1 Legal framework
1.1 What is the relevant legislation on arbitration in your jurisdiction? Are there any significant limitations on the scope of the statutory regime – for example, does it govern oral arbitration agreements?
The relevant legislation governing arbitration in Switzerland is Chapter 12 of the Swiss Private International Law Act (PILA), which entered into force on 1 January 1989. Since 1 January 2011, domestic arbitration has been governed by the Third Title of the Swiss Civil Procedure Code (CPC).
Both the PILA and the CPC require the arbitration agreement to fulfil minimum formal and substantive requirements in order to be valid (see also question 10).
1.2 Does this legislation differentiate between domestic arbitration and international arbitration? If so, how is each defined?
Chapter 12 of the PILA, which governs international arbitration, is applicable if at least one party to the arbitration agreement had its domicile or habitual residence outside Switzerland at the time of the conclusion of the arbitration agreement. In the sense of a negative distinction, the arbitration is otherwise considered to be domestic and is governed by the Third Title of the CPC. In terms of geographical scope, both the PILA and the CPC require the seat of the tribunal to be in Switzerland.
The parties to an international arbitration dispute may declare the provisions on domestic arbitration of the CPC to apply in lieu of the provisions of the PILA (Article 167, paragraph 2 of the PILA) and vice versa (Article 353, paragraph 2 of the CPC).
1.3 Is the arbitration legislation in your jurisdiction based on the UNCITRAL Model Law on International Commercial Arbitration?
Neither the PILA nor the CPC is based on the UNCITRAL Model Law. However, they do not substantially differ from the UNCITRAL Model Law.
1.4 Are all provisions of the legislation in your jurisdiction mandatory?
While Swiss law places great emphasis on party autonomy and maximum flexibility of arbitral proceedings, both the PILA and the CPC contain several mandatory provisions. In particular, the following provisions are mandatory:
- Article 177 of the PILA and Article 353 CPC determining the arbitrability of a dispute;
- Article 180, paragraph 1(c) of the PILA and Article 367, paragraph 1(c) of the CPC stipulating the right to challenge an arbitrator based on lack of independence or impartiality;
- Article 182, paragraph 3 of the PILA and Article 373, paragraph 4 of the CPC requiring the arbitral tribunal to ensure equal treatment of the parties and compliance with their right to be heard; and
- Article 185 of the PILA and Article 356 of the CPC providing for assistance by the state courts at the seat of the arbitral tribunal.
1.5 Are there any current plans to amend the arbitration legislation in your jurisdiction?
Roughly 27 years after Chapter 12 of the PILA entered into force on 1 January 1989, triggered by a motion of the Swiss Parliament, the legislation governing international arbitration is being revised. In January 2017, the Swiss Federal Council proposed a draft partial revision of Chapter 12 and invited interested parties to participate in consultation on such draft revision until the end of May 2017. The final legislation will then be submitted to the Swiss Parliament for discussion and approval.
Stakeholders agree that Chapter 12 of the PILA does not require fundamental reforms, as it is still considered to be a modern statute. As a consequence, the draft presented by the Swiss Federal Council does not constitute a complete revision of the existing legislation, but rather aims to maintain the attractiveness of Switzerland for international arbitration.
Against this backdrop, the revision of Chapter 12 of the PILA is directed at:
- implementing and converting into law Swiss Federal Tribunal case law from the last 25 years;
- further strengthening party autonomy; and
- making the provisions of Chapter 12 more user friendly.
The revised draft Chapter 12 includes, among other things:
- new codified provisions on the revision, rectification, explanation and correction of awards;
- the possibility to make submissions to the Swiss Federal Tribunal in English; and
- a relaxation of the formal requirements regarding the conclusion of the arbitration agreement.
1.6 Is your jurisdiction a signatory to the New York Convention? If so, have any reservations been made?
Switzerland is a signatory to the New York Convention, which was ratified in 1965 and entered into force on 30 August 1965. Switzerland made no reservations to the general obligations of the convention. The reciprocity reservation of Switzerland was withdrawn when the PILA entered into force on 1 January 1989 and the New York Convention applies erga omnes.
1.7 Is your jurisdiction a signatory to any other treaties relevant to arbitration?
Switzerland is a party to the Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States of 1965, as well as to the Geneva Protocol on Arbitration Clauses of 1923 and the Geneva Convention on the Execution of Foreign Arbitral Awards of 1927.
2 Arbitrability and restrictions on arbitration
2.1 How is it determined whether a dispute is arbitrable in your jurisdiction?
In international arbitration, Article 177, paragraph 1 of the Swiss Private International Law Act (PILA) and Swiss Federal Tribunal case law provide for a broad definition of (objective) arbitrability. Any dispute of economic interest – that is, any claim that ultimately pursues an economic purpose – may be subject to arbitration. Thus, monetary claims in family and inheritance law, and monetary claims relating to intellectual property, competition and antitrust law, are deemed arbitrable in Switzerland. As a consequence, in international arbitration, arbitrability is denied, for instance, for non-monetary matters concerning family status (eg, marriage, separation, divorce, matrimony, paternity, adoption), some matters relating to insolvency law (eg, opening of bankruptcy proceeding, arrest) and succession matters.
As regards domestic arbitration, the definition of ‘arbitrability' is more restrictive. Article 354 of the Swiss Code of Civil Procedure (CPC) stipulates that disputes in a domestic context are solely arbitrable if the parties are free to dispose of the rights and duties in question – that is, if a dispute can be settled in a legally binding manner by an out-of-court settlement or acceptance of a claim in a state court proceeding. In practical terms, this restriction means that, for instance, employment law-related disputes are not deemed arbitrable in principle (even though they are deemed arbitrable in Swiss international arbitration).
In addition, in terms of subjective arbitrability, the parties to the arbitration agreement must have the (legal) capacity to be a party as well as to conduct arbitration proceedings.
2.2 Are there any restrictions on the choice of seat of arbitration for certain disputes?
In both international and domestic arbitration, the geographical scopes of the PILA and the CPC require the seat of the arbitration to be in Switzerland (Article 176, paragraph 1 of the PILA and Article 353, paragraph 1 of the CPC).
In both international and domestic arbitration, it is for the parties to a given dispute to decide on the seat. No restrictions are imposed on the choice of seat under Swiss law (noting that insofar as a seat outside Switzerland is chosen, Swiss arbitration law does not apply). Thus, there is neither a requirement for a connection between the dispute and the seat of arbitration nor a requirement that one party be a national of or domiciled in the place chosen as the seat. However, since not all subject matter is suitable for arbitration, at least indirect restrictions apply to the choice of seat. Any arbitration agreement that provides for arbitration in a restricted matter must be considered void or at least partly void, making any choice of seat redundant.
In addition, pursuant to Article 355 of the CPC and also in Swiss international arbitration, unless the parties have agreed otherwise, the arbitral tribunal may hold hearings, take evidence and deliberate at any location.
3 Arbitration agreement
3.1 What are the validity requirements for an arbitration agreement in your jurisdiction?
In international arbitration, a valid arbitration agreement is required to fulfil minimum prerequisites of form and substance. In terms of formal requirements, Article 178, paragraph 1 of the Swiss Private International Law Act (PILA) requires the arbitration agreement to be made in writing, including by telegram, telex, fax or any other means of communication allowing the agreement to be evidenced by text. Signatures or exchange of the arbitration agreement is not necessary as long as the parties' agreement can otherwise be evidenced based on written documents. After its revision, Chapter 12 of the PILA (see question 5) is expected to relax the formal requirements and allow for an arbitration agreement to be validly concluded even if only one of the parties fulfils the formal requirements.
As regards substantive validity requirements, the arbitration agreement must stipulate the parties' consensus to submit a determined or determinable dispute to an arbitral tribunal to the exclusion of the jurisdiction of the state courts.
The same formal and substantive requirements apply to arbitration agreements in domestic arbitration (Articles 357 and 358 of the Swiss Code of Civil Procedure (CPC)).
3.2 Are there any provisions of legislation or any other legal sources in your jurisdiction concerning the separability of arbitration agreements?
Article 178, paragraph 3 of the PILA and Article 357, paragraph 2 of the CPC explicitly stipulate the principle of separability of the arbitration agreement. Both provide that the validity of the arbitration agreement cannot be contested on the grounds that the main contract is not valid or that the arbitration agreement concerns a dispute which had not yet arisen.
3.3 Are there provisions on the seat and/or language of the arbitration if there is no agreement between the parties?
In domestic arbitration, Article 355, paragraph 1 of the CPC provides for the seat of the arbitral tribunal to be determined by the parties or by reference to institutional rules of arbitration, such as the Swiss Rules of International Arbitration of the Chambers of Commerce of Basel, Bern, Geneva, Lausanne, Lugano, Neuchâtel and Zurich (available under www.swissarbitration.org/files/33/Swiss-Rules/SRIA_EN_2017.pdf). If no location is determined by the party agreement or by reference to arbitration rules, the tribunal itself must determine such location. Ultimately, the ordinary court that would have jurisdiction to decide on the matter in the absence of an arbitration agreement shall decide on the location (Article 355, paragraph 2 of the CPC).
Equally, Article 176, paragraph 3 of the PILA provides for a default mechanism stipulating that the seat of the arbitral tribunal is determined by the parties to the arbitration agreement, subsidiarily by the arbitral institution and ultimately, if the seat is designated neither by the parties nor by the arbitration institution, by the arbitral tribunal.
As regards the language of the arbitration proceedings, neither the PILA nor the CPC includes specific provisions governing such matter. As per Article 182, paragraph 1 of the PILA and Article 373, paragraph 1 of the CPC, it is up to the parties to decide on the language of the arbitration. Should the parties fail to agree on a language to be used in the arbitral proceedings, it is for the tribunal to decide on the language of the proceedings (see Article 182, paragraph 2 of the PILA and Article 373, paragraph 2 of the CPC).
In institutional arbitration under the Swiss Rules of International Arbitration, Article 17 determines that unless the parties have agreed on the language of the proceeding, the arbitral tribunal shall do so taking into account all relevant circumstances.
4 Objections to jurisdiction
4.1 When must a party raise an objection to the jurisdiction of the tribunal and how can this objection be raised?
As per Article 186, paragraph 2 of the Swiss Private International Law Act (PILA) and Article 359, paragraph 2 of the Swiss Code of Civil Procedure (CPC), any plea of lack of jurisdiction of the arbitral tribunal must be raised prior to any defence on the merits. In other words, such objection to the jurisdiction of the arbitral tribunal must be raised as early as possible in the proceeding; otherwise, the jurisdictional challenge will be barred due to an assumed tacit agreement to the arbitral tribunal's jurisdiction.
4.2 Can a tribunal rule on its own jurisdiction?
As per the principle of competence-competence applicable in both Swiss international and domestic arbitration – which provides that it is for the arbitral tribunal (in the first instance) to decide on its jurisdiction – the arbitral tribunal will rule on its own jurisdiction (Article 186, paragraph 1 of the PILA and Article 359, paragraph 1 of the CPC). This applies even if an action on the same matter between the same parties is already pending before a state court or another tribunal, unless there are serious reasons to stay the proceeding (so-called ‘negative effect' of competence-competence, Article 186, paragraph 1bis of the PILA).
4.3 Can a party apply to the courts of the seat for a ruling on the jurisdiction of the tribunal? In what circumstances?
According to Article 186, paragraph 1of the PILA and Article 359, paragraph 1 of the CPC, which are both mandatory provisions, it is for the arbitral tribunal to decide on its jurisdiction. While such decision of the arbitral tribunal, in both international and domestic arbitration, may be appealed before the Swiss Federal Tribunal (Article 190, paragraph 2(b) of the PILA and Article 393(b) of the CPC), an action brought before a state court for a ruling on the jurisdiction of the tribunal (or the absence thereof) is not admissible in Switzerland.
As regards the ‘negative effect' of competence-competence – that is, that an arbitral tribunal with its seat in Switzerland may equally decide on its jurisdiction, even if an action involving the same subject matter is already pending between the same parties before a state court –see questions 14 and 32.
5 The parties
5.1 Are there any restrictions on who can be a party to an arbitration agreement?
So-called ‘subjective arbitrability' – that is, the legal capacity of a specific entity or person to validly enter into an arbitration agreement – constitutes one of the requirements that must be fulfilled in order for an arbitration agreement to be deemed valid.
Whether a party has the capacity to be a party in arbitral proceedings is thus to be determined according to the applicable law. According to the Swiss Federal Tribunal, the legal capacity of a person is governed not by the special rules of conflict in arbitral proceedings, but rather by operation of the general conflict of laws rules. Thus, for natural persons, Articles 35 and 36 of the Swiss Private International Law Act (PILA) are applicable, referring to the law of the domicile of the party as the governing law for questions of legal capacity. For legal entities, Articles 154 and 155 of the PILA refer to the law of the state under which the respective entity is organised. If Swiss law is applicable, the question of legal capacity to be a party is dependent on the capacity to exercise civil rights. Thus, while natural persons must be of age and have legal capacity (Articles 12 to 19 of the Swiss Civil Code), legal entities must fulfil the necessary requirements described by law. The same holds true for national arbitration.
In this regard, Article 177, paragraph 2 of the PILA particularly states that a state, or an entity held by or controlled by a state, may be a party to an arbitration agreement. However, such state party is restricted from invoking its own law in order to contest its capacity to arbitrate or the arbitrability of a dispute covered by the arbitration agreement.
5.2 Are the parties under any duties in relation to the arbitration?
The Swiss legislation on both international and domestic arbitration includes few provisions on the parties' duties in arbitration proceedings; neither the PILA nor the Swiss Code of Civil Procedure (CPC) stipulates specific duties of the parties in this regard. Only the CPC explicitly stipulates the duty of the parties to appoint the arbitrators (Article 361 of the CPC). However, this provision is not mandatory.
However, according to Article 2, paragraph 1 of the Swiss Civil Code, the parties are bound by the general duty of good faith in procedural matters. As a consequence, the parties must cooperate in the establishment and substantiation of the relevant facts.
Beyond that, the parties' duties mainly derive from the arbitration agreement, the chosen arbitration rules and the orders of the arbitral tribunal (see Article 182 of the PILA and Article 373 of the CPC). Under the Swiss Rules of International Arbitration, for instance, the duty to act according to good faith is explicitly foreseen in Article 15, paragraph 7. Furthermore, like other arbitration rules, the Swiss Rules impose on the parties a duty to pay an advance on costs (Article 41, paragraph 1 of the Swiss Rules). Time limitations are also commonly imposed on the parties for the filing of submissions (eg, see Article 18, paragraph 1 and Article 19, paragraph 1 of the Swiss Rules). Finally, the parties must also comply with the final award rendered by the arbitral tribunal (Article 44 of the Swiss Rules).
In general, the duties that can be imposed on the parties are limited by Article 182, paragraph 3 of the PILA, which obliges the arbitral tribunal to treat the parties equally and to grant each party the right to be heard.
5.3 Are there any provisions of law which deal with multi-party disputes?
The Swiss legislation on international arbitration is silent on multi-party issues. However, the revised PILA is expected to address certain issues related to multi-party arbitration proceedings.
In contrast, Article 376, paragraph 1 of the CPC allows for arbitral proceedings conducted by or against multiple parties, on condition that:
- the respective parties are bound by one or several corresponding arbitration agreement(s); and
- the asserted claims are either identical or factually connected.
In addition, Article 376, paragraph 3 of the CPC allows for the intervention as well as the joinder of a third party to a pending arbitration, provided that there is an identical arbitration agreement between the third party and the parties to the arbitration proceeding and subject to the consent of the arbitral tribunal.
As regards the appointment of arbitrators in multi-party disputes, in domestic arbitration the state court at the place of arbitration (‘juge d'appui') may appoint all arbitrators, if seized by the parties after failure to designate the arbitrators. In practice, the same applies in international arbitrations seated in Switzerland.
Apart from the above, Swiss law includes no specific provisions on multi-party arbitration. However, if an arbitration is conducted under the Swiss Rules of International Arbitration, for instance, the arbitral tribunal may allow the joinder or intervention of a third party when so requested in a pending case (Article 4, paragraph 2 of the Swiss Rules). The decision on the joinder or intervention of a third party must be made by the arbitral tribunal, after consulting with both the parties and any confirmed arbitrator in all proceedings.
6 Applicable law issues
6.1 How is the law of the arbitration agreement determined in your jurisdiction?
In international arbitration, the required form of arbitration agreements is exclusively defined by Article 178, paragraph 1 of the Swiss Private International Law Act (PILA) (see also question 10). Thus, with regard to form, the parties may not subject their arbitration agreement to any law other than Swiss law. Consequently, the formal validity of an arbitration agreement must always be examined according to Swiss substantive law.
With regard to substantive validity (ie, the question of whether the parties have reached a consensus on the essential elements of the arbitration agreement), Article 178, paragraph 2 of the PILA sets out conflict of laws provisions as per the in favorem validitatis principle. Further to this principle, an arbitration agreement is valid if it complies with either:
- the law chosen by the parties (specifically to govern the arbitration agreement);
- the law governing the subject matter of the dispute – in particular, the law governing the main contract; or
- Swiss law.
As per Articles 357 and 358 of the Swiss Code of Civil Procedure (CPC), the same basic principles are applicable to domestic arbitration.
6.2 Will the tribunal uphold a party agreement as to the substantive law of the dispute? Where the substantive law is unclear, how will the tribunal determine what it should be?
In international arbitration, the substantive law is primarily determined by the parties' explicit or tacit choice of law. In the absence of such choice, the arbitral tribunal will apply the law with which the underlying agreement has the closest connection (Article 187, paragraph 1 of the PILA).
In domestic arbitration, Article 381 of the CPC provides for the arbitral tribunal to decide either according to the rules of law chosen by the parties or based on equity if authorised by the parties. In a subsidiary manner, the arbitral tribunal "shall decide according to the law that an ordinary court would apply".
7 Consolidation and third parties
7.1 Does the law in your jurisdiction permit consolidation of separate arbitrations into a single arbitration proceeding? Are there any conditions which apply to consolidation?
In domestic arbitration, Article 376, paragraph 2 of the Swiss Code of Civil Procedure (CPC) expressly provides for claims between the same parties to be joined in the same proceeding. Such consolidation is permissible if the claims are factually connected, as well as subject to corresponding arbitration agreements. In contrast, Chapter 12 of the Swiss Private International Law Act (PILA) is silent in this regard.
Article 4, paragraph 1 of the Swiss Rules of International Arbitration provides for the consolidation of separate arbitral proceedings. Prior to deciding on the consolidation, the arbitral tribunal must consult with the parties and any confirmed arbitrator, taking into account the relevant circumstances of the arbitral proceeding in question. Consolidation is equally possible if the parties to the separate arbitral proceedings are not identical.
7.2 Does the law in your jurisdiction permit the joinder of additional parties to an arbitration which has already commenced?
In domestic arbitration, joinder or intervention of additional parties to an already commenced arbitration is permitted and expressly provided for in Article 376, paragraph 3 of the CPC on condition that there is an identical arbitration agreement between the third party and the parties to the arbitration proceeding, and subject to the consent of the arbitral tribunal. In contrast, Chapter 12 of the PILA includes no provisions on the joinder of third parties to an arbitration proceeding.
As per Article 4, paragraph 1 of the Swiss Rules, the arbitral tribunal must decide on a request of a third party to participate in an arbitration proceeding already pending under the Swiss Rules, after consulting with the parties, including the party to be joined, and taking into account all relevant circumstances.
7.3 Does an arbitration agreement bind assignees or other third parties?
According to settled case law of the Swiss Federal Tribunal, an extension of the arbitration agreement to non-signatory third parties may be possible in the following scenarios, which are assessed on a case-by-case basis:
- A non-signatory third-party has clearly expressed its intention to be bound by the arbitration agreement through conduct. In particular, interference by such third party in the negotiations or performance of a contract containing an arbitration clause may lead to the applicability of such arbitration clause to such party.
- Non-signatory third party beneficiaries of agreements which contain an arbitration clause may invoke such arbitration clause when raising claims under the pertinent agreement, provided that express language in the arbitration clause does not determine otherwise.
- In case of the assignment of agreements with an arbitration clause, the arbitration clause is also generally deemed to have been assigned to the assignee.
- Under exceptional circumstances, the separate corporate forms of companies may be disregarded, such as in case of fraud or blatant abuse of rights. As per the alter ego doctrine or piercing of the corporate veil doctrine, a non-signatory party that exerts complete and exhaustive control over another party and has misused such control to such extent that it may be appropriate to disregard the separate legal forms of the two parties and treat them as one entity may be bound by an arbitration agreement formally signed by the controlled entity.
- The group of companies doctrine would provide for the application of an arbitration agreement to a parent company or other companies in the same group as the subsidiary which is a signatory to the arbitration agreement. However, this doctrine is a matter of debate in Switzerland and is not currently recognised.
8 The tribunal
8.1 How is the tribunal appointed?
In Swiss international and domestic arbitration, the parties to an arbitration enjoy freedom in the selection of arbitrators. Accordingly, Article 179 of the Private International Law Act (PILA) provides that the arbitrators shall be appointed, removed and replaced pursuant to the agreement of the parties. In the absence of such agreement, the court at the place of arbitration shall apply (by analogy) the provisions of the Swiss Code of Civil Procedure (CPC) on the appointment, removal and replacement of arbitrators (Article 179, paragraph 2 of the PILA in conjunction with Articles 360 to 371 of the CPC). Equally, if the parties fail to agree on the individual to be appointed as a sole or presiding arbitrator, the competent court at the place of arbitration will appoint the arbitrator upon a party's request.
If the parties to an arbitration agreement have, for instance, chosen the Swiss Rules of International Arbitration to govern the arbitration proceeding, but have not agreed on the number of arbitrators, the Arbitration Court –which was established by the Swiss Chambers' Arbitration Institution and is comprised of experienced arbitration practitioners – shall decide whether the case shall be referred to a sole arbitrator or to a three-member tribunal (Article 6, paragraph 1 of the Swiss Rules). Moreover, if the parties fail to designate the sole arbitrator within the applicable timeframe, the Arbitration Court shall proceed with the appointment (Article 7, paragraph 3 of the Swiss Rules).
8.2 Are there any requirements as to the number or qualification of arbitrators in your jurisdiction?
In both international and domestic arbitration, the members of the arbitral tribunal must be appointed as agreed by the parties (Article 179, paragraph 1 of the PILA and Article 361, paragraph 1 of the CPC). There are generally no restrictions on the appointment of arbitrators, apart from the requirements of independence and impartiality.
The parties are free to agree on the number of arbitrators. However, in domestic arbitration, if there is no agreement on the number of arbitrators, Article 360, paragraph 1 of the CPC stipulates that the arbitral tribunal will consist of three members. Equally, if the parties have agreed on an even number of arbitrators, it is presumed that an additional arbitrator must be appointed as the chairperson (Article 360, paragraph 2 of the PILA).
8.3 Can an arbitrator be challenged in your jurisdiction? If so, on what basis? Are there any restrictions on the challenge of an arbitrator?
Article 180, paragraph 1 of the PILA and Article 367 of the CPC set out three grounds for challenging an arbitrator:
- The appointed arbitrator does not have the qualifications agreed upon by the parties;
- The rules of arbitration agreed upon by the parties provide grounds for challenging the arbitrator; or
- Circumstances giving rise to reasonable doubts as to the arbitrator's independence exist.
The challenge of an arbitrator is restricted, by both Article 180, paragraph 2 of the PILA and Article 367, paragraph 2 of the CPC, if a party wishes to challenge an arbitrator whom it nominated itself or in whose appointment it participated. In such case, the party can do so only on grounds that have come to its attention after the appointment of the respective arbitrator, and the grounds for challenge must be notified to the arbitral tribunal and the other party without delay.
If the parties have not agreed on a challenge procedure (including by means of referring to institutional rules of arbitration), the competent court at the seat of the arbitral tribunal shall make a final decision (Article 180, paragraph 3 of the PILA).
8.4 If a challenge is successful, how is the arbitrator replaced?
The procedure for the removal of an arbitrator is primarily subject to the parties' agreement (Article 179, paragraph 1 of the PILA). In the absence of such agreement, the court at the place of arbitration shall apply (by analogy) the provisions of the CPC on removal or replacement of arbitrators (Article 179, paragraph 2 of the PILA in conjunction with Articles 360 to 371 of the CPC).
Articles 13 and 14 of the Swiss Rules provide for a specific procedural framework if an arbitrator is successfully challenged and is thus to be replaced. The Arbitration Court (see also question 24) will set a time limit for the parties to appoint a new arbitrator pursuant to the regular procedure stipulated in Articles 7 and 8 of the Swiss Rules (Article 13 of the Swiss Rules). In exceptional circumstances, and after consulting with the parties and the remaining arbitrators, the Arbitration Court may either directly appoint the replacement arbitrator or, after closure of the proceeding (pursuant to Article 13, paragraph 2 of the Swiss Rules), authorise the remaining arbitrator(s) to proceed with the arbitration and render any decision or award. In addition, as per Article 14 of the Swiss Rules, the proceeding shall, as a rule, resume at the stage reached when the replaced arbitrator ceased to perform his or her functions, unless the arbitral tribunal decides otherwise.
8.5 What duties are imposed on arbitrators? Are these all imposed by legislation?
The legal relationship between the arbitrator and the parties (receptum arbitri) is qualified according to the law at the seat of the arbitral tribunal (lex arbitri). According to Swiss case law and legal doctrine, the arbitrator is obliged to fulfil, personally and in a timely manner, all of his or her duties with all due care. In addition, throughout the proceeding, arbitrators are committed to independence and impartiality.
8.6 What powers does an arbitrator have in relation to: (a) procedure, including evidence; (b) interim relief; (c) parties which do not comply with its orders; (d) issuing partial final awards; (e) the remedies it can grant in a final award and (f) interest?
(a) Procedure, including evidence?
Neither the PILA nor the CPC includes particular rules governing the arbitral procedure per se. Pursuant to Article 182, paragraph 1 of the PILA, the parties may, directly or by referencing rules of arbitration, determine the arbitration proceeding. If the parties have not done so and/or the referenced rules of arbitration are silent in this regard, the arbitral tribunal must determine the procedure to the extent necessary (Article 182, paragraph 2 of the PILA). Whatever procedure applies, the arbitral tribunal must ensure equal treatment of the parties and the right of the parties to be heard (Article 182, paragraph 3 of the PILA).
As regards the taking of evidence, Article 184, paragraph 1 of the PILA and Article 375 of the CPC stipulate the arbitral tribunal's obligation to administer the taking of evidence. However, if the taking of evidence or other procedural acts require the assistance of the state courts (eg, due to the fact that arbitral tribunals do not have coercive powers), such participation may be requested from the state court at the seat of the arbitral tribunal either by the arbitral tribunal itself or by a party to the arbitration with the consent of the arbitral tribunal (Article 184, paragraph 2 of the PILA and Article 375, paragraph 2 of the CPC).
(b) Interim relief?
Provided that the parties have not agreed otherwise, and upon the request of a party, arbitral tribunals in Swiss arbitration proceedings have broad discretion with regard to interim measures and the parties can benefit from all interim relief available under Swiss domestic law (Article 183, paragraph 1 of the PILA and Article 374, paragraph 1of the CPC). As per Article 262 of the CPC, on the motion of one party, any interim measure suitable to prevent imminent harm may be ordered. In particular, in the cases provided for by law, the parties to the arbitration may seek:
- an injunction;
- an order to remedy an unlawful situation;
- an order directed to a registry authority or to a third party;
- performance in kind; and
- payment of a sum of money.
The party requesting interim relief may also be ordered by the arbitral tribunal to post security in order to secure potential damages suffered by the opposing party (Article 183, paragraph 3 of the PILA).
In contrast to the interim relief ordered by the Swiss state courts, an arbitral tribunal may even grant interim relief that is not recognised under Swiss law. However, the assistance of the state courts in connection with interim relief is of critical importance, as:
- if the respective party does not comply voluntarily, the interim relief must be enforced by the state courts;
- the arbitral tribunal has no competence to issue binding and enforceable orders against third parties which are not party to the arbitration agreement (eg, banks in the case of freezing orders); and
- given that interim measures are generally urgently required, a party will often require such interim relief to be ordered ex parte (ie, without the arbitral tribunal hearing the counterparty). While state courts will grant interim measures ex parte, arbitral tribunals are unlikely to grant interim relief ex parte, unless the institutional rules referenced by the parties expressly provide otherwise (as is the case with the Swiss Rules).
Various institutional arbitration rules (including the Swiss Rules and the International Chamber of Commerce Arbitration Rules) provide for the possibility to call on an emergency arbitrator to grant interim relief even before the arbitral tribunal has been formally established. Equally, state courts can be called on to grant interim relief before the constitution of the arbitral tribunal.
(c) Parties which do not comply with its orders?
In case the party concerned does not voluntarily comply with an interim measure ordered by an arbitral tribunal upon the request of the opposing party, the arbitral tribunal may request the state court to assist in the enforcement of such order (according to Article 183, paragraph 2 of the PILA and Article 374, paragraph 2 of the CPC).
(d) Issuing partial final awards?
Unless the parties to an arbitration proceeding have agreed otherwise, the arbitral tribunal may issue a partial final award limited to certain questions or prayers for relief (Articles 188 and 383 of the CPC).
(e) The remedies it can grant in a final award?
In principle, the PILA and the CPC impose no limits on the final relief that may be awarded by an arbitral tribunal with its seat in Switzerland. However, limitations on the available remedies may be imposed by the arbitration agreement, the law governing the dispute and, in practical terms, the laws of the place(s) where the award will need to be enforced.
If the dispute is governed by Swiss law, the following main categories of ﬁnal remedies exist:
- performance or damages, if speciﬁc performance is no longer possible;
- creation, modiﬁcation or termination of a legal relationship; and
- declaratory relief.
In accordance with Article V, paragraph 2(b) of the New York Convention, the Swiss courts will not enforce remedies that are considered to be contrary to Swiss public policy. In this regard, according to the Swiss Federal Tribunal, treble and punitive damages might infringe Swiss public policy, depending on the particular circumstances of the case.
The payment of interest on principal claims and costs is governed by the applicable substantive law to the matter in dispute (Article 187, paragraph 1 of the PILA). If Swiss law is the applicable substantive law, pre and post-award interest can be included by the arbitral tribunal on both the principal claim and the costs incurred.
8.7 How may a tribunal seated in your jurisdiction proceed if a party does not participate in the arbitration?
In general, it is up to the arbitral tribunal to deal with a party that does not participate in an arbitration and neither the PILA nor the CPC provides particular rules in this regard. However, as the arbitral tribunal is required by Swiss law to treat the parties to an arbitration proceeding equally and to ensure the parties' right to be heard, the arbitral tribunal is obliged to ensure that the parties are properly informed and served. If these conditions are met, a default award is generally considered valid and enforceable.
Except where a party fails to appoint an arbitrator when establishing the arbitral tribunal (in which case the state court will step in in lieu of the defaulting party – see question 24), Swiss law does not entrust the state courts at the seat of the arbitral tribunal with the authority to compel the parties to participate in the arbitration proceeding.
If the parties have agreed on the Swiss Rules, Article 28 provides for a specific procedure in case a party fails to undertake procedural acts. On condition that the parties are duly notiﬁed, the arbitral tribunal may proceed with the arbitration in case one of the parties fails to appear at a hearing without showing suﬃcient cause for its failure. Equally, the arbitral tribunal may render an award based on the available evidence if a party fails to produce evidence.
8.8 Are arbitrators immune from liability?
Neither the PILA nor the CPC specifically addresses arbitrators' liability or immunity therefrom.
As per general Swiss contract law, the liability of arbitrators is considered to be limited to unlawful intent or gross negligence. If the parties have agreed on the Swiss Rules, Article 45 excludes the arbitrators from liability for any act or omission in connection with arbitration conducted under the Swiss Rules, unless such act or omission is shown to constitute intentional wrongdoing or gross negligence.
9 The role of the court during an arbitration
9.1 Will the court in your jurisdiction stay proceedings and refer parties to arbitration if there is an arbitration agreement?
At least with regard to arbitral tribunals seated in Switzerland, Swiss court practice has established principles favouring arbitration over state court litigation. As per the ‘negative effect' of competence-competence, if the jurisdiction of the state court seized is contested based on the existence of an arbitration agreement, the state court should refer the matter for review to the arbitral tribunal stipulated in the arbitration agreement, unless the arbitration agreement on its face appears to be invalid and incapable of being performed by the parties (Article 186, paragraph 1bis of the Private International Law Act (PILA), "unless there are serious reasons to stay the proceedings"). Thus, if an arbitration agreement provides for an arbitral tribunal seated in Switzerland, a state court seized by a party will refrain from reviewing whether the alleged arbitration agreement is valid and covers the dispute, and will refer the matter to arbitration.
9.2 Does the court in your jurisdiction have any powers in relation to an arbitration seated in your jurisdiction and/or seated outside your jurisdiction? What are these powers? Under what conditions are these powers exercised?
Swiss law on international and domestic arbitration provides for significant restrictions on interventions by state courts, as well as on the grounds to challenge an award in the state court (see also question 41).
Both Chapter 12 of the PILA and the Third Title of the Swiss Code of Civil Procedure (CPC) provide limited grounds for seeking the assistance of the state court at the seat of the arbitral tribunal, such as with regard to the appointment, removal or replacement of an arbitrator and assistance with taking evidence or enforcing interim measures. Such state court intervention is permissible only upon the request of a party to the arbitration proceeding (or in domestic arbitration, upon the request of the arbitral tribunal with regard to the enforcement of interim measures – see Article 374, paragraph 2 of the CPC).
As regards the granting of interim relief, in both international and domestic arbitration, the parties retain the possibility to apply to the state court for interim measures (Article 374, paragraph 1 of the CPC and Article 183, paragraph 1 of the PILA). In this regard, most scholars recognise that the state courts and the arbitral tribunal have parallel jurisdiction.
9.3 Can the parties exclude the court's powers by agreement?
The provisions on assistance by the state courts at the seat of the arbitral tribunal (Article 185 of the PILA and Article 356 of the CPC) are mandatory and may not be excluded by agreement of the parties.
If none of the parties to an arbitration agreement is domiciled or resident in Switzerland, or has a place of business in Switzerland, Article 192, paragraph 1 of the PILA provides for the possibility to exclude applications to set aside awards.
10.1 How will the tribunal approach the issue of costs?
Swiss law does not provide rules on the estimation and allocation of costs of arbitration proceedings. The state courts in Switzerland follow the rule that ‘costs follow the event', whereby the costs of litigation are borne by the unsuccessful party; one might expect an arbitral tribunal to allocate the costs of arbitration in the same way as the state courts.
According to Article 38 of the Swiss Rules of International Arbitration, the arbitral tribunal shall determine the costs of the arbitration proceeding, as well as their apportionment, in its award. In principle, arbitral tribunals apply the rule that costs follow the event (Article 40, paragraph 1 of the Swiss Rules). However, the arbitral tribunal may apportion the costs taking into account the circumstances of the case.
In domestic arbitration, as per Article 378 of the CPC, the arbitral tribunal may order the advancement of the presumed costs of the proceeding and make the progress of the proceeding conditional on the payment of this advance. Unless the parties have agreed otherwise, the arbitral tribunal will determine the amount to be paid by each party. If the costs and compensation fixed by the arbitral tribunal are obviously excessive, a domestic arbitral award may be contested (Article 393(f) of the CPC).
In addition, in both national and domestic arbitration, the arbitral tribunal may order a party to provide security for costs. Such orders for the provision of security for costs are considered to constitute interim measures as per Article 183, paragraph 1 of the PILA and Article 374, paragraph 1 of the CPC. In consequence thereof, such order for security of costs may also be issued by a state court (see question 33).
10.2 Are there any restrictions on what the parties can agree in terms of costs in an arbitration seated in your jurisdiction?
Neither the PILA nor the CPC stipulates default rules regarding cost allocation in arbitration proceedings (see question 35). Thus, the parties can agree on this matter either directly or by referring to institutional rules.
In institutional arbitration under the Swiss Rules, arbitral tribunals are remunerated considering the amount in dispute, the complexity of the case, the time spent and any other relevant circumstances of the particular arbitration proceedings (Article 39, paragraph 1 of the Swiss Rules). With respect to the costs of legal representation and assistance, pursuant to Article 40, paragraph 2 of the Swiss Rules, the arbitral tribunal is free to determine which party shall bear such costs, taking into account the circumstances of the case.
11.1 Is third-party funding permitted for arbitrations seated in your jurisdiction?
Both the PILA and the CPC are silent with regard to third-party funding and there are no rules or restrictions on third-party funders in Switzerland. According to Swiss Federal Tribunal case law, third-party funding is, as a rule, admissible. However, third-party funders must respect certain limitations on interfering with the client-attorney relationship and avoid any conflict of interest.
12.1 What procedural and substantive requirements must be met by an award?
According to Article 189, paragraph 1 of the Private International Law Act (PILA), an arbitral tribunal seated in Switzerland shall render its award in conformity with the procedural rules and in the form agreed by the parties. Article 189, paragraph 2 further stipulates that the award shall be made by majority vote or, in the absence of a majority, by the chairperson alone. In addition, the award must be in writing, supported by reasons, dated and signed; in this regard, the chairperson's signature is sufficient.
12.2 Must the award be produced within a certain timeframe?
Swiss law specifies no timeframe within which the arbitral tribunal must produce its award. However, as per the arbitrators' contract, arbitrators are obliged to conduct the proceedings in a reasonably expedited manner and issue the necessary orders in good time.
In particular, the Swiss Rules of International Arbitration provide an expedited procedure that the parties may agree upon in cases where the amount in dispute exceeds CHF1 million (Article 42 of the Swiss Rules). In such cases, an award must be rendered (subject to limited exceptions) within six months of the date on which the secretariat of the Arbitration Court transmitted the file to the arbitral tribunal (Article 42, paragraph 1(d) of the Swiss Rules). In cases involving amounts in dispute of less than CHF1 million, the arbitration proceeding will as a rule be expedited.
13 Enforcement of awards
13.1 Are awards enforced in your jurisdiction? Under what procedure?
According to Article 190, paragraph 1 of the Private International Law Act (PILA) and Article 387 of the Swiss Code of Civil Procedure (CPC), a domestic award rendered by an arbitral tribunal with its seat in Switzerland is final and is thus enforceable from its notification, in the same way as a decision rendered by a Swiss state court. The applicable enforcement procedure depends on the relief awarded by the arbitral tribunal. While monetary awards are enforced pursuant to the Swiss Debt Enforcement and Bankruptcy Law, the CPC is applicable to enforcement proceedings with regard to non-monetary relief.
In terms of validity requirements, Article 189, paragraph 1 of the PILA requires the domestic award to be rendered in conformity with the procedural rules or in the form agreed upon by the parties. In the absence of such agreement, the arbitral tribunal should render the award by a majority or, in the absence of a majority, by the chairperson alone (Article 189, paragraph 2 of the PILA). The award must be in writing, supported by reasons, dated and signed; in this regard, the chairperson's signature is sufficient.
Foreign arbitral awards are recognised and enforced in Switzerland as per the New York Convention (Article 194 of the PILA), regardless of reciprocity.
In general, there is no need for a separate exequatur for the recognition of an award in Switzerland. An independent request for recognition may be granted only under exceptional circumstances, provided that the applicant can demonstrate that it has a legitimate interest in having this issue determined, without at the same time seeking enforcement of the award.
14 Grounds for challenging an award
14.1 What are the grounds on which an award can be challenged, appealed or otherwise set aside in your jurisdiction?
Under Swiss law, an arbitral award is, in principle, deemed final from notification and thus does not have suspensive effect. However, in practice, parties filing an appeal are nevertheless explicitly asked not to initiate enforcement proceedings if the appeal includes a motion for the grant of suspensive effect. In such case this motion will be reviewed and decided by the appeals court first, before it turns to the merits of the appeal as such.
In both international and domestic arbitration, a motion to set aside a (final or partial) arbitral award must be filed with the Swiss Federal Tribunal (Article 191 of the Private International Law Act (PILA) and Article 389, paragraph 1 of the Swiss Code of Civil Procedure (CPC)), the country's highest court. It is only in domestic arbitration that the parties have the option to agree that the arbitral award may initially be appealed to the cantonal high court at the seat of arbitration (Article 390, paragraph 1 of the CPC).
Both the PILA and the CPC provide very limited grounds to challenge an award. A motion to set aside an international award is permissible only on the following grounds (Article 190, paragraph 2 of the PILA):
- irregular constitution of the arbitral tribunal (or improper appointment of a sole arbitrator);
- an incorrect decision on jurisdiction;
- a decision that goes beyond the claims made by the parties or does not answer all claims raised (infra or ultra petita);
- violation of the principle of equal treatment of the parties or their right to be heard; and
- violation of (procedural or substantive) principles of public policy.
Pursuant to Article 393 of the CPC, a party to a domestic arbitration proceeding may appeal the award on two additional grounds:
- The arbitral award is arbitrary in its result because it is based on ﬁndings that are obviously contrary to the facts as stated in the case ﬁle or because it constitutes an obvious violation of law or equity; or
- The costs and compensation ﬁxed by the arbitral tribunal are obviously excessive.
The Swiss Federal Tribunal may be expected to render its decision within six to eight months of the appeal being lodged. However, the chance of success is remote: appeals on all available grounds other than jurisdiction are upheld in only around 7% of cases, while appeals on grounds of lack of jurisdiction are upheld in only around 10% of cases.
14.2 Are there are any time limits and/or other requirements to bring a challenge?
According to the Federal Tribunal Act, a motion to set aside an award rendered by an international arbitral tribunal with its seat in Switzerland must be filed with the Swiss Federal Tribunal within 30 days of notification of the award. The same timeframe applies to appeal an award rendered by a domestic arbitral tribunal with its seat in Switzerland before the cantonal court (such procedure being governed by the CPC).
14.3 Are parties permitted to exclude any rights of challenge or appeal?
If all parties to the dispute have their domicile or place of business outside Switzerland, the parties may waive the right to appeal an arbitral award (Article 192, paragraph 1 of the PILA). The parties may waive such right either in the arbitration agreement or subsequently by written declaration. Given the implications, the parties are required to expressly waive such right. In particular, references to institutional rules providing for the ﬁnality of arbitral awards are not deemed sufficient for such purposes.
15.1 Is arbitration seated in your jurisdiction confidential? Is a duty of confidentiality found in the arbitration legislation?
Although confidentiality is often considered an advantage of arbitration proceedings compared to litigation before state courts, neither the Private International Law Act nor the Swiss Code of Civil Procedure includes any provisions governing confidentiality in arbitral proceedings.
It is generally acknowledged that under the arbitrators' agreement with the parties (receptum arbitri), the members of the arbitral tribunal are under a duty of confidentiality with regard to the arbitration proceeding, deriving from the general duty of care under an agency agreement pursuant to Article 398, paragraph 2 of the Swiss Code of Obligations.
The parties to an arbitration agreement may agree upon confidentiality obligations in the arbitration agreement or choose arbitration rules that contain specific provisions on confidentiality. In the absence of clear provisions, it is unclear whether the arbitration agreement contains an implied duty of confidentiality of the parties or whether such duty could be derived from the duty of good faith pursuant to Article 2, paragraph 1 of the Swiss Civil Code; legal commentators are divided on the issue. However, the view favouring such implied duty has not been corroborated by case law thus far.
Concerning the conduct of the proceedings, the Swiss Federal Tribunal has ruled that the parties to an arbitration proceeding do not have the right to a public hearing under international treaties or under the Swiss Constitution. However, this relates solely to the privacy of the conduct of the proceedings (ie, hearings).
As regards the Swiss Rules on International Arbitration, Article 44 provides for a duty of confidentiality that applies unless the parties expressly agree otherwise in writing. The arbitrators, the tribunal-appointed experts, the secretary of the arbitral tribunal, the members of the board of directors of the Swiss Chambers' Arbitration Institution, the members of the Arbitration Court and the Secretariat and the staff of the individual chambers are all bound by this duty of confidentiality. Furthermore, the deliberations of the arbitral tribunal are confidential, according to Article 44, paragraph 2 of the Swiss Rules.
15.2 Are there any exceptions to confidentiality?
As discussed in question 44, the Swiss law on both international and domestic arbitration is silent on the question of confidentiality.
The Swiss Rules contain an explicit confidentiality provision and enumerate several exceptions thereto. To the extent that disclosure may be required of a party to fulfil a legal duty, to protect or pursue a legal right, or to enforce or challenge an award in legal proceedings before a judicial authority, that party is not obliged to keep the information confidential (Article 44, paragraph 1 of the Swiss Rules). Examples of such disclosure obligations include statutory provisions obliging a party to disclose information (eg, to auditors or tax authorities), disclosure obligations of listed companies and disclosure ordered by a court, public prosecutor or administrative authorities.
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.