REUTERS | Denis Balibouse

Can arbitration answer the particular needs of professionals in the field of commodity trading and shipping? A Swiss perspective

Users in the field of commodity trading and shipping are willing to have their dispute settled through a resolution process that is in line with their way of conducting business. Can arbitration in Switzerland answer these particular needs?

Efficiency and rapidity

One of the primary concerns for users in the field of commodity trading and shipping is to resolve their dispute in the most efficient and rapid manner possible. Arbitration generally answers these needs, as most of the rules issued by arbitral institutions provide the parties with flexibility to organise the proceedings as they see fit. This is even more so for commodity trading and shipping arbitrations seated in Switzerland, which are governed by a very liberal lex arbitri, the Swiss Private International Law Act (PILA). Moreover, the fact that arbitration is a single-tier procedure, at the end of which the award may be challenged only on very limited grounds, is a clear advantage over litigation in the courts. Provided that none are domiciled or resident in Switzerland, parties to an arbitration seated in Switzerland may even fully, or in part, waive their right to challenge the arbitral award. Some institutional rules also provide for accelerated proceedings (for example, Article 42 of the Swiss Rules of International Arbitration (Swiss Rules)). Furthermore, in order to further increase the efficiency of their proceedings, parties to a commodity trading or shipping dispute may consider designating as arbitrator(s) individuals with expertise in their areas of business.

Costs

Another important concern for professionals in the field of commodity trading and shipping is the issue of costs. There are different mechanisms that enable parties to an arbitration seated in Switzerland to reduce the costs of their arbitration. These include having:

  • An arbitrator who has particular experience in commodity trading and shipping business.
  • The dispute decided by a sole arbitrator (instead of having a three-member panel).
  • The dispute decided on the basis of documentary evidence only.
  • The parties waive their right to challenge the arbitral award in their contract, thereby avoiding the costs that would have resulted from setting aside proceedings (as indicated above, this is only possible if neither party is domiciled or resident in Switzerland).

Enforceability of awards

As for any other parties to arbitration, the enforceability of the award to be issued by the arbitral tribunal is of key importance for professionals involved in the business of commodity trading and shipping. In Switzerland, arbitral awards rendered by arbitral tribunals seated in Switzerland have the same effects as judgments rendered by a domestic state court and are thus directly enforceable (Article 190(1) of PILA). With respect to foreign arbitral awards, their recognition and enforcement are governed by Article 194 PILA, which itself refers to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. This Convention governs recognition and enforcement of all foreign awards, irrespective of whether they were made in a contracting state. Importantly, setting aside proceedings do not, as a general rule, result in a stay of the enforcement of the award.

Mediation

Last but not least, the preferred and usual means of dispute resolution in the commodity trading and shipping business is, and remains, direct settlement between users. This is because parties involved in such business usually aim to preserve their relationship and thus favour settling their disputes amicably. However, arbitration does not prevent this. On the contrary, most of the arbitration rules provide for mediation as a method to enhance settlement that can be used in parallel with arbitration (see for example the Swiss Rules of Commercial Mediation). Mediation rules issued by arbitral institutions are usually extremely flexible, and allow parties to adopt the procedure that is most appropriate to their needs and wishes. Mediation may be initiated at any time before or during the arbitration. If commenced while the arbitration is pending, mediation can either lead to the suspension of the arbitration, or it can be conducted in parallel. Importantly, mediation can be terminated at any time by either party.

Can arbitration in Switzerland provide the answers?

Therefore, the answer to the question put at the beginning of this post is quite obvious: yes, arbitration in Switzerland can answer the particular needs of professionals in the fields of commodity trading and shipping. Thanks to its liberal arbitration law, as well as its extensive connections and expertise in commodity trading and shipping, Switzerland is in fact often chosen as the seat for arbitrating such disputes. This trend is likely to increase in the future. In order to answer the particular needs of professionals in the field of commodity trading, shipping, and trade finance, the Geneva Chamber of Commerce and Industry, together with the Geneva Trading & Shipping Association (which has since become the Swiss Trading & Shipping Association) have created the Alternative Dispute Resolution for Commodity Trading, Shipping and Trade Finance (ACT). ACT provides for specific features especially designed for disputes in the sector. These include customised arbitration/mediation clauses based on the Swiss Rules and the Swiss Rules of Commercial Mediation (which parties may incorporate into their arbitration agreements), and an optional and indicative list of recognised arbitrators and mediators specialised in the commodity business. ACT thus provides users with flexible tools that create a time-saving, efficient and cost-effective dispute resolution process. Although developed by Swiss institutions, ACT is not specifically geared for the Swiss legal environment and may be used for disputes all over the world (subject to verification that all ACT features are consistent with the local lex arbitri).

Schellenberg Wittmer Elena Trabaldo-de Mestral

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