Draft Revision of Chapter 12 of the Swiss Private International Law Act

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On 11 January 2017, the Swiss Federal Council presented a draft bill on the revision of Chapter 12 of the Swiss Private International Law Act (PILA), which governs international arbitration proceedings seated in Switzerland.

The planned revision is intended to adapt the existing law so as to align it with case law established by the Federal Supreme Court over the last 30 years, and to clarify certain issues that have so far remained unresolved. Furthermore, it underlines party autonomy by loosening the form requirements of the arbitration agreement. Finally, the revision aims at making Chapter 12 of the PILA easier to use for foreign arbitration practitioners.

The most relevant proposed changes to the PILA concern the following issues:

  • Correction and revision of arbitral awards: Although the Federal Supreme Court and the legal doctrine acknowledge that an arbitral award may be subject to correction and revision, the current law lacks a legal basis for these remedies. This gap shall now be closed by explicitly providing for these remedies in the PILA. While a request for correction has to be submitted to the arbitral tribunal, a request for revision has to be filed with the Federal Supreme Court. A party may request the revision of an arbitral award if it subsequently discovers significant facts or evidence that could not have been submitted in the arbitral proceedings or in case it is established that the award was influenced to the detriment of the respective party by a felony or misdemeanour. A revision of the award is further possible if a party only after the issuance of the award discovers facts giving rise to a challenge of an arbitrator.
  • Form of the arbitration agreement: Currently, in order for an arbitration agreement to fulfil the form requirements of the PILA, it must be made in writing or in any other means of communication that establishes the terms of the agreement by a text. This form requirement has to be adhered to by all of the parties to the agreement, which nowadays appears rather strict. The proposed draft recognizes arbitration agreements as valid even if the form is fulfilled by one party only. This means in practice that an arbitration agreement can be validly entered into if the arbitration clause is contained in a written offer that is submitted to the counter party, who then accepts the offer only orally or tacitly.
  • Lacking designation of the seat of arbitration: Under the PILA, the state court at the place of arbitration has jurisdiction to appoint the members of the arbitral tribunal in case the parties have not agreed on an appointing procedure. In a scenario, however, where the parties have failed to designate the seat of arbitration (be it that they have designated only Switzerland as the place of arbitration or have failed to designate the place of arbitration at all), the jurisdiction of a specific state court cannot be established, and the arbitration is doomed to fail. In spirit of the principle in favorem validitatis, the draft revision provides that it is for the state court first seized to appoint the members of the arbitral tribunal. The tribunal so constituted shall then determine the seat of the arbitration.
  • Provisional and protective measures: Under the current law, only the tribunal is entitled to request the assistance of the state courts in case a party does not voluntarily comply with provisional or protective measures ordered by the tribunal. The proposed amendment of the PILA extends this right to the parties. This appears justified, given that the party who has requested the tribunal to order provisional or protective measures has a legitimate interest in obtaining assistance from the state courts in case such measures are not complied with.
  • Decision as to the costs of arbitration: Today, the PILA is silent with respect to the issue of costs. According to the Federal Supreme Court, an arbitral tribunal may determine the parties’ mutual obligations with respect to the reimbursement of costs, it lacks however the competence to render a binding decision as to its own fees. The draft revision now expressly confers the power and duty upon the tribunal to render a decision as to the amount and allocation of costs, as well as to compensation for legal and other costs, unless the parties agree otherwise.
  • Submissions to the Federal Supreme Court: In matters of international (and domestic) arbitration, submissions to the Federal Supreme Court such as a request for revision or an action for setting aside an arbitral award may now be filed in English. The court’s decision, however, will still be issued in one of the official languages.
  • Finally, the draft revision contains several minor amendments of a linguistic or technical nature. In order to facilitate the application of the PILA by foreign arbitration practitioners who are not necessarily familiar with Swiss law, the PILA no longer provides for references to the Swiss Code of Civil Procedure, but directly incorporates the relevant provisions.

The consultation phase, during which all interested parties may comment on the draft bill, lasts until 31 May 2017. Depending on the opinions submitted, the Department of Justice may then still amend the proposal before submitting it to Parliament.

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