Switzerland is one of the most, if not the most, loved place for arbitration practitioners. That’s why there is a great case law established by the Bundesgericht, the Federal Supreme Court of Switzerland. The case law of the Federal Court, developed in the 30 years since the Private International Law Act (SR 291 Bundesgesetz über das Internationale Privatrecht) entered into force in 1989, will now be codified.
Thus, the revision as well as the correction, explanation and amendment of arbitration decisions will be explicitly included in the law. It is also clarified, that assistance procedures are to be carried out before state courts in the summary proceedings. Party autonomy will be further strengthened by expressly declaring arbitration jurisdiction permissible even in unilateral legal transactions. Newly, submissions to the Federal Court are also admissible in English, since it is the prevailing language in international arbitration proceedings.
Switzerland is traditionally one of the world’s most important arbitration forum. An empirical study by the European Parliament on arbitration in the EU, including Switzerland, came to the conclusion in 2014 that Switzerland is by far the most popular place of arbitration and thus undoubtedly one ofthe leading arbitration places.3 A similar picture is provided by the annual statistics of the International Chamber of Commerce in Paris (ICC). Although the ICC does not have an office in Switzerland, 130 percent of all ICC arbitration worldwide is based in Switzerland, which makes it the second most frequent arbitration state of the ICC. In 2017, this was 90 out of 810 procedures compared to 121 for France as the most frequent host state.4
In addition, as in previous years, Swiss nationals were the third most frequently appointed arbitrators in these arbitration proceedings.5 The ICC procedures are regularly high in value. The same applies to the Swiss Chambers’ Arbitration Institution (SCAI), whose procedures, with a few exceptions, are always carried out in Switzerland.
There is also a statistically elusive number of other commercial arbitration conducted on an ad hoc basis without administration, by institutions such as the SCAI or the ICC, a growing number of investment arbitration courts based in Switzerland, and a very high number of sports arbitration cases.
Switzerland is also by far the most important arena for sports disputes. The Tribunal Arbitral du Sport (CAS) in Lausanne administered just under 600 procedures in 2016, which in most cases have an international character.7 Overall, over 1000 international arbitration proceedings are likely to take place in Switzerland each year.
The most important factors of arbitration in Switzerland are; the excellent legal framework, namely chapter 12 of the Federal Act of 18 December 1987 on the International Private Law, and at the same time, high quality and consistency of the case law of the Federal Court in the field of international arbitration.
As part of the preparatory work, the Federal Office of Justice appointed a group of experts. This was composed of Prof. Dr. Gabrielle Kaufmann-Kohler (University of Geneva), Prof. Dr. Felix Dasser (University of Zurich), Elliott Geisinger (lawyer in Geneva) and Prof. Dr. Daniel Girsberger (University of Lucerne). In addition, the Federal Office of Justice conducted exploratory talks with Swiss-based arbitration institutions (ICC Switzerland, Swiss Chambers’ ArbitrationInstitution, Tribunal Arbitral du Sport (CAS), WIPO Center for Arbitration andMediation) and the Federal Court.TheFederal Office of Justice, after concluding the consultation procedure, consulted other experts to clarify further specific questions relating to sports arbitration (Daniel Eisele [lawyer in Zurich], Prof. Dr. Ulrich Haas [University of Zurich], Dr. Stephan Netzle [lawyer in Zurich], Michele Bernasconi [lawyer in Zurich], Prof. dr. Antonio Rigozzi [University of Neuchâtel]).
The 12th chapter of the PILA is internationally recognized as an innovative, clear and concise law, which grants the parties great autonomy and flexibility in the process design, but at the same time provides a transparent and succinct framework. Thanks to these characteristics, the 12th chapter of the PILA satisfies very different types of arbitration (ad hoc procedure, institutional arbitration, sports arbitration, investment arbitration, etc.).
The draft aims to further strengthen the qualities of the 12th chapter of the PILA. Legal certainty and clarity will be increased through including the established case law of the Federal Court to the legal text, ambiguities will be eliminated and the law will become more user-friendly more than it is now. Taking into account the developments in international trade as well as other arbitration laws worldwide, the draft also introduces a number of innovations aimed at further optimizing Swiss arbitration.
I. Change in Wording
There will be some formal changes in articles (e.g. art. 183 para. 2 & 3) to adapt modern laws such as referencing the court and not the judge and neutralizing the language which was biased.
II. Legal Regulation of Revision, Corrections, Interpretations and Supplementation (Additional Award)
The remedies of the correction, interpretation and supplementation are now expressly regulated as well as the revision of arbitral awards. With the proposed changes, the order of legal remedies and appeal will be fully understood from the legislative text. The 12th chapter thus satisfies the claim of the historic legislator to regulate international arbitration comprehensively and conclusively.
III. Clarification of the Scope of the 12th Chapter
Before, the Federal Court pointed out that the time of initiation of the arbitral proceedings will determine the application of the 12th Chapter of PILA.8 Now, the definition of the scope of the 12th chapter of the PILA will be based expressly based on the parties to the “Arbitration Agreement” at the moment of conclusion of the agreement. This removes the legal uncertainty in applicable law.
IV. Legal Obligation to Promptly Challenge Procedural Defects
The duty to promptly challenge procedural defects is a central and long recognized principle of procedural law, which is of great importance in practice. The cases in which the Federal Court did not respond to a challenge due to forfeiture are numerous. In the interests of domestic and both foreign users of the 12th chapter of the PILA, it therefore seems appropriate to enshrine the obligation to immediately raise procedural defects, as is already the case in Swiss domestic arbitration.
V. Changes and Additions to the Challenge and Procedure of Arbitrators
Art. 180 did include the requirement of “independency” of the arbitrator but not the “impartiality” principle. Though it was understand from the purpose that independency and impartiality are globally recognized principles of arbitrators, the wording was added to the text. Also, if it became apparent after the award, that the one of the arbitrators was in violation of the abovementioned principle, the application for revision will be possible if there is no other recourse possible. Also resignation and the procedures for challenge and resignation have been clarified in Articles 180a and 180b.
VI. Summarized Proceedings for Assistance Procedures
So far, the applicable procedure for proceedings before the state court, invoked in support of arbitration (so-called Juge d’appui), is not legally clarified. Therefore, as part of the proposal, the new law should for both the international and national arbitration arrange expressly summary proceedings and SR 272 Schweizerische Zivilprozessordnung, the Code of Civil Procedure (CCP)9 will be amended accordingly.
VII. Direct Access of Foreign Arbitral Tribunal(s) or Parties to State Courts
Enforcing interim/provisional measures can be difficult and maybe an impossible exercise if said measures have been ordered by an arbitral tribunal seated outside of Switzerland. Articles 183 para. 2 and 185a PILA will help to facilitate such enforcement and allow arbitral tribunals seated outside of Switzerland (or parties to foreign arbitral proceedings) direct access to the Swiss state court at the place where the measure is to be enforced, be it for interim and provisional measures or for the taking of evidence.
VIII. Strengthening Party Autonomy
The 12th chapter of the PILA grants the parties great freedom in the process design. This characteristic is to be preserved and further strengthened taking into account the corresponding developments in the laws of other arbitration places.
IX. Legal Regulation of Arbitration Clauses in Unilateral Legal Transactions
The draft expressly stipulates that the jurisdiction of an arbitral tribunal may also be based on a valid arbitration clause contained in a unilateral legal transaction (e.g. last will, foundation, trust, statutes) if this is effectively established in accordance with the applicable substantive law.
X. The Lack of Designation of Place of Arbitration or Designation of Switzerland as a General Place of Arbitration
The parties may, without formal requirements, agree on the seat of the arbitral tribunal in the arbitral agreement or at any later date. If the seat name is not set out by the parties and also alternative designation mechanisms do not lead to determination of the seat, provisions of Chapter 12 of the PILA would be ineffective.
In order to further the willingness of the parties to arbitrate in Switzerland, the draft new stipulates that in case the parties could not determine the composition of the arbitral tribunal, the first-applied state court will be competent, if the parties did not agree on a seat or only with a broad agreement as “the seat in Switzerland”.
XI. Increasing the User-Friendliness
The 12th chapter of the PILA is a Swiss arbitration law (so-called lex arbitri) for arbitration with an international relevance, in particular to lawyers abroad, and is therefore in competition with foreign legal systems. The user friendliness is therefore of paramount importance.
XII. Independent and Final PILA Regulation of International Arbitration
International arbitration under Chapter 12 of the PILA always affects at least one foreign party. These may not be familiar or only slightly familiar with the Swiss legal system. For foreign parties it is therefore a decisive advantage if the lex arbitri is comprehensively regulated.
In the interests of user-friendliness, references to the CCP are therefore replaced by direct provisions in the PILA, so that the law largely regulates international arbitration on its own and ultimately. In this sense, new and exhaustive rules Articles 179, 180, 180a and 180b PILA will be enacted relating appointment and the rejection and dismissal of a member of an arbitral tribunal.
XIII. Uniform Form Requirement for All Agreements in the Context of Arbitration
Under applicable law, the form of the arbitration agreement isgoverned byArticle 178 (1) PILA. Article 176 (2) PILA provides that the parties may agree to the application of Part 3 of the Code of Civil Procedure by means of an express declaration in the arbitration agreement or in a subsequent agreement (so-called opting-out). For the appeal waiver, the law requires a formal point of an express declaration in the arbitration agreement or in a later agreement (Art. 192 para.1 PILA). Although the choice of words in the three provisions are different, the predominant view is that Article 178 (1) PILA applies to both opt-out and waiver of the requirements of the form.10
In order to enhance the user-friendliness, the shorter and more modern wording of Article 358 CCP (“The arbitration agreement must be in writing or in another form which allows it to be evidenced by text.”) will be included in Article 178 (1) PILA.On the other hand, the formal requirements for an opting-out as well as a waiver of appeal are linguistically standardized. All agreements in arbitral proceedings will now be subject to the same formal requirements. The same is proposed for internal arbitration.
XIV. Admission of English Submissions in Arbitration in the Federal Court
English is the predominant language in (international) arbitration.11 In appeal and/or revision proceedings, the Federal Court already accepts supplements of a legal text in English with the agreement of the parties. The draft goes a step further, despite the criticism of the Federal Court. New and all entries in arbitration matters before the Federal Court as the competent appeal instance can be submitted in English. Admission of submissions in English will reduce the translation burden on the parties. The proposed rules will strengthen therefore attractiveness of Switzerland as an international arbitration forum further.
As seen, Switzerland is not only well-known with its great landscapes, chocolate and army knives, but also has a wide reputation in dispute resolution via arbitration. Its great legal framework thanks to the PILA and excellence jurisprudence by the Federal Court enables it to be the most attractive arbitration forum.
Now, the PILA will be modernized and adapted to the contemporary needs of arbitrations, such as quick and clear court assistance provisions and English submissions to the Federal Court and in general enabling a more user friendly arbitration. It seems that Swiss arbitration will continue to hold the “crown” on its head.
Omer Faruk Kafali, LL.M.
* Reserach Assisstant at Ibn Haldun University, Department of Civil Procedure and Execution-Bankruptcy Law.
2 https://www.admin.ch/opc/de/classified-compilation/19870312/index.html (last visited 05.11.2019)
3 European Parliament, Directorate General for internal Policies, Policy Department C: Citizens’ Rights and Constitutional Affairs, Legal Instruments and Practice of Arbitration in the EU – Study, 2014, p. 181.
4 ICC Dispute Resolution Bulletin 2018/2, p. 60 f.
5 ICC Dispute Resolution Bulletin 2018/2, p. 58 f .: totally 116 appointments of Swiss women and Swiss in 2017. www.swissarbitration.org> Statistics> SCAI Commented Statistics 2015, last visited on 10.11.2019)
6 Approx. 100 procedures annually in the years 2015-2017 (Information SCAI dated 20.03.2018, SCAI, Commented Statistics 2015, August 2016, www.swissarbitration.org)
7 www.tas-cas.org > General Information> Statistics> CAS Statistics 1986-2016 (last visited on 30.10.2019).
8 Decision 4P.54/2002, 24th June 2002, E. 3.
9 https://www.admin.ch/opc/de/classified-compilation/20061121/index.html (last visited 06.11.2019)
10 BSK IPRG-Pfiffner/Hochstrasser, Art. 176, N 45; Kaufmann-Kohler/Rigozzi, International Arbitration. Law and Practice in Switzerland, 2015, Rz. 2.41; Arroyo (Hrsg.), Arbitration in Switzerland. The Practitioner’s Guide, 2013; BSK IPRG-Hochstrasser/Fuchs, Einl. 12. Kap., N 151 ff.
11 Statistics of SCAI shows that nearly 70 % of cases are held in English (SCAI, Commented Statistics 2015); more than 80% of all WIPO Arbitrations are also conducted in English. (www.wipo.int > IP Services > Alternative Dispute Resolution > Domain Name Dispute Resolution > How to find UDRP jurisprudence
> Statistics > All case languages; last visited am 14.10.2019).