REUTERS | Denis Balibouse

Get your Act together: Switzerland to update its arbitration law!

The Swiss Government published on 24 October 2018 the draft bill regarding the revision of its arbitration law, that is, Chapter 12 of the Private International Law Act (PILA). The revision’s stated objectives are to codify the case law of the Swiss Supreme Court, clarify open issues, increase party autonomy, and improve the wording of the PILA so as to make it more user-friendly.

In particular, the draft bill submitted to the Swiss Parliament brings the following changes:

  • Clarifications as to the scope of application of Chapter 12 PILA: the international character of a dispute must be assessed by reference to the time of conclusion of the arbitration agreement, rather than to that of the initiation of the arbitral proceedings (in direct deviation from the Swiss Supreme Court’s current case law).
  • Clarifications as to the formal requirements for arbitration agreements: pursuant to the draft bill, the arbitration agreement must be concluded in writing or in any other form which allows it to be evidenced by text. It is also specified that the arbitration agreement can be included in unilateral expressions of intent, such as wills or bylaws.
  • Competent state courts: cases where an arbitration agreement merely provides for arbitration in “Switzerland” (instead of referring to a specific city or judicial district) can lead to critical issues, in particular when the parties fail to agree on the appointment of the arbitral tribunal. Pursuant to the revised draft, the court first seized is competent to appoint all of the arbitrators (also in multiparty arbitrations).
  • Codification of the parties’ duty to object immediately to procedural irregularities: this general principle (well anchored in the jurisprudence of the Swiss Supreme Court) is now enshrined in draft Article 182(4) PILA.
  • Direct access of foreign arbitral tribunal(s) or parties to Swiss state courts: enforcing interim or provisional measures can be a difficult (if not impossible) exercise if said measures have been ordered by an arbitral tribunal seated outside of Switzerland. Draft Article 185a PILA helps facilitate such enforcement and allows arbitral tribunals seated outside of Switzerland (or parties to foreign arbitral proceedings) direct access to the Swiss state court at the place where the measure is to be enforced (be it for interim and provisional measures or for the taking of evidence).
  • Clarification of the applicable procedure before the juge d’appui: there is currently no express provision, be it in the PILA or in the Swiss Code of Civil Procedure (CPC), stating which procedure applies in a case where the arbitral tribunal or the parties seek the assistance of the competent state court (juge d’appui). Draft Article 251a CPC clarifies that such requests will be dealt with in summary proceedings.
  • Clearer remedies against arbitral awards: in addition to setting aside, draft Article 189a PILA provides that the parties can apply to the arbitral tribunal within 30 days after the issuance of the award in order to request corrections to, or interpretation of, the award, or to request an additional award on issues that have not been decided by the arbitral tribunal, although they were mentioned in the parties’ prayers for relief. Such applications do not suspend the 30-day deadline to have the award set aside. Finally, draft Article 190a PILA sets out the grounds for revision of an award.
  • Applications to set aside an award can be filed in English: as already mentioned in previous posts in February and July 2017, one of the most debated part of the proposed revision was the introduction of an amendment authorising parties to file their setting aside applications with the Swiss Supreme Court in English. Despite the opposition of the Swiss Supreme Court itself, this amendment was nevertheless maintained in the draft bill (see draft Article 77(2bis) of the Swiss Supreme Court Act). It remains to be seen how the Swiss Parliament will eventually decide on this issue.

The changes and clarifications described above provide a welcome update to the Swiss legal framework for international arbitrations. By increasing legal certainty and modernising certain features of Swiss arbitration law, the proposed bill goes a long way toward ensuring that Switzerland remains one of the most attractive arbitral seats in the world.

It should, however, be noted that the Swiss government refused to address, in the draft bill, the scope of the so-called negative effect of the kompetenz-kompetenz principle. According to this principle, a state court faced with an exceptio arbitri argument (that is, the existence of a valid arbitration agreement) must limit its review of the existence of such an arbitration agreement to a prima facie analysis.

According to the Swiss Supreme Court’s case law, this principle applies only when the arbitration is seated in Switzerland. However, the same Supreme Court constantly held that, based on Article II(3) of the New York Convention, Swiss state courts may examine with full power of review the existence of an arbitration agreement when the seat is located outside of Switzerland.

A 2008 parliamentary initiative proposed to abolish this distinction and to limit expressly the scope of review of Swiss state courts to a prima facie analysis, regardless of the seat of arbitration. After observing that the solution adopted by the Swiss Supreme Court was clear and created very few problems in practice, the Swiss government considered it more pragmatic to leave things as they currently are.

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