Arbitration under the Swiss Rules of International Arbitration (Swiss Rules) is a dispute resolution procedure leading to a binding decision (i.e., an award) from an independent arbitral tribunal. The award can virtually be enforced worldwide pursuant to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which today counts 147 signatory states. An arbitration under the Swiss Rules is initiated through the filing of a Notice of Arbitration to the Secretariat of any of the seven Swiss Chambers of Commerce, which in 2004 for harmonization purposes replaced their own rules by the Swiss Rules (i.e., Basel, Zurich, Geneva, Bern, Ticino, Lausanne and Neuchâtel).
It is well known that Switzerland is one the most often chosen venues in international arbitration. Accordingly, the Swiss Rules are applicable to disputes between parties from any part of the world in proceedings conducted in any language and under any law governing the contract at issue. The Swiss Rules apply to both domestic as well as international arbitrations.
The new Swiss Rules came into force on 1 June 2012 and apply to all arbitrations initiated after this date. The new Rules are available online (in 10 different languages).
Purpose and aim of the revision
Given that the Swiss Rules of International Arbitration of 2004 were well received by both arbitration practitioners (arbitrators and counsel) as well as the users of international arbitration (i.e., the parties, including their in-house counsel), no major revision was necessary and the 2012 revision can be considered a “light” one. The main aim was to ensure the compatibility of the Swiss Rules with the new Code of Civil Procedure, in force as from 1 January 2011, which inter alia governs Swiss domestic arbitration. At the same time, the drafters sought to increase the flexibility of the proceedings. Also, the newly created central institution, the “Swiss Chambers’ Arbitration Institution”, will ensure the uniform application of the Swiss Rules. The efficiency of the proceedings (especially the reduction of both the duration and the costs) has, amongst others, been achieved by way of several amendments. Arbitrations under the 2004 Rules were faster and more cost-efficient compared to arbitrations under other institutional rules, and the revision intends to even increase these amenities. Lastly, the international focus of the Rules was kept.
The new Swiss Rules provide an answer to the increasing complexity of international disputes. In particular, an amendment on complex multi-party proceedings (i.e., on the consolidation of multiple arbitrations) has been adopted. Moreover, the new Rules provide for significant amendments with regard to the so-called emergency arbitrator. The newly established emergency arbitrator enables parties to request interim measures already prior to the constitution of the arbitral tribunal. This way, preliminary relief at the beginning (and within) the arbitration is available.
Most importantly, ex parte relief is available (even before the arbitral tribunal has been constituted, and naturally also afterwards). This is of critical importance in cases where the opponent would frustrate the purpose of the measure ordered by the arbitral tribunal if the opponent was informed about the proceedings requesting interim relief before the tribunal orders the requested measure of protection (e.g., a ban not to resell to a third party the goods in dispute). The opponent, in ex parte proceedings, only learns about the order at the time of issuance (i.e., once received), but not before.
It cannot be overstated that the following overview only reflects some of the important amendments. For a detailed article-by-article comparison of the 2012 with the 2004 Rules, please consult this table of comparison.
Overview of some of the most important new provisions:
1. Provisions aiming at enhancing procedural efficiency (even more)
A whole series of new provisions aims at increasing the (already given) speedy and cost-effective resolution of disputes under the Swiss Rules.
For example, the Rules now expressly provide that all participants (i.e., the parties, their counsel and the arbitrators) in the arbitral proceedings must act in good faith and must make every effort to contribute to the efficient conduct of the proceedings; further, they must avoid causing unnecessary delays and costs, and the parties additionally undertake to comply with any award or order of the arbitral tribunal (or the emergency arbitrator) without delay (see Art. 15(7) Swiss Rules). A party that does not comply with this duty runs the risk of the arbitral tribunal sanctioning such recalcitrant conduct when allocating the costs of the arbitration (see Art. 40(1)-(2) Swiss Rules).
Additionally, the initial phase of the proceedings has been accelerated in that the designation of party-appointed arbitrators must be made in the Notice of Arbitration (and the corresponding Answer to the Notice) already (see Arts. 3(3)(h) and 3(7)(f) Swiss Rules). Further, in order to provide all necessary information on important procedural issues as early as possible, the parties must submit their proposals on the number of arbitrators, the language of the proceedings and the seat of the arbitration in the Notice of Arbitration (or the Answer to the Notice) if they have not previously determined these issues (see Arts. 3(3)(g) and 3(7)(e) Swiss Rules). As a result, these critically important procedural issues are raised (and can be dealt with) at the earliest possible stage.
Further, settlements that would lead to an early end of the proceedings are now expressly addressed in that the arbitral tribunal may – with the agreement of the parties – take steps to facilitate the settlement of the dispute. The requisite agreement of the parties will constitute a waiver of their right to challenge an arbitrator’s impartiality based on the arbitrator’s participation (including the knowledge acquired) in the framework of those steps aiming at a settlement (see Art. 15(8) Swiss Rules).
Expedited proceedings, which have proven to be very effective in practice, continue to be available. Thus, if the amount in dispute does not exceed 1 million Swiss francs, the dispute will – as a rule – be decided (after a single exchange of written submission and a single hearing) by a sole arbitrator within six months. Expedited proceedings, therefore, offer a speedy and cost-effective resolution of controversies over rather small amounts. Besides, parties may (even after initiating the proceedings) agree on a sole arbitrator –regardless of the arbitration clause providing for three arbitrators and regardless of the amount in dispute exceeding 1 million Swiss francs (for detail, see Art. 42 Swiss Rules).
2. Amended provisions on multi-party arbitrations
International commerce increasingly gives rise to disputes involving multiple parties. The new Swiss Rules, just like the former 2004 Rules, try to tackle the (often complex) issues arising in such scenarios by means of Art. 4 Swiss Rules. Art. 4 has been slightly amended. Its aim and content are set forth hereafter.
Consolidation of Arbitral Proceedings
Article 4(1) sets forth the criteria based on which the Court (of the “Swiss Chambers’ Arbitration Institution”) may decide to consolidate a newly initiated arbitration with other arbitral proceedings that are already pending. The Court is required to consult the parties to all proceedings involved as well as all arbitrators who were already confirmed in any of the proceedings in question. The Court must take into account all relevant circumstances, including the links between the different cases and the progress already made in the pending arbitral proceedings.
If the Court decides to consolidate the new arbitration with the pending one(s), the parties to all proceedings shall be deemed to have waived their right to designate an arbitrator. Also, the Court may revoke the appointment and confirmation of arbitrators and apply the provisions of Section II (Composition of the Arbitral Tribunal). This power of revocation of the arbitrators in all pending proceedings has been newly established and grants the Court the (further) right to again appoint new arbitrators within the framework of the (consolidated) multi-party arbitration.
In contrast to other sets of arbitration rules, consolidation can be ordered by the Court even when the parties to the new arbitration are not identical to those in the pending proceedings. So far, the Chambers ordered consolidation only in very few (justifiable) cases, and normally only if the parties concerned had endorsed this approach. It can be expected that the Court will continue to adopt this restrictive approach.
Under Art. 4(2), where a third person (or several third persons) request(s) to participate in an arbitration which is already pending, the arbitral tribunal has the power to decide on such request. The same applies if a party to the pending arbitration requests that a third person (or several third persons) participate in the arbitration. Here too, it will be for the arbitral tribunal to decide on the requested joinder. In any case, the arbitral tribunal will have to previously consult all parties concerned, including the person(s) to be joined, and take into consideration all relevant circumstances. For example, the more advanced the proceedings are, the less justified a joinder will be.
3. Provisions on the newly established emergency arbitrator in cases where immediate relief is needed, including ex parte relief
A party needing urgent interim or conservatory measures that cannot wait until the arbitral tribunal is constituted (so-called emergency relief) may make an application for such measures under Article 43. The application must be filed with the Secretariat and must include, inter alia, a reasoned request for the measures sought.
The emergency arbitrator will have to render a decision on the application within 15 days from the date on which the Secretariat transmitted the file to the emergency arbitrator. The emergency arbitrator’s decision does not bind the (subsequently constituted) arbitral tribunal. The arbitral tribunal may thus modify or even annul the measure ordered.
As mentioned, ex parte relief is available, which is a unique feature of the Swiss Rules compared with other sets of arbitration rules. Such relief is of critical importance where the opponent would frustrate the purpose of the measure ordered by the arbitral tribunal if the opponent was informed about the proceedings before the tribunal issues the order. In ex parte proceedings, the opposing party only learns about the order at the time of receipt, but not before. Only then, the opponent will have the opportunity to comment on the application (i.e., exercise the right to be heard under Art. 43(6) Swiss Rules).
As a matter of course, ex parte relief is also available after the arbitral tribunal has been constituted, that is, in the framework of ordinary interim relief pursuant to Art. 26 Swiss Rules (see the newly established Art. 26(3): “In exceptional circumstances, the arbitral tribunal may rule on a request for interim measures by way of a preliminary order before the request has been communicated to any other party, provided that such communication is made at the latest together with the preliminary order and that the other parties are immediately granted an opportunity to be heard.”).
Lastly, it should be stressed that parties – regardless of the emergency arbitrator provisions – are free to request interim measures before the competent state court. This is expressly stated in Art. 26(5). In other words, the courts of law continue to have (parallel) jurisdiction under the new Swiss Rules. Besides, the parties may also opt out of the emergency arbitrator provisions.
All in all, the new Swiss Rules maintain the essential features of the former 2004 Rules. At the same time, new provisions have been included to address, amongst others, disputes involving multiple parties, more efficient case management procedures as well as interim relief available from the newly established emergency arbitrator.
Given their aim of providing guidance in complex matters on the one hand, and reducing duration and costs of arbitration on the other, it can be expected that the revised Swiss Rules will be welcomed by both arbitration practitioners (arbitrators and attorneys) and users of international arbitration (i.e., mainly corporate entities which routinely include arbitration clauses in contracts).
In closing, it is worth noting that the revision of the Swiss Rules is part of an ongoing international trend to modernize arbitration rules. By way of example, the new IBA Rules on the Taking of Evidence in International Arbitration and the revised UNCITRAL Rules of Arbitration were both adopted in 2010. Likewise, the revised ICC Rules of Arbitration came into force on 1 January 2012, which revision was addressed and assessed in the penultimate MLL-Newsletter of December 2011.