On 19 June 2020, the Swiss Parliament approved a long-awaited revision of Swiss Arbitration Law, expected to enter into force in early 2021. This is a welcome development, preserving and further strengthening Switzerland’s position as one of the most attractive venues for hosting international arbitrations, both ad hoc and institutional.
International Arbitration in Switzerland is governed by Chapter 12 of the Federal Statute on Private International Law (commonly known as “PILA”), more specifically, Articles 176-194. The current version of the Swiss Arbitration Law came into force in 1989, over 30 years ago, and has not been subject to major amendments since this point in time. The reason for this is simple: Swiss Arbitration Law has proven to be a significant success. As one of the “forerunners” of modern arbitration laws worldwide, with respect and emphasis on the parties’ autonomy, Swiss Arbitration Law helped established Switzerland as a highly-attractive venue for arbitrating international disputes.
The Reform of Swiss Arbitration Law
The initiative for reform of Chapter 12 of PILA came from the Swiss Government in 2017. On 11 January 2017, the Swiss Government published a draft bill with proposed amendments. The aim of the reform was to modernize Swiss Arbitration Law and to bring it in line with the settled jurisprudence of the Swiss Federal Supreme Court and with the most recent developments in international arbitration. After the draft bill was published, several rounds of public consultations were held with different arbitration institutions, law associations and law faculties. An updated draft bill was released in October 2018. The draft bill was considered by the Swiss Parliament in March 2020 and approved by the Swiss Parliament on 19 June 2020. The amendments are anticipated to enter into force in early 2021.
Scope of Application: International Arbitration
Chapter 12 of PILA applies to international arbitration. Pursuant to Article 176(1), arbitration is considered international if one of the parties to an arbitration agreement, at the time of its signature, has its domicile outside of Switzerland. Under the current Swiss Arbitration Law, there was some ambiguity as to the timing which determines a party’s domicile, and whether it was at the time of the conclusion of the arbitration agreement or at the time of initiation of an arbitration. This confusion stemmed from the case law of the Swiss Federal Court. This issue has now been clarified, and revised Article 176 of PILA makes it clear that the decisive moment in determining a party’s domicile is the moment of the conclusion of the arbitration agreement.
Domestic arbitration, on the other hand, is governed by the Swiss Code of Civil Procedure. An interesting feature, however, is that pursuant to Article 176(2), parties may decide to opt out of Swiss International Arbitration and chose domestic arbitration instead, thereby excluding application of Chapter 12. Parties in domestic arbitration may also opt in to Chapter 12 which applies to international arbitration but this, however, has to be explicitly stated in the arbitration agreement at the time of its signature.
Procedure for Appointment and Replacement of the Arbitrators under Swiss Arbitration Law
Other revisions and clarifications of the Swiss Arbitration Law are related to the procedure for the appointment and replacement of arbitrators. Pursuant to Article 179(1) of PILA, arbitrators are appointed and replaced in accordance with the procedures set out in the arbitration agreement. However, where the parties have not specified the procedure for their appointment, Swiss State courts have jurisdiction to appoint the arbitrators. The recent updates clarifies a question that posed certain problems in practice, that if the parties have not explicitly determined the place of arbitration or have stated simply “arbitration in Switzerland“, the Swiss court to which the issue has been first raised has authority to appoint the arbitral tribunal. The revised bill further clarifies that in case of multiparty arbitrations, where the parties have failed to appoint an arbitrator, the appointment can also be made by the Swiss State court, and it contains provisions intended to minimise delaying tactics in ad hoc arbitrations (“A la demande d’une partie, le juge prend les mesures nécessaires à la constitution du tribunal arbitral si les parties ou les arbitres ne s’acquittent pas de leurs obligations dans les 30 jours à compter de celui où ils ont été
appelés à le faire.”)
New Written Form Requirements for Arbitration Agreement
Pursuant to Article 178 of PILA, arbitration agreements are deemed valid if made in writing, by telegram, telex, fax or any other means of communication which permits it to be evidenced by a text. The revised text introduced by the new bill now provides wording that clarifies that other forms of modern communication may also be used to prove the existence of an arbitration agreement.
Another change with respect to the form of an arbitration agreement is that the new bill introduces the possibility of arbitration agreements being made in unilateral legal instruments, for example, trusts, deeds, wills or articles of associations and bylaws (“Les dispositions de la présente partie s’appliquent par analogie aux clauses d’arbitrage qui sont prévues dans des actes juridiques unilatéraux ou des statuts“).
Challenges Against Arbitral Awards
Challenges against arbitral awards are decided directly by the Swiss Federal Supreme Court. An award can be set aside on very limited grounds as provided in Article 190 of PILA, which is in line with the grounds provided in the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards.
The new bill clarifies that an award may be challenged regardless of the amount in dispute. Moreover, the revised law codifies the remedies available to parties which, in addition to the right to request annulment, also includes a party’s right, in very limited cases, to request the reopening of the proceedings (a so-called “Revision”). As provided in the newly-introduced Article 190(a), an application for revision is allowed in one of the following, limited circumstances:
i. if relevant or material factors or evidence have been discovered after the arbitration proceedings have been concluded;
ii. if criminal investigation shows the award was tainted by illegality;
iii. if circumstances were discovered after the arbitration proceedings have been concluded, which raise doubts as to an arbitrator’s independence and/or impartiality.
Pursuant to Article 191, a foreign party may waive its right to file an application for revision, however, no waiver is possible for the ground that an award has been influenced by a criminal offense.
Submissions to Swiss Courts in English
Another interesting development, as English is the lingua franca of international commerce and trade, is that the new bill provides that applications for the setting aside of awards may now be submitted to Swiss Federal Court in English (“Les mémoires peuvent être rédigés en anglais“). Previously, all submissions to the Swiss Federal Court had to be made in one of the official languages, German, French, Italian or Romansh (spoken mainly in the southeastern Swiss canton of Grisons).
This happens to be one of the most controversial changes which, considering the short 30-day deadline for the submission of an application for setting aside, may be beneficial for foreign parties and reduce the cost and time of unnecessary translations. The decision of the Swiss Federal Court has to be made in one of the official languages, however. The precise implications of this revision will be seen in practice.