International Arbitration: Switzerland’s Revised International Arbitration Law as of 1 January 2021

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Switzerland is one of the world’s most attractive jurisdictions for international arbitration. The reason for this is not only Switzerland’s neutrality and its stable political situation, but also its Private International Law Act (PILA), of which the 12th chapter regulates international arbitration. In order to strengthen the position of Switzerland as an arbitration centre and further promote its attractiveness, the 12th chapter of the PILA has been revised.

1. Background and Objectives of the Revision of the InternationalArbitration Law

The revision incorporates central elements of the Swiss Federal Supreme Court’s case law into the law and clarifies open questions. In addition, the new law further improves the user-friendliness of the PILA and strengthens party autonomy in line with international developments. Overall, however, the revision is mainly limited to punctual adjustments; the goal is an improvement while substantially maintaining the law’s proven basic structure.

On 19 June 2020, Parliament adopted the revised PILA, which entered into force on 1 January 2021.

2. The Main Amendments at a Glance

2.1 Structure of the Law

With the revision of the PILA, all references to the Swiss Civil Procedure Code (CPC) that previously existed in Chapter 12 were deleted and replaced by corresponding provisions in the PILA. The revised PILA now regulates Swiss international arbitration law in a largely independent and self-contained manner, which makes it easier to deal with.

2.2 Clarification of the Scope of Application (Art. 176 para. 1 PILA)

The revised provision in Art. 176 para. 1 PILA clarifies the scope of application of international arbitration law. It states that Chapter 12 applies if, at the time when the arbitration agreement was entered into, at least one of the parties had neither its domicile nor its habitual residence nor its [corporate] seat in Switzerland.

The previous wording of the law, in contrast, was not clear as to whether the seat of the parties to the arbitration proceedings or the seat of the parties to the arbitration agreement was decisive – which could lead to different legal findings. This is the case where substitution of parties takes place between the conclusion of the arbitration agreement and the commencement of the arbitration proceedings or if several parties signed the arbitration agreement but not all of the signatories are party to the arbitration proceedings. The Swiss Federal Supreme Court has in its previous rulings focused exclusively on the seat of the parties who were ultimately involved in the arbitration proceedings (Federal Supreme Court Decision 4P.54/2002 of 24.06.2002, cons. 3).

The new wording of the law clarifies that – in contrast to the previous case law of the Swiss Federal Supreme Court – only the domicile, the habitual residence or the seat of the original parties to the arbitration agreement is relevant with regard to the application of the PILA. The domicile, habitual residence or seat of the parties ultimately involved in the arbitration proceedings is no longer relevant in this respect. This clarification is to be welcomed in view of predictability it brings.

2.3 Formal Requirements for Arbitration Agreements and Arbitration Clauses (Art. 178 para. 1 and para. 4 PILA)

With the revision, the outdated text forms of telegram, telex and fax previously mentioned in the law are no longer listed as possible forms of communication. The law now stipulates the written form or any other form that allows evidence by text – in a general manner – as formal requirement (Art. 178 para. 1 PILA).

Furthermore, it is now expressly provided that an arbitration clause may be contained not only in a contract, but also in a unilateral legal act (e.g. will, founding charter or trust, etc.) or included in articles of association, and that in this case the provisions of Chapter 12 apply mutatis mutandis (Art. 178 para. 4 PILA). This new provision reflects the fundamental principle of party autonomy in arbitration proceedings; where substantive law is governed by private autonomy, the possibility of dispute resolution by arbitration should be given.

2.4 Appointment and Replacement of the Arbitrators (Art. 179 – Art. 180b PILA)

As in the previous legal text, the appointment of the arbitral tribunal shall be made primarily in accordance with the procedure established by the parties directly or with reference to the rules of an arbitral institution. In the absence of any agreement, the arbitral tribunal consists of three members, with the parties each appointing one member and the two party-appointed arbitrators then unanimously electing the chairperson.

If the parties have not agreed on a procedure or if the arbitral tribunal cannot be appointed or replaced for other reasons, the state court at the seat of the arbitration, the juge d’appui, may be called upon to take the required measures to advance the proceedings.

If the parties fail to determine the seat of the arbitration, according to the new provision, the (Swiss) state court first seized is competent for the appointment of the arbitral tribunal. The arbitrators, appointed by the court seized, subsequently will determine the seat of arbitration.

Furthermore, it is also new that in the case of multi-party arbitration, the state court may appoint all of the arbitrators. It is at the discretion of the state court to appoint either all or only single members of the arbitral tribunal, depending on the circumstances of the specific case. The purpose of this provision is to ensure that the principle of equal treatment is complied with and implemented when constituting the arbitral tribunal.

In addition, the law now regulates the procedure for challenge and removal in a more detailed manner.

Finally, the new law explicitly mentions the impartiality of the arbitrators, besides their independence, as an additional requirement. However, this principle already did apply prior to the revision, even if it had not yet been anchored in the law.

In general, the rules of the appointment, replacement, challenge and removal of arbitrators have been defined more precisely and clearly, and above all without reference to the CPC.

2.5 Duty to Give Prompt Notice of Violation of Procedural Rules (Art. 182 para. 4 PILA)

The duty to give prompt notice of a violation of the procedural rules already applied prior to the revision based on the procedural principle of good faith. It has now been codified. Parties must give notice of violations of the procedural rules without delay as soon as such violations are detected or could have been detected with reasonable diligence, otherwise their right to do so is forfeited.

2.6 Assistance by the State Court in Support of Foreign Arbitral Proceedings (Art. 185a PILA)

The newly introduced provision enables arbitral tribunals seated abroad or parties to foreign arbitral proceedings to directly request the Swiss state courts for assistance in case interim or conservatory measures are to be enforced (at the place of enforcement) or in case of taking of evidence proceedings (at the place where the evidence is to be taken). Thereby, a direct gateway between foreign arbitral tribunals and Swiss state courts is introduced, thus eliminating the time-consuming and formally burdensome process of international mutual legal assistance.

2.7 Complete Listing of Possible Legal Remedies against Arbitral Awards (Art. 189a to 191 PILA)

Previously, the only remedy against an arbitral award mentioned by the law was the application to the Swiss Federal Supreme Court to have the award set aside. Now, the law expressly mentions as additional remedies the revocation as well as the correction, interpretation and amendment of the award.

Furthermore, the statutory time limit of 30 days to challenge the arbitral award before the Swiss Federal Supreme Court was copied from the Code of the Federal Supreme Court (CFSC) to the PILA (Art. 190 para. 4 PILA).

2.8 Submissions to the Swiss Federal Supreme Court may be Written in English

Probably the most important and significant amendment of the revised law is to be found in Art. 77 CFSC, according to which the application to the Swiss Federal Supreme Court to set aside the arbitral award can be written and submitted in English – the predominant language in international arbitration. The same applies to requests for revocation (Art. 119a para. 2 CFSC).

However, these amendments have no effect on the language of the proceedings before the Swiss Federal Supreme Court, which still will be conducted in one of Switzerland’s official languages. Accordingly, the judgement will also be rendered in one of the official languages.

Furthermore, the CFSC now expressly states with regard to arbitration proceedings that the action to set aside an arbitral award is admissible irrespective of the amount in dispute.

2.9 Application of the Summary Proceedings in Cases before the Juge d’Appui

The revision of the international arbitration law has also led to various amendments in the CPC, in particular the introduction of Art. 251a CPC. Art. 251a CPC foresees that matters in which the state court acts as juge d’appui under the PILA are governed by the provisions of the summary proceedings.

3. Closing Remark

The revision of the 12th chapter of the PILA has turned out well. No major changes were made, but such were also not needed. Instead, the Swiss international arbitration law has been punctually modernized and made overall more user-friendly. Whether and how the amendments made in this revision will have an effect on Switzerland as an arbitration hub will only be shown in the years to come. Yet, the attempt itself has been a success.

This article is also available in German.

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