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Alternatives to litigation

i Overview of alternatives to litigation

In Switzerland, the most frequently used alternative dispute resolution procedure is arbitration, while mediation and expert determinations are also available.

ii Arbitration

Switzerland is one of the world's premier destinations for international arbitration proceedings. By way of illustration, in 2020, Geneva and Zurich were among the five most frequently selected cities for arbitration cases administered by the ICC (together with Paris, London and New York). In 2020, Switzerland hosted well over 200 arbitration proceedings.61

Swiss law distinguishes between international arbitration (governed by Chapter 12 of the PILA), and domestic arbitration (governed by Title 3 of the CCP). An arbitration will be domestic if, at the time of contracting, both parties were domiciled in Switzerland; in all other cases, the arbitration will be international. The most notable differences between the two are in the definition of arbitrability (the definition in domestic arbitration is narrower) and the grounds for annulment of arbitral awards (domestic arbitration permits somewhat more extensive review). Swiss law permits parties to opt out of the regime for domestic arbitration in favour of international arbitration, and vice versa. Where all parties are non-Swiss, they may waive any judicial review of arbitral awards.62

Switzerland is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and regularly enforces foreign arbitral awards. Swiss courts are known for their arbitration-friendly and pro-enforcement approach.

2021 was a particularly eventful year for international arbitration in Switzerland. Several important arbitration-related reforms were passed: the much-anticipated reform of the Swiss law of international arbitration (i.e., Chapter 12 of the PILA), the revision of the Swiss Rules of International Arbitration and the transition of the Swiss Chambers' Arbitration Institution into the new Swiss Arbitration Centre.

The new law of international arbitration maintains all the key features that have made arbitration in Switzerland successful and attractive to international parties and achieves incremental improvements in selected areas. The key features of the new law include the possibility to make English-language submissions to the Federal Court; more broadly available court assistance; and clarifications, modernisations and codification of case law in certain areas.

The revised Swiss Rules of International Arbitration entered into force on 1 June 2021. The key changes relate to multi-party and multi-contract proceedings as well as amendments aiming to streamline arbitration proceedings through paperless filings and remote hearings. The new rules also address data protection and cybersecurity.

In addition, the Swiss Arbitration Centre endorsed the arbitration toolbox, developed by the Swiss Arbitration Association.63 The toolbox is an innovative website that guides users through the entire arbitration process by way of a questionnaire, offering tools and solutions to questions that may arise in the course of arbitration proceedings.

iii Mediation

Mediation is independent from the court system and entirely based on contract. The CCP expressly provides that the parties may opt to replace the mandatory conciliation proceeding before a claim can be filed in court with a private mediation.64 In practice, parties rarely make use of this option. Mediation is quite common in family law and inheritance matters, but less frequent in commercial disputes.

In a landmark case in 2016, the Federal Court held that failure to comply with a mandatory pre-arbitral mediation requirement may result in a stay of the arbitration until the mediation requirement is fulfilled.65 The Federal Court has been less willing, however, to stay litigation proceedings on the same ground, explaining that the CCP does not mention non-compliance with a mediation requirement as a permissible ground to stay proceedings.66

iv Other forms of alternative dispute resolution

Another alternative dispute resolution mechanism found in practice is expert determination by which an expert makes a determination about certain facts that the parties accept as binding.67 Expert determination clauses are particularly frequent in purchase price adjustment mechanisms in M&A agreements, but they can also be found in, inter alia, shareholders' agreements and joint venture agreements. There are no formal rules governing an expert determination other than what is provided in the parties' contract.

Parties sometimes combine several forms of alternative dispute resolution. Multi-tiered dispute resolution clauses are quite frequent in practice, where the first tier consists of a cooling-off period, settlement negotiations or mediation, and the second tier consists of binding arbitration. Hybrid mechanisms such as arbitration-mediation-arbitration or mediation-arbitration have also been suggested. The mediator and the arbitrator should not be the same person.