Overview

Global surveys on the international arbitration scene published in 2015 continue to name Switzerland as one of the leading places for international arbitration along with London, Paris, Singapore and Hong Kong. One of the reasons for this century-old worldwide recognition of Switzerland as an international arbitration hub is that Switzerland enacted in 1989 a legal framework for international arbitration which the world still considers as state-of-the-art, innovative and of remarkable quality.

"The proposed bill intends to make Swiss international arbitration laws even more readable and therefore more user-friendly."

In order to preserve and further bolster Switzerland's globally leading position in the international arbitration world - be it ad-hoc or institutional, sports or investment protection arbitration based on BITs - the Swiss Federal Government has launched on January 11, 2017, a legislative bill which aims at incorporating some of the more important court precedents rendered by the Swiss Supreme Court in connection with Swiss international arbitration laws (technically speaking: the 12th Chapter of the Swiss International Private Law Act of 1989) over the last 30 years. At the same time, some questions that remained open since the enactment of the Swiss International Private Law Act of 1989 (the "Act") shall be solved.

The proposed bill's intention is to make Swiss international arbitration laws even more readable and therefore more user-friendly. The following is an overview on some of the cornerstones of the proposed legislation which is - as mentioned - more a fine tuning than a real overhaul.

Changes and amendments in more detail

Rectification, explanation, amendment and revision

The rectification, explanation, amendment and revision of an international arbitration awards were not regulated by the Act so far. In line with the Swiss Civil Procedural Code of 2011, the Act now provides for these legal remedies, thereby writing into the law a variety of Swiss Supreme Court precedents rendered over the last 12 years, which confirmed the availability of a rectification, explanation, etc. even w/o an explicit legal basis in the Act.

"The proposed bill wants to see the residence/business incorporation test met when the arbitration agreement was taken."

A rectification of an international arbitral award can e.g. be requested if mere editorial and /or calculation mistakes need to be corrected. The arbitral tribunal must render an explication, if the judicial dispositive of an arbitral award is unclear, non-complete, ambiguous or contradictory. An amendment shall be possible, if important petitions had been disregarded by the arbitral tribunal. And finally, a revision of an arbitral award must take place if instrumental documents are the hand of an arbitration party which could - by no fault - be introduced during the ongoing arbitration proceeding. Another reason for a revision exists if a crime or other misdemeanour had influenced the arbitrational award.

Arbitrational parties' residence and/or business registration test

Arbitration proceeding under the Act can only take place if at least one of the potential arbitration parties had its residence and/or business incorporation outside of Switzerland (the so-called internationality test of the Act). In a much criticized decision of 2002, the Swiss Federal Supreme Court considered the individual's residence and/or business incorporation relevant at the time when the arbitral proceeding was initiated. For a variety of good reasons, the proposed bill wants to see the residence/business incorporation test met when the arbitration agreement was taken (e.g. in order to thwart fraudulent party manoeuvres to change an individual's residence and/or business incorporation when a deal goes sour).

"The proposed bill foresees that arbitration clauses in testaments, in a company's articles of association or when setting up a foundation are enforceable."

Form of arbitration clause further alleviated

The present Act regards an arbitration clause enforceable if both parties have signed in writing, by telecopier or any other means of communication which permits the evidence by text (the Act still mentions telegrams or telex as valid communication means). This mutual form requirement applicable to both parties shall be alleviated so that only one party must meet the above form test whilst the other party can agree on arbitration w/o observing any particular form (for instance over the phone or via skype ). The proposed bill argues that Germany, Austria, and Uncitral have recently introduced similar rules favoring the enforceability of arbitration clauses (whereby Uncitral serves as a model for around 70 countries worldwide).

"Court briefs filed with Switzerland's Federal Supreme Court can be soon held in English."

Similarly, the proposed bill foresees that arbitration clauses which can be found in testaments, in a company's articles of association or when setting up a foundation (technically speaking: all legal documents which provide for unilaterally set-up arbitration clauses) are binding and enforceable vis à vis all parties concerned.

Arbitral awards must address costs of arbitral tribunal and lawyers' costs

The proposed bill introduces for the first time a provision whereby the arbitral tribunal is authorized to decide both on the costs of the arbitral tribunal and the lawyers' costs. In a decision of 2010, the Swiss Federal Supreme Court ruled that such costs orders as part of the arbitrational award did not have a basis in the Act, so they had rather the legal character of an invoice.

"The bill contains specific rules on the appointment and replacement of arbitrators if the parties have not agreed on this topic in advance."

English as procedural language with Swiss Supreme Court

Unlike the above changes and amendments, which are more or less an incorporation of the arbitrational "status quo" in Switzerland, the Swiss Federal Government proposed in January 2017 also a real innovation: in the near future, court briefs filed when challenging international arbitration awards before Switzerland's Federal Supreme Court on the basis of gross formal and / or substantive violations of law (e.g. the "ordre public") can be held in English. Though this proposal should be welcomed in principle, constitutional lawyers might complain that the official languages ​on the federal level - German, French, Italian and to some extent Romantsch - are exclusively set by the Switzerland's Federal Constitution, what means that any additional official language cannot be introduced by means of a mere legislation.

Further rules to improve international arbitration in Switzerland

The new bill contains specific rules on the appointment and replacement of arbitrators if the parties have not agreed on this topic in advance. In such case, a state "juge d'appui" at the prospective seat of the arbitrational tribunal can be called upon to elect and/or replace specific arbitrators (either through written party agreement or following a pertaining party request). These rules apply to multi-party arbitration as well. For the first time, arbitrators are obliged to disclose any facts and/or circumstances which could potentially interfere with their independence.

"The Swiss Federal Justice Agency also pondered over the introduction of a national-centralized "juge d'appui."

If the arbitration parties omitted to designate the seat of the arbitrational tribunal (e.g. by solemnly agreeing on "Arbitration in Switzerland") and not specifically indicating e.g. which city in Switzerland), a state "juge d'appui" in any Canton of Switzerland can be called to determine the arbitrational seat, if other arbitration mechanism do not work to this end.

For cases where the arbitration tribunal issues a preliminary order, the bill foresees that both the arbitrational tribunal and any affected arbitration party can request from the state "juge d'appui" that these orders are executed, this in case that one party refuses to comply with a preliminary order. This provision also reflects the current court practise in Switzerland. The state "juge d'appui" can also be called to assist in the evidence taking process whereby foreign evidence taking procedures can be applied on request.

Arbitration topics not incorporated in the bill

The Swiss Federal Justice Agency also pondered over the introduction of a national-centralized "juge d'appui", in other words a state court that could be called upon when it comes to appointing or replacing one or more arbitrators, for instance independency cases, or the prolongation of the arbitral court's term, or in terms of assisting in the execution of preliminary arbitral orders (see above).

Designating a particular cantonal court as a national-centralized "juge d'appui" was for federalistic reasons no feasible approach, whilst the Swiss Federal Supreme Court would not have been a good pick either because of the obvious conflicts of interest of the court as a final judicial instance over all international arbitration matters in Switzerland. As cases for a state "juge d'appui" are somwhat rare, the bill does no longer address this topic at least for the time being.

"Until May 31, 2017, all interested parties can file their comments in the now on-going consultation process."

State courts in Switzerland are sometimes confronted with a party's defence that an arbitration clause is in place which disallows the state court's capability to take the case. Depending as to whether a specific arbitration clause provides for arbitration in Switzerland or abroad, the state courts have the current practise to review this defense only in a summary way in terms of Swiss arbitration, whilst a full review of the defense takes place in terms of a foreign arbitration. The arbitration acts of most countries (see for instance Germany, Austria or France) prescribe a summary review, whilst e.g. UNCITRAL or the New York Convention of 1958 on the Recognition and Enforcement of Arbitral Awards takes a neutral standpoint. In Switzerland, it seems that leading legal commentators cannot agree on a comprehensive approach in favor of either a limited or full review. Accordingly, the drafters of the bill did not want to change the current status quo in favor of one or the other solution.

Closing comments

Until May 31, 2017, all interested parties can file their comments in the now on-going consultation process managed by the Swiss Federal Justice Agency. The Agency collects these comments and will - as the case may be - amend its draft. It is then up to the Swiss Federal Government to bring the draft into the Swiss Parliament whereby one can anticipate that the highly technical bill (only lawyers active in the arbitration can really relish its finesses) will pass the Parliament w/o major discussions. For the same reasons, it can also be anticipated that the amended Act will not be subject to a referendum.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.