1.1 Describe the prevalence of commercial arbitrations as a method of settling disputes, both domestic and international.
Switzerland is one of the traditional venues for both international and domestic commercial arbitration.
In 1989, the Swiss legislature adopted a law on international arbitration, which received wide international praise and acceptance for its simplicity, flexibility, and pragmatism. Since then, a large body of case law has emerged surrounding the new law, both providing guidance on the interpretation and application of the relevant rules and confirming the Swiss judiciary’s restraint in interfering with international arbitration. This legal background, as well as Switzerland’s excellent business infrastructure, its location at the heart of Europe, the high professional standards of the Swiss legal profession, Switzerland’s political stability, and the nation’s historical neutrality, makes Switzerland one of the preferred centres for international arbitration. Geneva and Zurich are among the most frequently selected sites for arbitrations under the rules of the International Chamber of Commerce in Paris (ICC), and Switzerland, together with the UK, ranks first in terms of the nationality of ICC arbitrators. In addition, Switzerland hosts a number of permanent international arbitration institutions, such as the Tribunal Arbitral du Sport (TAS), the Arbitration Centre of the World Intellectual Property Organisation (WIPO), the United Nations Claims Compensation Committee (UNCC).
In domestic matters, arbitration is less frequently used than in international matters, but is often the preferred dispute resolution mechanism in situations requiring confidentiality, such as in financial, technology or intellectual property matters, or in multi-party situations, such as in shareholder, joint-venture or consortium disputes.
2.1 What are the principal sources of law and regulation relating to domestic and international arbitration? (Describe the role of federal or state laws and relevance of court decisions.)
Swiss statutory law distinguishes between the rules for international arbitration and those for domestic arbitration. Additionally, Switzerland has a large body of case law on domestic and international arbitration. Case law serves as a reference for the interpretation of statutory law and for filling gaps in the statutory law of arbitration. Courts frequently consult academic sources, although these are not binding authority.
2.2 List and briefly describe relevant arbitration statutes, international treaties and conventions.
The rules applicable to international arbitration are set forth in Chapter 12 (arts 177–194) of Switzerland’s Federal Act on Private International Law (PILA). These rules apply whenever at least one of the parties had neither its place of domicile nor its habitual residence in Switzerland at the time at which the arbitration agreement was entered into. The parties may exclude in writing the application of the PILA and agree on the exclusive application of the procedural provisions governing domestic arbitration.
Switzerland is also a signatory state of the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 10 June 1958) (the New York Convention).
Domestic arbitration falls under the Swiss Inter-cantonal Convention on Arbitration of 27 August 1969 (the Concordat). The Concordat was ratified by every Swiss Canton and replaced the civil procedure rules of the various Cantons. Again, the Concordat is a short set of rules comprising no more than 46 articles. The Swiss legislature is currently preparing a new federal law on civil procedure, which will contain a chapter on domestic arbitration. This chapter will replace the Concordat. The draft contains no substantial changes to the Concordat. The new law is anticipated to become effective no earlier than 2009.
In addition, the Chambers of Commerce of Basle, Bern, Geneva, Ticino, Vaud, and Zurich recently adopted the uniform Swiss Rules of International Arbitration (Swiss Rules), which took effect on 1 January 2004 (www.swissarbitration.ch). The Swiss Rules replaced the individual rules of the participating Chambers of Commerce on international arbitration and will apply in all cases in which an agreement to arbitrate refers to the arbitration rules of the participating Chambers of Commerce. The Swiss Rules apply to all international arbitral proceedings in which notice of arbitration is submitted on, or after, 1 January 2004. The Swiss Rules are based on the UNCITRAL Arbitration Rules, to which some changes and additions have been made. However, the Swiss Rules are not part of Swiss statutory law. They apply only where the parties mutually agree to arbitrate under the rules of a participating Chamber of Commerce.
3.1 What are/describe the principal institutions and/or government agencies that assist in the administration or oversight of international and domestic arbitrations?
No government agencies are involved in the administration of private commercial arbitration.
On a private level, a number of Swiss Chambers of Commerce render arbitration services. In the past, the two local Chambers of Commerce most often chosen for arbitration services were the Zurich Chamber of Commerce and the Geneva Chamber of Commerce and Industry. As of 1 January 2004, these two Chambers, together with their counterparts in Bern, Basle, Vaud, and Ticino, collectively form the Arbitration Committee exercising their powers under the Swiss Rules (see above). In addition, certain international Chambers of Commerce provide their own arbitration rules and services in Switzerland, including the Swiss-American and German-Swiss Chambers of Commerce.
Most Swiss arbitration practitioners are members of the Swiss Arbitration Association (ASA), a private non-profit organisation of more than 1,000 Swiss and non-Swiss members committed to promoting commercial arbitration.
4.1 What is the relationship between agreements to arbitrate and access to the courts? Is there a presumption of arbitrability/policy support for arbitration? Will the courts stay court actions in favour of agreements to arbitrate?
Switzerland is divided into 26 Cantons. As a general rule, the court system is organised independently by each Canton. Each Canton has lower (district) courts and an upper (appellate) court. In addition, there is the Swiss Federal Supreme Court in Lausanne, which is the highest court in Switzerland and exercises jurisdiction on a federal level.
With respect to arbitration, the Swiss courts’ role consists of: (i) the recognition of arbitration agreements by denying the court’s jurisdiction in cases of valid arbitration agreements; (ii) the appointment of arbitrators in the event that one of the parties defaults; (iii) the enforcement of procedural orders issued by arbitrators; (iv) the granting of interim relief and conservatory measures; (v) restricted review of appeals from arbitral awards; and (vi) enforcement of arbitral awards.
Swiss courts tend to be arbitration-friendly if it is established that the parties have agreed to exclude the courts’ jurisdiction.
If a party bound by an arbitration agreement starts litigation before a national court, the national court will rule first on the validity and scope of the arbitration agreement. The court will not stay proceedings until an arbitral tribunal has been constituted and has had a chance to decide on the issue. If the court holds the arbitration agreement to be valid, the court will decline jurisdiction and will not examine the merits of the case.
If the same dispute is brought by one party before a national court and by the other party before an arbitral tribunal, the question of which proceedings will be stayed depends on the priority of bringing action (lis pendens). If arbitration proceedings were brought first, the judge must stay the proceedings until the arbitrators’ decision on jurisdiction has been rendered and, if appealed, reviewed by the appellate court. If, on the other hand, the action was first filed with a Swiss or foreign court, the arbitral tribunal must suspend proceedings until the national court has ruled on jurisdiction. If the court first seized with the matter is a foreign court, the arbitral tribunal in Switzerland is only required to suspend proceedings if the foreign court’s decision on jurisdiction meets the necessary requirements for recognition in Switzerland.
4.2 May an arbitral tribunal rule on a party’s challenge to its own jurisdiction (‘competence-competence’)? Need a tribunal suspend its proceedings if a party seeks to test jurisdiction in the courts?
Arbitral tribunals have the competence to decide on their jurisdiction. An arbitral tribunal’s decision on jurisdiction may be challenged before the Swiss Federal Supreme Court (in international arbitration) or before the cantonal court of appeals (in domestic arbitration). The appeal has no suspending effect on the arbitral proceedings.
5.1 Provide a selected bibliography of the most influential publications in or relied upon in the jurisdiction – books, journals, newsletters and pamphlets.
Statutes Swiss Federal Act on Private International Law of 18 December 1987, Chapter 12 on international arbitration (arts 176–194) Inter-cantonal Arbitration Convention on domestic arbitration (Concordat) of 27 August 1969
Books S V Berti (ed) International Arbitration in Switzerland (Basel: 2000), an introduction and commentary in English on arts 176–194 of PILA. P Lalive, J F Poudret and C Reymond Le droit de l’arbitrage (Lausanne: 1989), a commentary in French on Swiss domestic and international arbitration. T Rüede and R Hadenfeldt Schweizerisches Schiedsgerichtsrecht (Zurich: 2nd edn, 1993, and 1999 (supplement)), a textbook in German on Swiss domestic and international arbitration. J F Poudret and S Besson Droit comparé de l’arbitrage international (Zurich/Brussels: 2002), a comparative study in French. A Bucher and P-Y Tschanz International Arbitration in Switzerland (Basel: 1989), a textbook in English on Swiss international arbitration. P Patocchi and E Geisinger IPRG Internationales Privatrecht (Zurich: 2000), a commentary in German on the Swiss Act on Private International Law, including the provisions on international arbitration. H Girsberger et al (eds) IPRG Kommentar (Zurich: 2004), a commentary in German on the Swiss Act on Private International Law, including the provisions on international arbitration. G Kaufmann-Kohler and B Stucki International Arbitration in Switzerland (The Hague: 2004), a handbook in English.
Journals ASA Bulletin of the Swiss Arbitration Association, a quarterly publication with articles and case law on arbitration in German, French and English.
Websites
Swiss Chambers’ Arbitration: www.swissarbitration.ch
Zurich Chamber of Commerce: www.zurichcci.ch
Geneva Chamber of Commerce and Industry: www.ccig.ch
Swiss Arbitration Association (ASA): www.arbitration-ch.org
Swiss Federal Supreme Court, with federal case law: www.bger.ch
Kluwer Arbitration: www.kluwerarbitration.com/arbitration/arb/default.asp
6.1 Are there form and/or content requirements for an enforceable agreement to arbitrate? How may they be satisfied?
In international arbitration, art 178 of PILA governs the formal requirements for the validity of arbitration agreements. According to this provision, an arbitration agreement is formally valid if it is made in writing, by telegram, telex, fax or any other means of communication which permits it to be evidenced by text. Neither a signature nor an exchange of documents is required. In recent decisions the Swiss Federal Supreme Court has started to develop a practice of extending arbitration clauses to non-signatories. In domestic arbitration, the arbitration agreement must be signed.
An arbitration agreement is valid in terms of substance if it conforms either to: (i) the law chosen by the parties; (ii) the law governing the subject matter of the dispute; or (iii) Swiss law.
The required minimum content of an arbitration agreement under Swiss law includes the parties’ agreement to submit the dispute to arbitration, and an indication of the dispute or legal relationship forming the subject matter of the arbitration. Other basic core elements include the designation of the seat of the arbitral tribunal (including the name of the city), the number of arbitrators, and a procedure for their appointment.
Arbitration is not mandatory for any type of normal commercial dispute in Switzerland.
7.2 Is arbitration prohibited for certain types of dispute (restraints of fundamental public policy)?
Pursuant to art 177 of PILA, any dispute involving an economic interest may be the subject of an international arbitration. This includes all kinds of monetary interests connected to contractual, quasi-contractual, commercial, civil, administrative, and public law matters, whether they arise under domestic, foreign, or international law. In domestic arbitration, arbitral proceedings may not be used to resolve disputes over rights and duties that are not at the free disposal of private parties, such as most matters involving family law, personal status, or criminal liability. In domestic arbitration, the legislature has provided, in some exceptional situations, for the exclusive jurisdiction of national courts, or for a restriction of the parties to agree on arbitration prior to the time at which the dispute arises, such as in landlord-tenant disputes, labour law disputes, and some consumer protection matters.
8.1 May an arbitral clause be considered valid even if the rest of the contract in which it is embedded is invalid?
The separability or autonomy of arbitration clauses is a well-established principle in Swiss law. Article 178(3) of PILA explicitly states that the validity of an arbitration agreement cannot be contested on the grounds that the main contract is not valid. The same concept is provided for in art 21(2) of the Swiss Rules. Thus, the validity of an arbitration agreement must be examined and determined independently from the validity of the main contract. Even if the main contract is invalid, the arbitration clause may still be binding and thus provide the arbitrators jurisdiction to rule on claims arising from the invalidity of the main contract.
9. QUALIFICATION/APPOINTMENT/LIABILITY OF ARBITRATORS
9.1 Are there specific provisions regulating the qualifications of arbitrators? Are there requirements (including disclosure) for ‘impartiality’ and ‘independence’, and do such requirements differ as between domestic and international arbitrations?
Swiss law on international arbitration contains no requirements regarding the personal or professional qualifications of arbitrators other than the duty to be independent (see section 9.2 below). Any person with the legal capacity to act may serve as arbitrator, including legal entities. However, the parties have full autonomy to agree on any kind of arbitrator qualification.
The extent to which independence includes impartiality is a point of controversy among Swiss scholars. The degree of impartiality may vary depending on whether the arbitrator was appointed by one of the parties, the co-arbitrators, an institution or a court, and depending on the cultural background and professional environment of the arbitrator. In a 1994 decision, the Swiss Federal Supreme Court concluded from the fact that art 180 of PILA mentions only independence, without explicitly adding impartiality, that the degree of impartiality may be less stringent for party-appointed arbitrators than for chairpersons of arbitral tribunals. However, even party-appointed arbitrators are bound to exercise an adequate degree of impartiality and to avoid arbitrary decisions.
If the arbitration is conducted under the auspices of one of the Swiss Chambers of Commerce, then art 9 of the Swiss Rules provides that the arbitrators must remain ‘at all times impartial and independent of the parties’.
In domestic arbitration, the necessary qualifications for arbitrators can be deduced from the grounds for challenging arbitrators in this context. These grounds include a direct interest of the arbitrator or one of his or her family members in the outcome of the case; previous activity of the arbitrator in the matter in another role, such as having served as lawyer, expert, witness etc; a close friendship or a strong animosity between the arbitrator and one of the parties; and other grounds of lesser importance. Also, in domestic arbitration, an agreement prohibiting the appointment of lawyers as arbitrators is invalid, and an arbitrator may be challenged if he or she has served a term of imprisonment for committing a ‘dishonourable’ crime or offence.
Swiss statutory law establishes no requirements for disclosure in arbitration. However, disclosure of grounds that may give rise to justifiable doubts regarding an arbitrator’s independence and impartiality is a common practice among Swiss arbitrators. Proper disclosure is relevant as it may exclude a party from challenging an arbitrator at a later stage of the proceedings and save an arbitrator from liability. For this reason, the Swiss Rules explicitly require prospective arbitrators to disclose any circumstances likely to give rise to justifiable doubts regarding their impartiality or independence.
9.2 Are there provisions governing the challenge or removal of arbitrators? Do the courts or other jurisdictions play/have a role in any such challenge?
In general, an arbitrator’s appointment may be challenged if he or she does not meet the requirements agreed by the parties or required by the arbitration rules chosen by the parties. In international arbitration, Swiss law provides that an arbitrator’s appointment may be challenged if circumstances exist that give rise to justifiable doubts as to his or her independence. Such circumstances include subordination relationships, economic ties, ongoing professional connections or the promise of an additional fee.
In domestic arbitration, the grounds for challenging the appointment of arbitrators are identical to those applicable to federal judges, since the Concordat refers to the provisions on the exclusion and challenging of federal judges set forth in arts 22 and 23 of the Federal Act on the Organisation of the Federal Judiciary. Also, in domestic arbitration, the appointment of an arbitral tribunal as a whole may be challenged if one of the parties exercised an overriding influence in the designation of the arbitrators.
A party may challenge an arbitrator in whose appointment it participated only on grounds the party became aware of after the appointment. Disclosure prior to the acceptance of an appointment as arbitrator thus plays a significant role.
The national court at the seat of the arbitration has jurisdiction over challenges to an arbitrator’s appointment in international arbitration, unless the parties agree otherwise. Alternative procedures are prescribed in art 11 of the Swiss Rules, under which a so-called Special Committee appointed by the Chambers of Commerce’s Arbitration Committee shall decide any challenges. In domestic arbitration, the national court at the seat of the arbitration decides; the parties may not provide for another procedure.
9.3 Does legislation govern, or have the courts developed rules regarding the liability of arbitrators for acts related to their decision-making function?
Swiss law does not explicitly address arbitrators’ liability. In legal doctrine, the liability of arbitrators is usually based on general terms of contract law governing the contract between the parties and the arbitrators (receptum arbitri). The arbitrators of a tribunal are considered jointly and severally liable for breach of their duties of diligence, which includes the duty to treat the matter and procedure properly and expeditiously, to perform the judicial function personally, to participate efficiently in the resolution of the dispute, to render a decision on all claims subject to the arbitrators’ jurisdiction, and not to withdraw from the arbitration without just cause. Legal commentators are of the view that the arbitrator’s liability should not go further than that of national judges: this liability, at federal level, is limited to intentional misconduct and gross negligence. Under Swiss law, a contractual exclusion of liability for gross negligence or unlawful intent is null and void, while an exclusion of simple negligence is possible. Such a contractual exclusion of liability is contained in art 43(3) of the Swiss Rules, which provides that none of the Chambers of Commerce or their staff, arbitrators or tribunal-appointed experts will be liable for any act or omission in connection with an arbitration conducted under the Swiss Rules, ‘save where the act or omission is shown to constitute deliberate wrongdoing or extremely serious negligence’. Arbitrators cannot be held liable for their interpretation of the law or for discretionary decisions, except in cases of obvious abuse of discretionary powers.
10. PARTY REPRESENTATION
10.1 Are there particular qualification requirements for representatives (‘counsel’) appearing in the jurisdictions?
Any person with the legal capacity to act can represent parties in arbitration proceedings in Switzerland. The representative need not be a lawyer. Foreign attorneys representing parties in Swiss arbitration are not subject to the Swiss laws on lawyers’ professional duties and qualifications and on the supervision of attorneys admitted to the bar.
11. PLACE OF ARBITRATION/PROCEDURES
11.1 Are there provisions governing the place (seat) of arbitration, or any requirement for arbitral proceedings to be held at the seat?
The seat of the arbitration is determined either by the parties, or by the arbitration institution designated by the parties, or, failing both, by the arbitrators. The seat must be identified clearly enough to allow for a determination of the competent court, should court assistance be required: the determination of the place should thus refer to the name of a city. In an international dispute, a designation such as ‘arbitration in Switzerland’ may constitute a valid arbitration agreement, but it fails to lend sufficient clarity as to the seat of the arbitration. In such a situation, if the defendant refuses to co-operate in specifying the place of arbitration within Switzerland the claimant will be at an impasse. Leading commentators consider that vague designations such as ‘Switzerland’ fail to meet the minimum requirements of clarity, for which reason such clause would be insufficient to serve as a basis for arbitration in Switzerland. If the parties fail to designate the seat of the arbitration in domestic arbitration, the seat will either be determined by the arbitrators or at the place of the national court that would have jurisdiction over the case if the parties had not agreed on arbitration (art 2 of the Concordat).
The parties and arbitrators can agree to hold meetings and conduct hearings at places other than the designated seat of arbitration, including locations outside Switzerland. By submitting to arbitration under the Swiss Rules, the parties confer the power on the arbitrators to decide where the proceedings will be conducted.
11.2 Are specific procedures mandated in particular cases, or in general?
Under Swiss law, parties may provide for arbitral procedures directly, by reference to institutional or ad hoc arbitration rules, or by reference to statutory procedural rules. In the absence of any such choice, the arbitral tribunal must itself determine the procedure to the extent necessary.
Swiss law contains a small number of procedural rules for international arbitration, some of which are mandatory. These rules encompass equal treatment of the parties, the parties’ right to be heard, lis pendens, interim relief and protective measures, and the taking of evidence. Additional rules apply in domestic arbitration. In general, however, the parties and the arbitrators have full autonomy to tailor the procedure according to the needs of the case.
The Swiss Rules provide for an expedited procedure under certain circumstances. As a rule, the expedited procedure applies in cases where the amount in dispute is below 1,000,000 Swiss Francs or if the parties have chosen this procedure.
12. EVIDENCE GATHERING
12.1 What is the general approach to the gathering and tendering of evidence at the pleading stage and at the hearing stage (production, discovery, privilege, use of witness statements etc)? Are there differences between domestic and international arbitrations?
The parties and the arbitrators determine their own procedure for the taking of evidence. Depending on the national origin and professional background of the parties and arbitrators, the evidence procedure may follow either the civil law (inquisitorial) or the common law (adversarial) tradition. In general, all of the standard means of providing evidence are admissible, such as documents, testimony by parties and witnesses, expert reports, inspections etc. Discovery proceedings are admissible if available under the procedural rules determined by the parties. Most institutional arbitration rules do not provide for discovery. In Swiss international arbitration practice, compulsory discovery proceedings are hardly ever used.
At the pleadings stage, evidence is usually submitted in the form of exhibits to legal briefs. Such exhibits include documents, photographs, charts, videos, witness statements (affidavits), expert opinions, product samples, and so on.
Swiss law requires evidence be furnished directly to the arbitral tribunal.
Arbitrators cannot delegate the taking of evidence to third parties. The evidence must be submitted to, and received by, the arbitrators collectively (ie all arbitrators must be present when witnesses testify). This rule is mandatory in domestic arbitration, but parties can waive it in international arbitration.
12.2 What powers of compulsion or court assistance are there for arbitrators to require attendance of witnesses or production of documents, either prior to or at the substantive hearing? Is there a difference between domestic and international tribunals or as between parties and non-parties? Do special provisions exist for arbitrators appointed pursuant to international treaties (ie bilateral or multilateral investment treaties)?
Swiss arbitral tribunals have no coercive powers. However, Swiss law provides that arbitrators can request the assistance of state authorities for purposes of gathering evidence. The arbitral tribunal, or a party with the consent of the arbitral tribunal, may request the assistance of the court at the seat of the tribunal. The court will apply its own procedural law. Therefore, if court assistance is required, the evidence to be taken and the procedure to be observed while taking evidence must correspond to the court’s rules on civil procedure.
Switzerland is not a party to any international treaties governing the appointment of arbitrators in standard commercial arbitration.
13. INTERIM MEASURES/ROLE OF THE TRIBUNAL
13.1 Are there special provisions relating to the granting of interim and preliminary relief? Have the courts recognised and/or limited any such authority? Do the courts themselves play a role in interim relief in arbitration proceedings?
In Swiss domestic arbitration, the power to grant interim relief and to order conservatory measures is reserved to the national courts. Arbitrators may only suggest measures for voluntary compliance by the parties (art 26 of the Concordat). In contrast, arbitrators in international arbitration have the power to grant interim relief and to order conservatory measures, unless the parties have agreed otherwise. However, arbitrators cannot enforce their orders and measures. If a party does not comply, arbitrators can request the assistance of the competent national court. The court must grant assistance and will apply its own procedural rules.
Arbitrators may order any kind of suitable measures. If arbitrators wish to have the order enforced, the measure must fit in with the procedural rules of the national court in charge of enforcement. The court competent for granting assistance is usually the court where the measures would need to be enforced.
The arbitrators’ jurisdiction to grant interim relief and to order conservatory measures is not exclusive. A party may choose to request either the arbitrators or the competent national court to order such measures, unless the parties have previously explicitly excluded this choice. This option is available prior and during the arbitration. Article 26(3) of the Swiss Rules provides that a request for interim measures addressed by a party to a judicial authority will not be deemed incompatible with the agreement to arbitrate, or treated as a waiver of that agreement.
14. TAXATION OF ARBITRATORS’ FEES
14.1 Does the state, or any of its sub-divisions, purport to tax domestically the fees of foreign arbitrators conducting hearings in the state? Is there a difference if the arbitration is ‘seated’ in the state or elsewhere?
Arbitrator fees are not subject to Swiss VAT. In contrast, attorney fees of counsel representing a party in arbitration are subject to Swiss VAT if the represented party has its place of business in Switzerland.
Foreign arbitrators are treated as self-employed for Swiss income tax purposes. A foreign arbitrator is only subject to Swiss income tax if he or she conducts his or her activities through a permanent establishment (meaning a fixed place of business) in Switzerland and if the duration of such activities in Switzerland exceeds a specific minimum period of time (depending whether a double tax treaty is in force between Switzerland and the arbitrator’s country of domicile). Most tax treaties ratified by Switzerland follow the OECD Model Tax Treaty, where a period exceeding six months within 360 days triggers Swiss income taxation. If no such treaty is in force, a period exceeding 30 days leads to Swiss income taxation.
If liability for Swiss income tax is triggered, the arbitrator is obliged to file a tax return in Switzerland declaring that the income derives from the permanent establishment (self-assessment system).
There are no withholding or source taxes applicable to arbitrator fees in Switzerland.
15. DEFAULT PROCEEDINGS
15.1 Are there provisions governing a tribunal’s ability to determine the controversy in the absence of a party who, on appropriate notice, fails to appear at or seek adjournment of the arbitral proceedings?
If a party fails to co-operate in the establishment of the arbitral tribunal, eg by failing to appoint an arbitrator, the national court at the seat of the arbitration can be called for assistance.
Once the arbitral tribunal has been constituted, the arbitrators decide how to deal with a defaulting party. Swiss law does not specifically address this problem. Whatever procedure the arbitrators choose, they must ensure equal treatment for the parties and the parties’ right to be heard. Thus, arbitrators must make sure that the defaulting party has received the arbitrators’ communications and notices. If a properly served and informed party does not assist in, or indeed obstructs, the proceedings, arbitration may continue without the defaulting party’s participation.
Article 28 of the Swiss Rules provides that if a duly notified party fails to appear at a hearing or fails to submit documentary evidence without showing sufficient cause for such failure, the arbitral tribunal may proceed with the arbitration and may make the award on the evidence before it.
16. THE ARBITRAL AWARD
16.1 Must an award take any particular form, eg in writing, signed, dated, place, the need for reasons, delivery etc?
Pursuant to art 189 of PILA, the arbitral award must comply with the procedure and form agreed by the parties. This includes conformity with provisions contained in applicable institutional rules. Absent an agreement or provisions in the applicable institutional rules, Swiss law provides that the award must be made by a majority decision or, in the absence of a majority, by the presiding arbitrator alone. Dissenting opinions are admissible only if both the parties have provided for such a possibility in the arbitration agreement, or if the majority of the arbitrators consent to the communication of a dissenting opinion with the award. Swiss law establishes the following formal requirements:
Swiss law does not set any other formal requirements for international arbitral awards. Likewise, there are no additional formal requirements that would need to be observed with respect to the recognition and enforcement of an award under the New York Convention.
16.2 Are there limits on arbitrators’ powers to fashion appropriate remedies, eg punitive or exemplary damages, rectification, injunctions, interest and costs?
In international arbitration, arbitrators must decide the dispute according to the rules of law chosen by the parties or, in the absence of such a choice, according to the rules of law with which the case has the closest connection. The available remedies are determined by the law applicable to the substance of the case. The parties may also authorise arbitrators to decide ex aequo et bono. Whatever the basis of the decision, the result may not violate international public policy. A violation of international public policy is a basis for appeal and, as such, constitutes the only significant statutory limitation on the arbitrators’ authority to fashion remedies. The intention is to avoid a situation in which an award rendered in Switzerland might be unenforceable anywhere in the world. Arbitrators may award treble damages or punitive damages if allowed under the applicable substantive law. If the award is to be enforced in Switzerland, however, arbitrators should be aware that treble damages and punitive damages may violate Swiss public policy, depending on the particular circumstances of the case (there is conflicting and insufficient case law on this issue).
The situation is similar in domestic arbitration. The available remedies are determined by the law chosen by the parties. As decisions in domestic arbitration are usually intended to be enforced in Switzerland, arbitrators must consider issues of Swiss enforceability. As will be discussed below, the violation of Swiss (as opposed to international) public policy is a valid objection in Swiss enforcement proceedings.
17. RECOURSE FROM AN AWARD
17.1 Are there provisions governing modification, clarification or correction of an award?
Swiss statutory law contains no provisions dealing with the interpretation, rectification or completion of an arbitral award. However, the majority of Swiss legal doctrine holds that an arbitral tribunal has the power to clarify, on request by one of the parties, unclear points, contradictions and gaps in the award which are obviously the result of an error on the part of the arbitrators. A request must be filed with the arbitrators within the same period of 30 days applicable to the filing of an appeal with the Swiss Federal Supreme Court.
The Swiss Rules explicitly provide for the possibility to request from the arbitrators an interpretation or correction of an arbitral award. In addition, the Swiss Rules provide for the possibility to request an additional award with regard to any claims presented in the arbitral proceedings but omitted from the award. Such requests must be submitted to the arbitral tribunal within 30 days of receipt of the award.
17.2 May an award be appealed to or set aside by the courts? If so, on what grounds and by what procedures?
Swiss legislature exercises great restraint in providing possibilities for interference by national courts in private arbitration, reflected in the limited legal remedies against awards and in the restricted grounds for appeal. Swiss courts generally tend to respect arbitrators’ judicial independence, and only interfere in exceptional cases.
The two possibilities for recourse against an international arbitration award rendered in Switzerland are: (i) an appeal (ie a request for setting aside proceedings) to the Swiss Federal Supreme Court; and (ii) a request to the Swiss Federal Supreme Court for a retrial (revision of the award).
In international arbitration, appeals must be addressed to the Swiss Federal Supreme Court. In domestic arbitration, appeals must be filed with the cantonal court of appeals. Under certain circumstances, cantonal appellate court decisions can be appealed at the level of the Federal Supreme Court, which may result in a two-tier appeal of domestic arbitral awards.
The grounds for appeal in international arbitration are narrowly restricted and concern almost exclusively the violation of fundamental procedural rights. As a rule, arbitrators’ findings on the merits of a case cannot be challenged before the Federal Supreme Court, unless the findings suggest a violation of international public policy. In international arbitration, the grounds for appeal are enumerated in art 190 of PILA. They include: (i) improper appointment of arbitrators; (ii) incorrect confirmation or rejection of jurisdiction by arbitrators; (iii) ruling of arbitrators beyond the claims submitted, or failure to rule on one of the claims submitted; (iv) violation by the arbitrators of the principle of equal treatment of the parties or of the right to be heard in an adversarial procedure; and (v) incompatibility of the award with international public policy. In domestic arbitration, additional grounds for appeal apply, including the argument that the decision is arbitrary because it has been based on obviously wrong facts or on a clear violation of the law.
Appeals can be lodged against both final and partial awards. Partial awards end proceedings with respect to a part of the merits of the dispute. Furthermore, appeals regarding improper appointment of arbitrators and regarding arbitral decisions on jurisdiction must be lodged against the arbitrators’ interim order or decision, provided that the order or decision is binding on the parties and the arbitrators in the sense that the arbitrators cannot reconsider the decision. Appeals must be lodged within 30 days of notification of the decision to the parties. Usually, an arbitral decision is deemed to have been communicated upon receipt of the decision by the parties, unless the procedural rules applied in the arbitration provide for another means of notification. In domestic arbitration, arbitral awards are deposited with the national court at the seat of the arbitration, which court will notify the parties of the award. The parties may agree on another means of notification.
Swiss statutory law does not explicitly provide for retrials in international arbitration (revision of international arbitral awards). The Swiss Federal Supreme Court considers this to be a lacuna in Swiss legislation and ruled in a leading case that, based on an analogous application of the rules governing retrials in federal court cases, arbitral awards can be revised and that retrials can be held. Pursuant to these rules, a request for retrial can be based either:
(i) on the grounds that the applicant discovered new relevant facts or new decisive evidence which he or she was unable to submit in the prior proceedings; or (ii) if it is established by means of a criminal investigation that the decision was influenced by a crime or offence. In the case of newly discovered facts, the applicant must show that the previously unknown facts relate to events that occurred prior to the date of the award; facts arising after the rendering of the award cannot serve as grounds for retrial. The applicant must also show that he or she is not at fault for not raising the facts in the prior proceedings. Finally, the newly discovered facts and evidence must be relevant to the outcome of the case, and must not just relate to the argument supporting the decision. The same applies to a crime or offence serving as grounds for retrial: the crime must have had a causal effect on the decision as such, and not just on the considerations and reasoning of the arbitrators. A request for a retrial must be submitted within 90 days after discovery of the ground(s) for retrial. If more than ten years have passed since the award was rendered, a request for retrial can only be submitted in the case of a crime or offence.
In domestic arbitration, retrials are governed by arts 41–43 of the Concordat. The procedure is similar (albeit not identical) to the one described for international arbitration. The respective time limits for filing a request for a retrial in domestic arbitration are 60 days and five years.
Finally, it must be noted that Swiss law restricts the parties’ autonomy to waive legal remedies by means of an agreement (exclusion agreements). Parties may only agree to exclude setting aside proceedings (or to limit such proceedings to specific grounds for appeal) if: (i) none of the parties has its domicile, habitual residence or a place of business in Switzerland; (ii) the exclusion agreement is in writing; and (iii) the waiver is stated in explicit terms, ie the agreement must clearly and unambiguously reflect the common intention of the parties to waive their right to an appeal. Neither a statement that the award shall be final and binding, nor a reference to institutional rules providing for a waiver of legal remedies is considered sufficient to constitute a valid exclusion agreement. As the Swiss possibilities of recourse against arbitral awards are restricted to situations in which fundamental procedural rights have been violated, entering into exclusion agreements should be approached with caution. As the time of writing, the Swiss Federal Supreme Court has just rendered its first and only decision, which upheld the validity of a waiver of the right to appeal.
18. ENFORCEMENT OF AWARD
18.1 What are the procedures and standards for enforcing an award? Is there a difference between ‘domestic’ and ‘non-domestic’ awards?
The New York Convention generally governs enforcement of a foreign arbitral award in Switzerland. Switzerland has also ratified a number of bilateral treaties regarding the enforcement of arbitral awards. Where these bilateral treaties are more favourable to the enforcement of arbitral awards than the New York Convention, the bilateral treaties prevail. Such treaties have been concluded with France, Spain, Italy, Germany, Belgium, the Czech Republic, the Slovak Republic, Austria and Liechtenstein.
For awards that require the payment of a sum of money or the posting of security, enforcement procedures follow the rules of the Swiss Code on Debt Collection and Bankruptcy (CDCB).
Enforcement of non-monetary awards must be sought from the cantonal court or authority having jurisdiction to grant leave to enforce the award (exequatur).
With respect to a monetary award, the creditor must first apply to the Debt Collection Office at the registered seat or domicile of the debtor and request the issuance of a payment order to the debtor. The debtor can challenge the order within ten days of its receipt, or else he or she must pay the debt within 20 days. If the debtor challenges the payment order, the creditor must seek recognition and enforcement of the arbitral award in summary court proceedings. Under art IV of the New York Convention, a party applying for recognition and enforcement must produce the original or a certified true copy of the arbitration agreement and of the award. These documents must evidence an agreement to arbitrate pursuant to art II of the New York Convention. If these documents are not in one of the three Swiss official languages (German, French, or Italian), a certified translation must be supplied.
Swiss embassies and consulates are authorised to authenticate arbitrators’ signatures. The certification of translations can either be done in Switzerland or in the country where the award has been rendered.
Since enforcement of the award is mandated by treaty, the debtor must state and support any objections based on the New York Convention in summary court proceedings. Recognition and enforcement must be denied by the court on its own motion if the award violates public policy or if the dispute is not arbitrable. The debtor may raise the following objections to enforcement:
19. CONFIDENTIALITY OF PROCEEDINGS
19.1 What are the confidentiality requirements of the arbitral process, ie existence of the arbitration, pleadings, documents produced, hearing, award?
There are no statutory provisions on confidentiality in arbitration. There is a consensus in Swiss legal doctrine that the arbitrators have a duty to maintain confidentiality, which implicitly arises from the contract of the arbitrators’ appointment (receptum arbitri). The issue is more controversial with respect to the duty of confidentiality of the other participants, such as the parties, witnesses, and experts. Obviously, the parties are bound to confidentiality if there is an explicit agreement to this effect, whether in the arbitration agreement or in the applicable arbitration rules to which the parties have submitted. If there is no explicit agreement, some authors argue that the duty of confidentiality is inherent to each arbitration agreement. This notion, however, has not yet been tested in court.
Based on the arbitrators’ power to grant interim relief and to order conservative measures, parties can request arbitrators to order protective measures to ensure the confidentiality of sensitive information disclosed in the proceedings (eg trade secrets and business secrets).
20.1 Is there any particular aspect of the approach to arbitration in the jurisdiction which bears special mention?
Switzerland is a multi-cultural and consensus-oriented society. This may be one of the reasons why arbitration has a long-standing tradition in Switzerland. The legal and political background is arbitration friendly. Swiss national courts exercise restraint in interfering with private proceedings. Many Swiss legal practitioners specialise in and are experienced in arbitration. The extensive case law, modern statutory law, and comprehensive legal commentaries in Switzerland make the outcome of arbitral dispute resolution predictable and provide a basis for fair and professional proceedings. All of these elements make Switzerland one of the preferred places for commercial arbitration in the world.
