Year in review: international arbitration in Switzerland

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Year in review

Developments affecting international arbitrationLegislation

On 1 January 2025, a revision of the CCP entered into force. The amendments contain several limited but noteworthy modifications to the provisions governing domestic arbitration.

Notably, the revised CCP strengthens tribunals' powers to decide on their own jurisdiction. Previously, where proceedings on the same subject matter and between the same parties were pending before both a state court and an arbitral tribunal, the forum last seised was required to stay its proceedings until the first forum had ruled on its jurisdiction.⁶ This provision has now been repealed. Consequently, if a state court has been previously seised, the arbitral tribunal is no longer required to await the decision of the state court and may proceed with the arbitration – as has long been the case in international arbitrations.

In addition, the revised CCP now permits cantons to allow ancillary proceedings conducted before state courts – in support of domestic and international arbitration proceedings (such as concerning the appointment of arbitrators, assistance with interim measures or in the taking of evidence) – to be conducted in English at the parties' request. This is possible provided that the arbitration agreement is in English or the arbitration itself is conducted in English (Articles 251a(2) and 356(3) of the CCP).

Although it entered into force on 1 January 2023, the revision of Swiss corporate law, embedded in the Swiss Code of Obligations (CO), merits mention here as it represents a significant development in the area of corporate dispute resolution.⁷ The newly introduced Article 697n of the CO resolves a long-standing debate concerning the validity and scope of arbitration clauses in articles of association. Under the revised regime, Swiss-incorporated entities – such as companies limited by shares, partnerships limited by shares and limited liability companies – may include arbitration clauses in their articles of association. These clauses become effective upon their formal inclusion. However, the inclusion requires either the unanimous consent of all founders at the time of incorporation or a qualified majority vote of the general assembly thereafter (Articles 629(1) and 704(1)(14) of the CO). Arbitration clauses incorporated in articles of association must be recorded in the commercial register.⁸ The resulting arbitral proceedings are governed by the domestic lex arbitri, and the seat of the arbitration must be in Switzerland. Unless expressly limited, the arbitration clause extends to all corporate disputes, including challenges to corporate resolutions, corporate liability claims and actions to enforce capital protection provisions.⁹

New guidelines and rules

While the Swiss Rules have remained unchanged since 2021, the Swiss Centre revised and published a new version of its Guidelines for Arbitrators and Internal Rules of the Arbitration Court in 2024.¹⁰ In addition and reflecting the legislative changes mentioned in relation to corporate law disputes, in 2023, the Swiss Centre introduced the Supplemental Swiss Rules for Corporate Law Disputes, accompanied by an Explanatory Note to guide their application.¹¹ On 1 July 2025, the Swiss Centre will also introduce the Supplemental Swiss Rules for Trust, Estate and Foundation Disputes (the TEF Rules), aimed at addressing the specific needs of private-wealth arbitration. The TEF Rules customise the arbitration process for trust, estate and foundation matters. This development could position the Swiss Centre as a leading institution for specialised dispute resolution in the private-wealth domain.

Arbitration developments in local courts

Under Swiss arbitration law, international arbitral awards may only be set aside on one of the following limited grounds set out in Article 190(2) of the PILA:

1. improper appointment of the sole member of the arbitral tribunal or improper constitution of the arbitral tribunal (Article 190(2)(a));
2. the tribunal's wrongful acceptance or refusal of jurisdiction (Article 190(2)(b));
3. ultra, extra or infra petita decisions (Article 190(2)(c));
4. violation of the principle of equal treatment or right to be heard (Article 190(2)(d)); and
5. incompatibility of the award with public policy (Article 190(2)(e)).

In recent case law, the Federal Supreme Court has shed light on the interpretation and practical application of several of these grounds. The following discusses recent key decisions that illustrate how the Federal Supreme Court has approached challenges based on these grounds.

Independence and impartiality of the arbitral tribunal

The independence and impartiality of arbitrators are essential elements of a properly constituted arbitral tribunal. Under Swiss arbitration law, these principles are safeguarded by several provisions of the PILA, such as in Articles 180, 180a, 180b, 190(2)(a) and 190a(1)(c). Specifically, a lack of independence or impartiality falls within the broader concept of an 'unlawfully constituted tribunal' under Article 190(2)(a) and may give rise to a challenge of the arbitral award.

In this context, the parties have a 'duty of curiosity', which requires them to take reasonable steps to ensure that the arbitral tribunal offers sufficient guarantees of independence.¹² Case law sets high standards for the duty of curiosity: parties are expected to use major internet search engines and consult other relevant sources for signs of bias. However, there is no obligation to systematically and thoroughly search all available sources.¹³ Once a party becomes aware of a potential ground for challenge, it must promptly raise the issue with the appropriate authority, which will vary depending on the stage of the proceedings and applicable procedural rules.¹⁴

In this context, the 2021 revision of the PILA introduced Article 190a(1)(c), which provides a limited post-award remedy. Under this provision, a party may seek the setting aside of an award if it became aware of a ground for challenging an arbitrator under Article 180(1)(c) of the PILA (i.e., if circumstances exist that give rise to justified doubts as to the arbitrator's independence or impartiality) only after the conclusion of the arbitral proceedings, provided it acted with due diligence and no other legal remedy is available.

In two 2023 decisions concerning challenges brought by the National Iranian Oil Company against an ICC interim award, the Federal Supreme Court clarified the scope of revision proceedings under Swiss arbitration law.¹⁵ The Court reiterated that a ground for challenging an arbitrator must have existed at the time the award was rendered. Grounds that arise only after the issuance of the award do not, in themselves, justify its revision. When a party seeks to revise an award due to alleged bias, such as post-award statements or opinions suggesting partiality, it bears the burden of proving that the ground for challenge existed at the time the award was made. In one decision,¹⁶ the Federal Supreme Court found that the appellant had failed to demonstrate any pre-existing bias on the part of an arbitrator against Iranians, Muslims or individuals wearing a veil. In the companion case,¹⁷ the Court concluded that nearly all the circumstances cited by the appellant regarding another arbitrator in the same tribunal occurred after the award was issued, and that the two circumstances predating the award were insufficient to justify a revision.

Jurisdiction

A party may challenge an arbitral award when the tribunal wrongly accepted or declined jurisdiction. Under Article 190(2)(b) of the PILA, a jurisdictional challenge must be brought against the tribunal's first challengeable decision to avoid forfeiting the right to raise jurisdictional objections.¹⁸ In this situation, the Federal Supreme Court will conduct a full review of the legal arguments raised by the appellant, including those relating to preliminary issues that are determinative of the arbitral tribunal's jurisdiction.¹⁹

One possible objection under Article 190(2)(b) of the PILA is the absence of party consent to the arbitration agreement. In a 2024 sports arbitration case, the Federal Supreme Court held that even if an athlete has not signed a document referring to an arbitration clause in favour of the CAS, their conduct may still indicate acceptance of CAS's jurisdiction. In that case, the athlete expressly referred to the arbitration clause during proceedings before the CAS Ad Hoc Division, demonstrating that she considered herself bound by it.²⁰

Furthermore, in 2023, the Federal Supreme Court confirmed the prevailing Swiss legal doctrine on a state's authority to sign a contract. According to this doctrine, a state cannot rely on its own domestic law to claim that the person or body signing the arbitration agreement lacked authority, as long as the counterparty, exercising due diligence, could not have recognised the lack of authority (Article 177(2) of the PILA). Moreover, regarding the succession to an arbitration clause, and without generally taking a position on how state succession to treaties should be assessed under international law, the Court confirmed the sole arbitrator's finding that South Sudan had entered into the licence agreement, including the arbitration clause, as the successor state. This finding was based on a treaty between Sudan and South Sudan, according to which the two states agreed to allocate assets and liabilities along territorial lines (principle of territoriality), on a ministerial order and on the fact that South Sudan had itself acted as a successor.²¹

Similarly, as to the extension of an arbitration clause to non-signatory third parties, the Federal Supreme Court has consistently ruled that extension is possible if, based on the principle of good faith, the non-signatory's conduct shows interference in the performance of the contract to such an extent that it reflects a willingness to be bound. In the case at hand, the Court addressed whether the arbitration clause contained in loan agreements involving a group of companies could be extended to non-signatory family members who owned and managed the companies. The arbitral tribunal found that the family members' active involvement in the implementation and repayment discussions of the loan agreements as well as the benefit they derived from the loan agreements demonstrated that willingness. The Court (whose review was limited because the findings of the tribunal were mostly factual) therefore upheld the tribunal's decision.²²

In addition to these issues, the Federal Supreme Court recently addressed two further aspects relevant to the jurisdiction of arbitral tribunals under Article 190(2)(b) of the PILA.

First, in 2023, the Court examined whether the arbitral tribunal had correctly applied the principle of separability in light of the signing party's alleged lack of capacity for discernment. The tribunal had examined the party's capacity specifically with regard to the arbitration clause, without extending its analysis to the main contract, and had concluded that the arbitration agreement was valid and confirmed its jurisdiction. The appellant argued that this approach disregarded the Court's case law on exceptions to the principle of separability²³ and maintained that the arbitration clause was void due to the party's overall incapacity. The Court rejected this argument and reiterated that the capacity of discernment is a relative concept, to be evaluated in relation to the specific act and its nature and significance. It is therefore possible for a person to lack the capacity to understand one legal act but not another. Consequently, the invalidity of the main contract due to incapacity does not automatically extend to the arbitration agreement. The Court found that the tribunal had acted in accordance with established jurisprudence in limiting its assessment to the arbitration clause.²⁴

Second, the Court reaffirmed its case law on multi-tier dispute resolution clauses.²⁵ It held that compliance with a mandatory multi-tier dispute resolution clause is a matter of jurisdiction ratione temporis. To establish whether a pre-arbitral step is mandatory, the clause must be interpreted according to Article 18 of the CO: the court or tribunal must thus first seek the parties' subjective intent and only if this is unclear, apply the objective interpretation based on good faith. In the present case, the arbitral tribunal had established that the parties did not agree on a mandatory multi-tier dispute mechanism based on the subjective interpretation. Because the subjective intent is a factual determination that the Court cannot review or alter (Article 77(2) of the Federal Supreme Court Act), the Court dismissed the challenge.²⁶

Ultra, extra or infra petita decisions

Pursuant to Article 190(2)(c) of the PILA, an arbitral award may be set aside if the arbitral tribunal has ruled beyond the claims submitted to it (ultra petita), has granted relief that differs from what was requested (extra petita) or has failed to address certain claims altogether (infra petita).²⁷ The ground for challenge under Article 190(2)(c) of the PILA relates specifically to the relief sought by the parties and must be distinguished from objections pertaining to the scope of the arbitration agreement or the arbitral mandate.²⁸ Moreover, ultra, extra or infra petita objections do not apply to procedural requests.²⁹

There have been no noteworthy cases on ultra, extra or infra petita decisions recently.

Equal treatment and right to be heard

The principles of equal treatment and the right to be heard are enshrined in Article 182(3) of the PILA. For a procedural irregularity to be admissibly raised before the Federal Supreme Court, the affected party must have brought the alleged breach to the attention of the arbitral tribunal without undue delay; failure to do so results in forfeiture of the right to later invoke the irregularity in annulment proceedings (Article 182(4) of the PILA).

As a general rule, the party alleging a violation of the right to be heard must explain how the outcome of the proceedings would have been different if the violation of the right to be heard had not occurred. However, in a 2024 decision,³⁰ the Federal Supreme Court made an exception to the usual requirement that an appellant must demonstrate how the outcome of proceedings might have differed. The tribunal (a rabbinical arbitral tribunal) had initially issued an award lacking factual findings and legal reasoning, which the respondent unsuccessfully challenged. Several months later, at the claimant's request and without notifying the respondent, the tribunal issued an explanatory award with a substantially expanded operative part. The respondent challenged this second award, arguing that it had been denied the right to be heard. The Court found that the tribunal had not merely overlooked the appellant's legal arguments; rather, the appellant had not been heard at all and was not even informed of the request for clarification. Therefore, the appellant could not reasonably be expected to specify the arguments it would have raised. The Court therefore confirmed a violation of the right to be heard and annulled the explanatory award.³¹

Public policy

An arbitral award can also be annulled if it is contrary to substantive or procedural public policy (Article 190(2)(e) of the PILA).

A violation of public policy under Article 190(2)(e) requires a breach of fundamental legal principles that is incompatible with the core values and legal order of Switzerland. In the case of substantive public policy, it is not sufficient for the tribunal's reasoning to be questionable; the result of the award itself must be incompatible with public policy.³² Errors such as misappraisal of evidence, manifest factual or legal errors do not suffice, and the threshold for annulment is higher than that for arbitrariness.³³ A breach of procedural public policy arises only when fundamental, universally recognised procedural guarantees are violated in a manner that shocks the conscience and is clearly incompatible with the principles of the rule of law.³⁴ Mere incorrect or arbitrary application of the procedural rules does not suffice; only violations of rules that are essential to procedural fairness may justify the annulment of an award.³⁵

As a result, the annulment of an international arbitral award on the grounds of incompatibility with public policy remains rare.³⁶ The Federal Supreme Court has recently ruled on two landmark cases on that matter.

Regarding substantive public policy in the context of sports arbitration, the Court held that the young age of an athlete accused of intentionally violating anti-doping rules does not, in itself, warrant a more lenient sanction than that imposed on an athlete only a few years older. In the case at hand, the athlete, who was 15 years and 8 months old at the time of the anti-doping test and had significant competitive experience, did not present any objective justification for being treated differently from other athletes.³⁷

With regard to procedural public policy, the Court held that the fact that a rabbinical arbitral tribunal did not observe the 30-day time limit set out in Article 189a(1) of the PILA for issuing an explanatory award does not amount to a violation of procedural public policy as this deadline is not considered a fundamental and universally recognised procedural guarantee. The fact that this time limit may align with international standards (as reflected in various international arbitration rules)³⁸ and may be supported by the principle of expeditiousness was deemed insufficient to establish a breach of procedural public policy.³⁹

Investor–state disputesCases involving Switzerland

Switzerland has rarely been a respondent in investor–state arbitration. To date, only one publicly known case has involved Switzerland in this role: Human Rights Defenders Inc v. Swiss Confederation,⁴⁰ which was brought under the 1988 Hungary–Switzerland Bilateral Investment Treaty (BIT). The case was ultimately discontinued following the claimant's failure to pay the initial advance on costs.

However, this landscape may be shifting. In the wake of the takeover of Credit Suisse by UBS, numerous bondholders have filed trigger letters to commence proceedings against Switzerland, challenging the write-down of AT1 bonds ordered by the Swiss Financial Market Supervisory Authority.⁴¹

These developments may mark the beginning of a more active role for Switzerland in investment arbitration, raising novel legal and political questions.

Cases involving investors and other states

One of the most internationally significant investor–state cases involving Switzerland is EDF Energies Nouvelles SA v. Kingdom of Spain.⁴² In that case, the Federal Supreme Court affirmed the jurisdiction of a Swiss-seated ad hoc arbitral tribunal to hear a claim brought by a French investor against Spain under the Energy Charter Treaty (ECT). In rejecting Spain's application to set aside the award, the Court held that it was not bound by EU law or the reasoning of the European Court of Justice in Komstroy and found no basis in public international law to accord primacy to EU law over the ECT. The ruling illustrates Switzerland's pro-arbitration stance in intra-EU investment disputes and suggests that Switzerland would also take a pro-enforcement stance in these cases.⁴³

Another investor–state dispute, AsiaPhos Ltd and Norwest Chemicals Pte Ltd v. the People's Republic of China,⁴⁴ concerned the interpretation of the arbitration clause in Article 13(3) of the 1985 China–Singapore BIT. The clause provided that disputes 'involving the amount of compensation resulting from expropriation, nationalization, or other measures having effect equivalent to nationalization or expropriation' may be submitted to international arbitration. The arbitral tribunal found that this clause conferred jurisdiction solely over disputes concerning the amount of compensation and therefore declined jurisdiction over the investor's broader damages claims as well as its claims regarding the determination on various violations of the BIT. The Federal Supreme Court, interpreting the clause by applying Article 31 of the Vienna Convention on the Law of Treaties, upheld the tribunal's decision. Specifically, it rejected the investors' argument that, under Swiss law and Article 178(2) of the PILA, a presumption of broad arbitral jurisdiction should apply once the existence of an arbitration agreement is established. That presumption, developed in the context of commercial arbitration,⁴⁵ does not extend to investment treaty arbitration where the treaty explicitly assigns jurisdiction over certain matters to domestic courts. In these cases, the allocation of jurisdiction between state courts and arbitral tribunals is governed strictly by the treaty text.

Furthermore, by submitting a new legal opinion, the appellants sought to demonstrate that recourse to the Chinese state courts would have been impossible. With regard to the admissibility of that legal opinion, the Federal Supreme Court recalled that while new facts and evidence are generally inadmissible under Article 99(1) of the Federal Court Act, legal opinions may be submitted within the appeal period to support legal arguments.

Finally, the Federal Supreme Court has been confronted with the Clorox Spain SL v. Bolivarian Republic of Venezuela saga three times in recent years. The first time, the Court confirmed Clorox's appeal, which had challenged the negative jurisdictional award, therefore setting aside, for the first time, an investment treaty award.⁴⁶ According to the Court, the arbitral tribunal had introduced a requirement that had no foundation in the 1995 Spain–Venezuela BIT, namely that the investor must personally make an active investment in return for consideration. The Court therefore annulled the award and held that it was for the tribunal to determine whether the investor had engaged in treaty abuse or merely legitimate nationality planning. Subsequently, the Court rejected Venezuela's challenge of the jurisdictional award accepting the tribunal's jurisdiction, in which it had argued that the restructuring was abusive.⁴⁷ The Court clarified that there is no treaty abuse if the investor can demonstrate that a restructuring was primarily motivated by reasons other than seeking protection under the investment treaty. The Court emphasised that an abuse of rights can only be assumed in exceptional circumstances. Finally, the Court rejected Venezuela's application to set aside the final award,⁴⁸ finding no violation of public policy.⁴⁹