1 Arbitration Agreements

1.1 What, if any, are the legal requirements of an arbitration agreement under the laws of your jurisdiction?

In Switzerland, international arbitration is governed by Chapter 12 of the 1987 Private International Law Act ("PILA"), in force since 1989. The PILA underwent a light revision in 2020, which entered into force on 1 January 2021.

According to Article 178(1) PILA, an arbitration agreement is valid if it is made in writing or by any other means of communication allowing it to be evidenced by text. As to its substance, the principle "in favor validitatis" applies: namely, the arbitration agreement is valid if it complies either with the requirements of the law chosen by the parties, or with the law governing the subject matter of the dispute and in particular the law applicable to the main contract, or with Swiss law (Article 178(2) PILA).

The validity of an arbitration agreement may not be challenged on the grounds that the main contract is invalid or that the arbitration agreement concerns a dispute that has not yet arisen (Article 178(3) PILA).

The 2021 revision also expressly provides that the provisions of Chapter 12, including the above principles, also apply to an arbitration contained in a unilateral deed or in articles of association (Article 178(4) PILA).

1.2 What other elements ought to be incorporated in an arbitration agreement?

It is recommended (although not mandatory) to also specify the seat of the arbitration, the language of the proceedings, as well the number and the procedure for the appointment of arbitrators. Parties may also include a waiver (in the form specified in Article 178(1) PILA, see above question 1.1) of their right to challenge the final award, as permitted by Article 192 PILA; provided, however, that none of them has their domicile, habitual residence or seat in Switzerland. Parties may not waive their rights to request the revision of the award pursuant to Article 190a(1)(b) PILA (see below question 10.4).

1.3 What has been the approach of the national courts to the enforcement of arbitration agreements?

Switzerland is known to be an arbitration-friendly jurisdiction, where valid arbitration agreements are duly enforced by the courts.

In particular, pursuant to Article 7 PILA, if the parties have entered into an arbitration agreement in respect of an arbitrable dispute, the Swiss court seized shall decline jurisdiction unless: (a) the respondent has proceeded on the merits without making a reservation; (b) the court finds that the arbitration agreement is null and void, inoperative or incapable of being performed; or (c) the arbitral tribunal cannot be constituted for reasons clearly attributable to the respondent to the arbitration.

2 Governing Legislation

2.1 What legislation governs the enforcement of arbitration proceedings in your jurisdiction?

In accordance with Article 194 PILA, the recognition and enforcement of foreign arbitral awards is governed by the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention" or "NYC").

Arbitral awards rendered as a result of arbitration proceedings seated in Switzerland are enforceable in Switzerland in the same manner as Swiss court judgments, i.e., according to the provisions of Articles 335 ff. of the Swiss Civil Procedure Code ("CPC") and, for monetary awards, the provisions of the Federal Act on Debt Collection and Bankruptcy.

2.2 Does the same arbitration law govern both domestic and international arbitration proceedings? If not, how do they differ?

No, Switzerland has a dual system: international arbitration proceedings are governed by the PILA (see above question 1.1), while domestic arbitration proceedings are governed by Articles 353 ff. CPC.

Pursuant to Article 176(1) PILA, the provisions of Chapter 12 PILA apply to any arbitration if the seat of the arbitral tribunal is in Switzerland and if at least one of the parties to the arbitration agreement was not domiciled, habitually resident or seated in Switzerland at the time of its conclusion. Article 176(2) PILA provides that the parties may exclude the application of Chapter 12 PILA and instead agree to the application of Articles 353 ff. CPC governing domestic arbitration proceedings. Such declaration must satisfy the formal requirements of Article 178(1) PILA (see question 1.1 above).

Conversely, in accordance with Article 353(2) CPC, parties to domestic arbitration proceedings can opt out of Articles 353 ff. CPC and apply instead the provisions of Chapter 12 PILA.

2.3 Is the law governing international arbitration based on the UNCITRAL Model Law? Are there significant differences between the two?

Chapter 12 PILA is unique to Switzerland and is not based on the United Nations Commission on International Trade Law ("UNCITRAL") Model Law. There are, however, no major differences or inconsistencies between the two.

2.4 To what extent are there mandatory rules governing international arbitration proceedings sited in your jurisdiction?

Although parties enjoy wide autonomy under Chapter 12 PILA and can modify most rules by agreement, certain provisions are mandatory, such as, e.g., the provisions on the arbitrability of the dispute (Article 177(1) PILA), the form of the arbitration agreement (Article 178(1) PILA), the challenge of arbitrators (Article 180 PILA), the rule on lis pendens (Article 181 PILA) and the principle of equality of the parties and their right to be heard in adversarial proceedings (Article 182(3) PILA).

3 Jurisdiction

3.1 Are there any subject matters that may not be referred to arbitration under the governing law of your jurisdiction? What is the general approach used in determining whether or not a dispute is "arbitrable"?

According to Article 177(1) PILA, any claim involving an economic interest may be submitted to arbitration. The notion of "economic interest" is interpreted broadly. For example, unfair competition, antitrust claims or employment claims are arbitrable. Family law issues such as adoption or divorce are not arbitrable as they primarily concern personal rights. Debt enforcement proceedings such as declarations of bankruptcy or attachment orders are reserved to state courts and are thus not arbitrable. It should finally be noted that, pursuant to Article 177(2) PILA, a state cannot invoke its own law to contest its capacity to arbitrate or the arbitrability of the dispute.

3.2 Is an arbitral tribunal permitted to rule on the question of its own jurisdiction?

Yes. According to Article 186(1) PILA, the arbitral tribunal shall decide on its own jurisdiction. This principle of compétencecompétence also applies when proceedings between the same parties and with the same subject matter are already pending before a state court or another arbitral tribunal, unless there are substantial grounds for a stay of proceedings (Article 186(1bis) PILA).

3.3 What is the approach of the national courts in your jurisdiction towards a party who commences court proceedings in apparent breach of an arbitration agreement?

The national court shall decline jurisdiction unless (a) the respondent has proceeded on the merits without reservation, (b) the court finds that the arbitration agreement is null and void, inoperative or incapable of being performed, or (c) the arbitral tribunal cannot be appointed for reasons that are clearly attributable to the respondent in the arbitration (Article 7 PILA). The review by the court will be made prima facie if the seat of the arbitration is in Switzerland, but with a complete power of review if the seat is abroad.

3.4 Under what circumstances can a national court address the issue of the jurisdiction and competence of an arbitral tribunal? What is the standard of review in respect of a tribunal's decision as to its own jurisdiction?

See question 3.3 above. Moreover, an arbitral tribunal's decision on jurisdiction can be reviewed by the Swiss Federal Supreme Court in challenge proceedings with full power of review. The Supreme Court will, however, not review the facts established by the arbitral tribunal that are relevant for the question of jurisdiction, such as, e.g., the actual intent of the parties, unless those facts have been established in violation of the fundamental procedural guarantees. The jurisdiction of a foreign arbitral tribunal may also be reviewed in the context of enforcement proceedings under the New York Convention.

3.5 Under what, if any, circumstances does the national law of your jurisdiction allow an arbitral tribunal to assume jurisdiction over individuals or entities which are not themselves party to an agreement to arbitrate?

This question is not expressly addressed in Chapter 12 PILA. According to case law, an arbitration agreement can bind a non-signatory in exceptional circumstances when the relevant applicable law (see question 1.1 above) allows it. Under Swiss law, this can be the case, e.g., when the non-signatory intervened in the conclusion and performance of the main contract in a way that the other party had legitimate reasons to believe that the non-signatory intended to be bound by the arbitration agreement. The mere existence of a group of companies is, however, not sufficient to extend an arbitration agreement to an affiliated company. Arbitration agreements are also generally transferred to a party's legal successor or in case of assumption of debt.

Under Swiss law, provisions regarding time limitations are deemed substantive rules. Therefore, the relevant time limitation will be determined by the applicable substantive law. Under Swiss law, the following limitation periods are provided by the Swiss Code of Obligations (as of 1 January 2022):

  • a general limitation of 10 years for all claims unless otherwise provided by federal civil law;
  • five years for rent, interest and all period payments, for claims related to delivery of foodstuffs, board and lodging or hotel expenses, and for claims related to work carried out by craftsmen, purchase of retail goods, medical treatment, professional services provided by advocates, solicitors, legal representatives and notaries and work performed by employees for their employers;
  • three years for tort claims from the day a party has knowledge of the damage and of the perpetrator, and in any event 10 years after the damage. If the damage results from an offence for which criminal law provides a longer limitation period, the longer period is also applicable to the tort claim; and
  • three years for claims based on unjust enrichment from the date on which the person suffering the damage learned of his or her claim, and in any event 10 years after the date on which the claim first arose.

3.7 What is the effect in your jurisdiction of pending insolvency proceedings affecting one or more of the parties to ongoing arbitration proceedings?

According to case law, the effect of pending insolvency proceedings on a party must be assessed pursuant to the general conflict of law rules under the PILA. If an insolvent foreign entity retains its legal capacity under the foreign applicable law, it has capacity to be a party in Swiss arbitration proceedings. That is also the case if the foreign law contains restrictions that are only specifically related to arbitration proceedings, but the foreign law maintains the general legal capacity of that party. For Swiss entities, courts have also confirmed that the bankrupt party remains bound by the arbitration agreement concluded prior to bankruptcy.

4 Choice of Law Rules

4.1 How is the law applicable to the substance of a dispute determined?

The substantive applicable law is determined according to the rules of law chosen by the parties or, absent such choice, according to the rules of law with which the case has the closest connection (Article 187(1) PILA). The arbitral tribunal may also decide ex aequo et bono if so authorised by the parties (Article 187(2) PILA)

4.2 In what circumstances will mandatory laws (of the seat or of another jurisdiction) prevail over the law chosen by the parties?

It is generally accepted that Swiss arbitral tribunals must apply the mandatory norms of the lex causae. In certain circumstances, Swiss arbitral tribunals may have to apply mandatory norms of another jurisdiction based on criteria to be assessed on a caseby-case basis. In general, arbitral tribunals are afforded a certain flexibility in considering whether to apply mandatory norms that do not belong to the lex causae.

4.3 What choice of law rules govern the formation, validity, and legality of arbitration agreements?

Pursuant to the principle of favor validitatis, an arbitration agreement is valid if it meets the requirements of the law chosen by the parties, or the law governing the subject matter of the dispute and, in particular, the law applicable to the main contract or Swiss law (Article 178(2) PILA (see question 1.1 above).

5 Selection of Arbitral Tribunal

5.1 Are there any limits to the parties' autonomy to select arbitrators?

Article 179(1) PILA provides the parties with broad autonomy to select, appoint or replace arbitrators in accordance with their agreement. Their autonomy is, in principle, not limited except by the requirements of independence and impartiality (Article 180 PILA). The parties are further free to agree on specific qualifications to be met by the arbitrators.

5.2 If the parties' chosen method for selecting arbitrators fails, is there a default procedure?

In such case, the state court where the arbitral tribunal has its seat can be seized to appoint the arbitrator(s) (Article 179(2) PILA). Following its recent revision, the PILA now further provides that if the parties have not agreed on a seat or have only agreed that the seat of the arbitral tribunal be in Switzerland, the first state court seized has jurisdiction (Article 179(2) in fine PILA).

5.3 Can a court intervene in the selection of arbitrators? If so, how?

As mentioned under question 5.2, the court at the seat of the arbitral tribunal can assist in the constitution of the arbitral tribunal at the request of one party. In the case of a multiparty dispute, the state court may appoint all the members of the arbitral tribunal (Article 179(5) PILA).

5.4 What are the requirements (if any) imposed by law or issued by arbitration institutions within your jurisdiction as to arbitrator independence, neutrality and/or impartiality and for disclosure of potential conflicts of interest for arbitrators?

A prospective arbitrator must disclose without delay - and throughout the proceedings - the existence of circumstances that could give rise to legitimate doubts as to his or her independence and impartiality (Article 179(6) PILA). Similarly, an arbitrator may be challenged if circumstances exist that give rise to legitimate doubts as to his or her independence and impartiality. The "legitimate doubts" must be assessed objectively. The Swiss Federal Supreme Court has recognised that the International Bar Association ("IBA") Guidelines on Conflicts of Interest constitute a useful tool in this respect.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure of arbitration in your jurisdiction? If so, do those laws or rules apply to all arbitral proceedings sited in your jurisdiction?

The parties are free to determine the arbitral procedure, either directly or by reference to arbitration rules or a procedural law of their choice (Article 182(1) PILA). Absent such agreement, the arbitral tribunal shall determine the procedure (Article 182(2) PILA), provided that it guarantees the parties' equal treatment and their right to be heard in adversarial proceedings (Article 182(3) PILA).

6.2 In arbitration proceedings conducted in your jurisdiction, are there any particular procedural steps that are required by law?

The parties - and the arbitral tribunal - have broad autonomy to determine the procedural steps, subject to the fundamental procedural guarantees of Article 183(2) PILA (see question 6.1 above). In case of a breach of the rules of procedure, a party must object immediately and will not be entitled to invoke such breach later on (Article 182(4) PILA).

Originally Published by ICLG.

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