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 (hereinafter: "PILA"). A recent (light) revision 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, it 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).
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 above also applies 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 of their right to challenge the final award, as permitted by Article 192 PILA, provided, however, that the parties have no 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. While international arbitration proceedings are governed by the PILA (see above question 1.1), domestic arbitration proceedings are governed by Articles 353 ff. of the 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.
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 compétence-compétence 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.
3.6 What laws or rules prescribe limitation periods for the commencement of arbitrations in your jurisdiction and what is the typical length of such periods? Do the national courts of your jurisdiction consider such rules procedural or substantive, i.e., what choice of law rules govern the application of limitation periods?
In Swiss law, provisions regarding time limitations are deemed substantive rules. Therefore, the relevant time limitation will be determined by the applicable substantive law.
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 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 which are only specifically related to arbitration proceedings, but 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.
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Originally published by The International Comparative Legal Guide to International Arbitration 2021.
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.
