Answer ... 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.
Answer ... 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”.