack of jurisdiction have a statistical chance of success of about 10%. In addition, appeals proceedings are conducted rather swiftly. A decision of the Swiss Federal Tribunal can generally be expected to be rendered within 6 to 8 months following the lodging of the appeal.
The parties may waive any possibility at all to appeal an arbitral award if all parties to the dispute have their domicile or place of business outside Switzerland. Such waiver can either be outlined in the arbitration agreement or be made subsequently by written declaration of the parties. Such waiver must, given its implications, be made expressly be the parties. Reference to institutional rules providing for the finality of arbitral awards do not suffice for such purposes.
As a general rule, a separate challenge of the recognition of an award is generally – for the parties bound by an arbitration award – not available under Swiss law, as there is no special separate procedure for the recognition of an award. Only the decision of the Swiss court that decides on the recognition within the enforcement procedure may be challenged.
As a rule, the effects of an award on the merits only extents to the parties involved in the arbitral proceedings and the award does generally not have any effect vis-à-vis third parties. Therefore, a third party will in ordinary circumstances lack the necessary legitimate interest to challenge the recognition of an award.
Despite the recent increase of third party funding, the issue remains unregulated under Swiss law. There are no rules or restrictions on third-party funders in Switzerland. While, the Swiss Federal Tribunal has expressly confirmed that third party funding is, as a rule, admissible, certain limitations on influencing the client-attorney relationship will need to be respected by third party funders. In particular, in order to avoid any conflict of interest, the third party funder should not unduly interfere with the client-attorney relationship.
The possibility of emergency arbitrator relief is not stipulated in the PILA or the CPC. However, a state court can at all times (i.e. even before constitution of an arbitral tribunal) be seized to obtain interim relief.
The revised Swiss Rules in effect as from 1 July 2012 introduced the possibility to apply for emergency arbitrator relief. Pursuant to art. 43 Swiss Rules a party requiring urgent interim measures before the constitution of the arbitral tribunal may submit an application for emergency relief to the secretariat of the arbitration court. Based on the statistics of the Swiss Chambers' Arbitration Institution, emergency arbitrator relief is not very actively used with only3% of all cases submitted in the year 2015 representing emergency relief procedures.
There are currently no broad initiatives to strengthen transparency in arbitration. On the contrary, Art. 44 Swiss Rules explicitly stipulates that all awards, orders, and materials submitted by a party in the course of an arbitral proceeding are to be kept confidential, unless agreed otherwise by the parties.
Gender- and other diversity in international arbitration is actively promoted by the Swiss Chambers' Arbitration Institution. In particular, gender diversity is a debated topic. According to the statistics for the year 2015 issued by the Swiss Chambers' Arbitration Institution, 47% of the arbitrators appointed by the court were women. However, the percentage of women appointed by the parties or the co-arbitrators amounted to only 5%.
In 2016 the Swiss Chambers' Arbitration Institution has signed the "Equal Representation in Arbitration Pledge" committed to improving the representation of women in arbitration.
Since the entry into force of the CPC on 1 January 2011, domestic mediation is explicitly recognized under Swiss Law as an alternative form of dispute resolution. The CPC only articulates the relation between mediation and judicial proceedings in civil matters and does not govern the domestic mediation processes itself. The parties retain their full autonomy to decide on the procedure for their domestic mediation. As regards the mediation of international cases or foreign mediation, Swiss law does not contain any specific statutory provisions.
However, there are many institutions in Switzerland that offer private mediation, such as the Swiss Chamber for Commercial Mediation (SCCM), the Swiss Chambers' Arbitration Institution (SCAI), the Federation of the Swiss Mediation Associations (FSM), and various cantonal mediation associations. In addition, also the WIPO and the CAS provide for mediation services.
To our knowledge, the Swiss Federal Tribunal has not yet decided on the question of whether an award that has been set aside in another jurisdiction may nevertheless be enforced or vice versa. As regards enforcement proceedings in Switzerland governed by the New York Convention, art. V para 1(e) stipulates that a party can object to the enforcement of an award, inter alia, if the award has been set aside by a competent authority in the country of its origin. In addition, the Swiss Federal Tribunal has held in recent cases that the recognition and enforcement of an award does not aim at attributing to the award any other effects than those already pertaining to the award in its state of origin.
Switzerland has a strong and effective legal framework to combat corruption. On a scale from 0 (highly corrupt) to 100 (very clean), Transparency International's Corruption Perceptions Index 2017, a recognized source for comparing worldwide corruption, ranks Switzerland 3rd with a score of 85 (the average score in Western Europe is 66). In particular, the provisions of the Swiss Criminal Code are pivotal elements of the fight against corruption. Arts. 322ter to 322novies of the Swiss Criminal Code prohibit active and passive bribery of public officials, including arbitrators, as well as active and passive bribery of private individuals which are prosecuted ex officio.
As regards the standard of proof, the determination of the facts of the case must be based on all available and admissible evidence and must be justifiable as well as objectively comprehensible. A defendant may only be convicted if the criminal court is convinced, beyond any reasonable doubt, that all conditions for criminal liability are met.

References: art. 353
 art. 367
 art. 373
 art. 356
 art. 357
 art. 177
 art. 354
 art. 181
 art. 372
 art. 190
 art. 189
 art. 189
 art. 387
 art. 389
 art. 390
 art. 190
 art. 393
 art. 43
 Art. 44