Switzerland is one of the leading countries when it comes to international arbitration and it is no secret that this is mainly due to its excellent legal framework, embodied in Chapter 12 of Switzerland’s Private International Law Act. Adjustments to optimise this legal framework have recently been discussed in the Swiss parliament with the aim of maintaining Switzerland’s attractiveness as a central place of arbitration at the international level.
A. Switzerland’s international arbitration law
In Switzerland, international arbitration is governed by Chapter 12 of the Private International Law Act (“PILA”) of 18 December 1987, which comprises 19 articles (Articles 176 – 194 PILA) and has been conceived as a self-standing unit within the PILA.
Over the years, Chapter 12 PILA has been of significant importance in consolidating Switzerland’s long tradition as a hub of international arbitration. Although Chapter 12 was enacted more than 30 years ago, it is still considered a “modern” piece of arbitration legislation, which strongly favours party autonomy.
In October 2018, the Swiss government published a detailed project for the amendment of Chapter 12 PILA (the “Draft Bill”), intended to modernise Swiss arbitration law and further increase Switzerland’s attractiveness as a seat of international arbitration.
B. Key amendments
The key amendments foreseen by the Swiss government are aimed at: (1) enshrining certain elements deriving from the Swiss Supreme Court’s consistent case law; (2) strengthening party autonomy; and (3) generally making the law easier to apply.
1. Enshrinement of the Swiss Supreme Court’s case law in Chapter 12 PILA and clarification of ambiguities
Chapter 12 PILA applies “if the seat of the arbitral tribunal is in Switzerland and if, at the time of the conclusion of the arbitration agreement, at least one of the parties had neither its domicile nor its habitual residence in Switzerland” (art. 176 para. 1 PILA).
There is currently a disagreement between the Swiss Supreme Court and Swiss doctrine as to whether the parties referred to in this provision are the parties to the arbitration proceedings or the parties to the arbitration agreement.
The Draft Bill therefore includes new wording in Article 176 para. 1 PILA, specifying that the rules of Chapter 12 PILA apply to the parties “to the arbitration agreement”. This constitutes a welcome clarification to the scope of application of Chapter 12 PILA.
The proposed wording of Article 176 para. 1 PILA will also explicitly specify that Chapter 12 PILA applies if one of the parties does not have “its headquarters” in Switzerland. This is a simple point of clarification, since the concept of “domicile” already encompasses the concept of the seat of a company.
In its current edition, Chapter 12 PILA only contains a provision for the setting-aside of an arbitral award. In accordance with case law, parties may nevertheless rely on further legal remedies against an arbitral award. The Draft Bill therefore includes new provisions regarding the rectification, interpretation and revision of an arbitral award.
In addition, the principle that parties must immediately challenge any infringements of the procedural rules of international arbitration is also subject to a new article. Such a provision, which is already included in the law regulating domestic arbitration, will again provide for greater legal certainty.
Chapter 12 PILA offers the possibility to seek the assistance of the state court (“Juge d’appui”) at the seat of the arbitral tribunal, for the constitution of the arbitral tribunal or for the taking of evidence. The Draft Bill provides that the proceedings in front of the court will be subject to the summary procedure (i.e. a faster procedure than the ordinary procedure).
2. Strengthening of party autonomy
Chapter 12 PILA already offers a large degree of autonomy to the parties to the arbitration. The Draft Bill is aimed at strengthening this principle by drawing inspiration from the developments observed in other international arbitration “hot spots”.
For example, the Draft Bill expressly provides that the jurisdiction of an arbitral tribunal may be based on an arbitration clause contained in a unilateral legal act – such as a will, a foundation, a trust or the statutes of an association – if the clause meets the necessary formal requirements and if the act in question is valid under the law to which it is subject.
The Draft Bill also proposes that the parties to the arbitration may determine the seat of the arbitral tribunal in the arbitration agreement, or subsequently agree without any further formal requirements. It remains to be seen whether this procedural relaxation will have an impact on the number of international arbitrations conducted before tribunals seated in Switzerland.
Currently, Chapter 12 PILA does not offer any solution regarding a situation where the parties have not determined the seat of the arbitration or have merely indicated that it would be in Switzerland. In order to remedy this legal gap, the Draft Bill provides that the first judge seized in Switzerland will be competent to determine the seat of the arbitral tribunal. This rule again helps to ensure that the willingness of the parties to conduct arbitration proceedings in Switzerland can be fulfilled to the greatest possible extent.
3. Improving Chapter 12 PILA to facilitate its application
New provisions detailing the procedure to follow regarding the challenge or removal of an arbitrator will be integrated into Chapter 12 PILA, and the current reference to the relevant provisions of the Swiss domestic arbitration rules removed. This should contribute in strengthening Chapter 12 PILA as a “one-stop shop” law for international arbitration in Switzerland.
The Draft Bill also proposes that the parties to the arbitration be authorised to submit any document in English to the Federal Supreme Court in the event of an appeal or a revision, including the notice of appeal or the application for revision themselves. This would be a significant step forward, as the Federal Supreme Court currently only accepts appendices in English provided that neither party requests their translation.
On another note, the Draft Bill provides for a new article (Article 185a PILA) enabling both foreign arbitral tribunals and parties to a foreign arbitration to request the assistance of a Swiss judge (“Juge d’appui”) for the execution of interim or protective measures and for the taking of evidence in Switzerland without having to resort to the time-consuming procedure of international mutual legal assistance. This provision will further promote both Switzerland’s arbitration-friendly reputation and the accessibility of the provisions of Chapter 12 PILA to foreign parties.
C. Parliamentary procedure
The Draft Bill has been discussed in both chambers of the Swiss parliament: the National Council has adopted the Draft Bill in December 2019 without objection, but with a few minor adjustments. The Council of States has also voted in favour of it at the beginning of March 2020, subject to the increased use of English in proceedings before the Federal Supreme Court, to which a majority of senators have objected.
After a divergence elimination procedure, during which the increased use of English in front of the Federal Supreme Court was eventually accepted, the final Draft Bill was unanimously adopted by members of Parliament on 19 June 2020.