Investment treaty practice in Switzerland

Investment treaty practice

Does the state have a model BIT?

There is no Swiss model BIT in the sense of an official, published model BIT. However, SECO maintains a template or working document for internal use in negotiations. As this is merely used as a basis for negotiations and is regularly updated, caution should be exercised with respect to statements made about ‘the Swiss model BIT’.

Does the state have a central repository of treaty preparatory materials? Are such materials publicly available?

All administrative documents of the Swiss federal government, including diplomatic correspondence, are available in the Swiss Federal Archives (which are located in Berne but searchable online), but only after the statutory closure periods have expired. These periods run for a minimum of 30 years; therefore, not all treaty preparatory materials are publicly available. Parliamentary ratification records can be found in the Federal Gazette, which is available online. However, from 1963 to 2004, the Swiss Federal Council had sole authority to negotiate and conclude BITs, so no parliamentary deliberations or ratifications were necessary.

What is the typical scope of coverage of investment treaties?

Swiss BITs typically define the term ‘investor’ to include natural persons who are citizens of a contracting party, legal entities that are incorporated or duly organised under the laws of a contracting party and legal entities that are controlled by citizens of, or legal entities that are incorporated or duly organised under the laws of, a contracting party. More recent BITs concluded by Switzerland also require that legal entities have real economic activities in the territory of the contracting party to qualify as investors.

Switzerland’s addition of the ‘real economic activities’ requirement was intended to exclude entities without any substance in a contracting party’s territory (eg, mailbox companies) from BIT coverage. Therefore, a Swiss company that merely forwards correspondence to a foreign parent company would have difficulty showing that it conducts ‘real economic activities’ in Switzerland. Swiss BITs usually contain a very broad definition of ‘investment’ that begins with a general clause stating that the term extends to every kind of asset and then lists several categories by way of example. Examples include movable and immovable property and other rights in rem, shares and participations in companies, intellectual property rights and concessions under public law. They also include claims to money or to any performance having an economic value. However, Switzerland’s most recent BITs explicitly exclude claims arising solely out of commercial contracts for the sale of goods or services.

What substantive protections are typically available?

Swiss BITs typically provide that investors:

• shall be accorded fair and equitable treatment;
• shall enjoy full protection and security in the territory of the other contracting party; and
• shall not be discriminated against.

According to the Swiss understanding, ‘fair and equitable treatment’ is a reference to an absolute standard (rather than a relative and minimum standard of customary international law) with respect to the treatment of foreign property. Unlike BITs of some other states, Swiss BITs do not state that the treatment of investors shall not exceed this standard; therefore, they do not set a ceiling on the fair and equitable standard established under the BIT. The ‘full protection and security’ provision is understood to set a standard that is higher than the minimum standard of customary international law.

Swiss BITs also guarantee the free transfer of funds related to the investment and include a national treatment clause and a most-favoured-nation clause. Switzerland’s most recent BITs explicitly state that the most-favoured-nation clause does not extend to dispute resolution mechanisms provided for in other BITs concluded by the contracting parties.

The protection from expropriation contained in Swiss BITs extends to direct and indirect expropriation. Especially in newer BITs, direct expropriation is subject to the explicit requirements that it be enacted for a public purpose, in a non-discriminatory manner and according to due process of law and that provisions be made for prompt payment of effective and adequate compensation. Such compensation is further defined as the market value of the investment expropriated immediately before the expropriatory action was taken or became public knowledge, whichever is earlier. Newer Swiss BITs also contain an umbrella clause providing that each contracting party shall observe any obligation or commitment it has assumed with regard to investments in its territory by investors of the other contracting party.

What are the most commonly used dispute resolution options for investment disputes between foreign investors and your state?

Swiss BITs contain a wide variety of dispute resolution options, which is not surprising as they have been negotiated and signed over a span of more than 50 years (see question 5). Swiss BITs provide that disputes may be submitted to international arbitration if a mandatory consultation phase does not result in an amicable settlement of the dispute. However, most Swiss BITs signed before 1981 (and two signed thereafter) merely contain a ‘state-state’ or ‘horizontal’ dispute resolution clause. Nearly all Swiss BITs signed since 1981 also include ‘investor-state’ or ‘diagonal’ dispute resolution clauses. These are also quite varied but typically provide, at the investor’s choice, either for ICSID arbitration or for ad hoc arbitration (usually under the United Nations Commission on International Trade Law (UNCITRAL) arbitration rules). Some BITs contain the additional option to submit the dispute to arbitration under the Rules of Arbitration of the International Chamber of Commerce.

Does the state have an established practice of requiring confidentiality in investment arbitration?

There is no established practice regarding confidentiality issues that may arise during the course of investment arbitration proceedings as Switzerland has not been a party to any known investment treaty arbitrations. But in the course of the negotiations regarding the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration, Switzerland took an active role in promoting transparency in investment arbitration. Moreover, SECO has announced that Switzerland will strive to include in all its future BITs a reference to the application of the UNCITRAL Rules on Transparency, and Switzerland’s recent BIT with Georgia contains such a reference. On 27 March 2015, Switzerland signed the UN Convention on Transparency in Treaty-based Investor-State Arbitration (Mauritius Convention) and, on 18 April 2017, Switzerland became one of the first three states to ratify the UN Convention on Transparency, hence resulting in the Treaty’s entry into force on 18 October 2017. The Mauritius Convention extended Switzerland’s consent to apply the UNCITRAL Rules on Transparency to all Swiss BITs concluded prior to 1 April 2014.

Does the state have an investment insurance agency or programme?

Since the discontinuation in 2007 of the former Investment Risk Guarantee fund, Switzerland no longer has a specific investment insurance programme. However, Switzerland is a member of the Multilateral Investment Guarantee Agency. Furthermore, certain investments or aspects of investments may be able to obtain Swiss Export Risk Insurance (SERV) coverage. SERV was not designed to insure direct foreign investments as such. However, because SERV insures exporters of goods or services from Switzerland against political risks, transfer and moratorium risks, force majeure, and credit risks, investments involving such exports may be able to obtain such coverage.