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Christian Oetiker
Partner, VISCHER Ltd, Basel

Mladen Stojiljkovic
Counsel, VISCHER Ltd, Zurich

Nicole Brauchli-Jageneau
Senior Associate, VISCHER Ltd, Zurich

Background

International arbitration proceedings seated in Switzerland are governed by Chapter 12 of the Private International Law Act of 18 December 1987 (hereinafter ‘Chapter 12’ or ‘PILA’). Among Chapter 12’s most notable characteristics are the wide scope of party autonomy, its clarity, and arbitration-friendliness. Comprising (so far) only 19 articles, it remains to this day one of the world’s most concise arbitration legislations. Further key features include a broad definition of arbitrability, the arbitrators’ competence-competence, a choice of law rule favouring the validity of the arbitration agreement, and an efficient procedure for challenging awards on only limited grounds. Challenges are submitted directly to Switzerland’s highest court, the Federal Supreme Court, which typically decides within six to nine months.

Chapter 12 is widely considered a legislative masterpiece. So when in 2012, on the occasion of the law’s approaching 25th anniversary, the Swiss Parliament invited the government to present a bill for the revision of Chapter 12, it was clear that there was no need for any fundamental changes. Rather, the goal was to revise only as much as necessary and as little as possible.

The drafters of the bill focused primarily on increasing the certainty of the law, furthering party autonomy, and improving user-friendliness. As part of this process, the drafters decided that, in order to increase the law’s accessibility for foreign users, the references in Chapter 12 to other laws, most notably to the domestic Code of Civil Procedure, should be eliminated and the respective provisions included in Chapter 12. In addition, they decided that certain landmark decisions of the Federal Supreme Court, such as those creating new extraordinary remedies against arbitral awards, should be reflected in the text of Chapter 12. The new law will have 24 provision – five more provisions than the current law – achieving both the goal of being more comprehensive without losing its conciseness.

English language submissions to the Federal Supreme Court

A key innovation of the new law is that the parties will be able to make submissions to the Federal Supreme Court not only in the official Swiss languages (German, French, Italian), but also in English. This new option is a significant improvement, particularly in cases where otherwise much time would be spent on translating draft submissions from the official Swiss languages to English or vice versa. Considering that the time limit to file challenges against arbitral awards is only 30 days, the possibility to make English language submissions may, in many instances, prove to be an important time-saver.

It bears noting, however, that the new English language option applies only to submissions in connection with challenges of an arbitral award. The Federal Supreme Court will still issue its decisions in one of the official Swiss languages.

Clarification of the scope of Chapter 12

The new law clarifies the requirements under which Chapter 12 will apply. Article 176(1) of PILA provides that Chapter 12 will apply if at least one of the parties has its domicile abroad. According to a controversial decision by the Federal Supreme Court from the 1990s, whether Chapter 12 applies depends not on the parties' domicile when they entered into the arbitration agreement but on the parties' domicile of the parties to the arbitration when the arbitration is initiated. Yet most commentators have considered the opposite solution to be more appropriate, arguing that the parties' domicile when they enter into the arbitration agreement should be decisive, irrespective of subsequent changes of domicile, because the applicable lex arbitriis determined at the time of contracting. The new law adopts this solution and effectively reverses the court's case law on this issue, providing parties with more legal certainty.

The new law maintains the possibility for parties to opt out of the applicability of Chapter 12 of PILA in favour of the provisions of the Swiss Code of Civil Procedure (article 176(2) of PILA). Likewise, parties to domestic arbitration can opt into the applicability of Chapter 12 of PILA (article 353(2) of the Swiss Code of Civil Procedure).

Court assistance more broadly available

Chapter 12, in its current form, grants arbitral tribunals seated in Switzerland (but not the parties) the right to seek assistance from a Swiss state court if the parties do not comply with the arbitrators' decisions on interim measures or evidence-taking orders. Under the new law, the parties, too, will have that possibility. In addition, the new article 185a of PILA allows arbitral tribunals seated abroad and parties to directly request support from Swiss courts for their proceedings in connection with interim measures or evidentiary matters, avoiding the cumbersome route via international legal assistance. The request is to be addressed to the Swiss court where the measure is to be enforced.

Swiss courts can appoint arbitrators even without a specified seat

Under existing law, it was doubtful whether a Swiss court could be requested to appoint an arbitrator where the underlying arbitration clause merely referred to ‘arbitration in Switzerland’ or arbitration without a defined seat. Many believed that the failure to specify a Swiss city in the arbitration clause meant that, for lack of a specified seat, no Swiss court had jurisdiction to make the appointment. The new law clarifies that a specified seat is not needed and any Swiss court has jurisdiction to appoint arbitrators. Once the arbitral tribunal is constituted, it can determine the seat of the arbitration (article 176(3) of PILA).

Correction, explanation, or completion of awards

The new law expressly provides that parties may submit to arbitral tribunals requests for correction, explanation, or completion of awards. The Federal Supreme Court already acknowledged these remedies under the current law. The revised Chapter 12 now reflects these remedies in its text.

Correction will serve only to rectify typographical and calculation errors in the award. Thus, it will not allow the arbitrators to review the substance of the award.

Explanation will be limited to the operative part of the award. Thus, it will not apply to the tribunal's reasoning, however ambiguous or unclear it may be. The examples of explanations envisaged by the drafters were the correct identification of the parties, or the correct indication of the currency of an amount awarded.

Completion is a remedy that will allow the parties to request an additional award on claims that had been asserted in the course of the arbitration but that the tribunal erroneously left undecided. This rule is intended to avoid infra petita challenges – that is challenges of arbitral awards on the basis that the tribunal failed to address some of the parties' claims (article 190(1)(c) of PILA).

Correction, explanation, or completion must be requested within 30 days from the award's notification. Such a request has no impact on the time limit for challenging an award. The arbitral tribunal may correct, explain, or complete its award on its own motion within the same time limit. In all cases in which an award is corrected, explained, or completed, a new time limit for challenging the affected parts of the award starts from the notification thereof.

Revision of awards

Under the Federal Supreme Court's case law, a party can request the reopening of arbitral proceedings under certain circumstances: The discovery of new material evidence, which existed before the award was rendered but of which the respective party had no knowledge, and the discovery that the award was influenced by a crime. The Federal Supreme Court created this extraordinary remedy against awards as the PILA was silent on the issue. The new Chapter 12 contains provisions addressing the possibility of a revision of awards, thereby codifying the Court's case law. In addition to the above two grounds, a request for revision can also be submitted if grounds are discovered that call into question the independence or impartiality of an arbitrator and other remedies are no longer available.

Requests for a revision must be submitted to the Federal Supreme Court within 90 days from the discovery of the ground for revision and no later than ten years after the award became final and binding (article 190a(2) of PILA). Where a criminal proceeding has established that the award was influenced by fraud or other criminal conduct, the ten-year limitation period does not apply.

Waiver of procedural objections

One of the most important aspects of the Federal Supreme Court's case law is the parties' duty to object immediately to procedural errors. Failing to do so in a timely manner results in a waiver of the right to assert this error later in the arbitration or any challenge of the award. The duty to timely object is now expressly included in article 182(4) of PILA.

No negative effect of competence-competence when seat is abroad

A number of features that were discussed during the legislative process did not make it into the final bill. This is true, for example, for the proposed extension of the so-called effet négatif de la compétence-compétenceto cases where the tribunal sits abroad. The term, which was coined in France, describes the concept that arbitrators should, in principle, be the first to rule on their own jurisdiction, without interference from courts. Courts, however, retain the power to review arbitral jurisdiction after the arbitration, applying a de novo standard of review. A parliamentary initiative had sought to reverse the Federal Supreme Court's case law, which requires a full review of arbitration agreements where the arbitral seat is abroad, in contrast to domestic arbitration, where the courts are to refer the parties to arbitration unless the arbitration agreement is manifestly null and void, inoperable, or incapable of being performed. The drafters carefully considered the issue but decided to leave the law as it was, as there was no consensus as to whether the standard of review in cross-border cases posed a real problem in practice that required legislative intervention.

Conclusion

The new and modernised Chapter 12 of PILA will likely enter into force in early 2021. It maintains all key features that have made Swiss arbitration law a worldwide success, while making incremental improvements that increase certainty of the law, party autonomy, and overall user-friendliness.

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