Apr 2023

Switzerland

Law Over Borders Comparative Guide:

Arbitration

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1 . Key considerations in deciding whether to arbitrate in this jurisdiction

Switzerland is one of the leading seats of arbitration chosen by parties. The local arbitration hubs are Geneva (French-speaking part of Switzerland) and Zürich (German-speaking part). Switzerland has a liberal approach to arbitration, which is reflected in the arbitration-friendly legal framework. 

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1.1. Advantages

Some key advantages when choosing to arbitrate in Switzerland are:

  • Party autonomy. The parties have great flexibility and freedom in how they want to govern arbitration proceedings. 
  • Efficiency and quality of challenge proceedings. Challenges to awards are heard directly by the highest court in Switzerland, the Swiss Federal Tribunal (SFT), being the only judicial forum where arbitral awards can be appealed. On average, the SFT only takes six months to render a decision.
  • Fast proceedings. Arbitration proceedings generally last between 18 to 24 months.
  • Internationality. The entire proceedings (excluding the appeal to the SFT) can be held in English or any other foreign language at the parties’ choice.
  • Switzerland has a policy of neutrality and a stable political and democratic structure, which provides stability and predictability for the parties.
  • High quality and integrity of the legal profession. The Swiss Arbitration Association (ASA) is Switzerland’s leading arbitration organisation. It is a non-profit association with over 1000 members. It established the Swiss Arbitration Centre and issues the ASA Bulletin. 
  • Well-equipped and reliable state court system.
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1.2. Disadvantages and common pitfalls

The cost of living in Switzerland is among the highest in the world, which could make some arbitration costs (e.g. accommodation or hearing venues) more expensive. Swiss legal fees may however be lower than legal fees in other popular arbitration venues.

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1.3. Other distinctive features

The legal framework of Switzerland’s Private International Law (PILA) Chapter 12, with its concise 24 articles translated into multiple languages, is a streamlined set of provisions governing international arbitration in Switzerland. It ensures the proper constitution and functioning of the arbitral tribunal and guarantees the parties’ fundamental procedural rights, while giving them flexibility.

Switzerland also has a tradition of efficiently administering small and mid-sized disputes in expedited procedures.

An award rendered in Switzerland can only be set aside for very limited reasons and the SFT has a restrictive approach to challenges (see below, Section 11.2). The SFT has upheld awards in about 93% of cases, only sanctioning serious irregularities, such as violations of due process or lack of jurisdiction (Swiss International Arbitral Awards Before the Federal Supreme Court, ASA Bull. 2021, Volume 39, Issue 1, Dasser/Wojtowicz). 

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2 . Principal laws and institutions relating to international arbitration in this jurisdiction

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2.1. Legal framework

International arbitration proceedings in Switzerland are governed by Chapter 12 of PILA, the latest revision of which entered into force on 1 January 2021. By election, the parties can also choose the Swiss Code of Civil Procedure Part 3 to apply (which governs domestic arbitration in Switzerland). 

Furthermore, Switzerland is a signatory of the New York Convention, which governs the recognition and enforcement of foreign arbitral awards — and the ICSID Convention — which provides for conciliation and arbitration of investment disputes between contracting states and nationals of other contracting states.

There are no specific commercial courts or chambers to hear international arbitration matters in Switzerland, either on a federal or on a cantonal level. The SFT is the only state court in Switzerland to hear challenges against arbitral awards (Art. 191(1) PILA).

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2.2. What qualifies as international arbitration?

Under Swiss law, international arbitration is defined as an arbitration proceeding before an arbitral tribunal with its seat in Switzerland 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(1) PILA). There is no distinction in this regard between ad hoc and institutional international arbitration.

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2.3. Main local international arbitration institutions

The Swiss Arbitration Centre and the International Chamber of Commerce (ICC) are the leading arbitration institutions in Switzerland. Geneva and Zurich are among the top five most frequently selected cities in ICC proceedings (ICC Dispute Resolution 2020 Statistics). The Swiss Arbitration Centre is an independent institution that provides high-quality arbitration and mediation services worldwide and which also drafted the Swiss Rules of International Arbitration (Swiss Rules 2021), which provide an efficient, flexible and cost-effective framework for the resolution of international disputes. 

Switzerland hosts many other dispute-settlement institutions such as the Court of Arbitration for Sport, specialised in the settlement of sports-related disputes and the World Intellectual Property Organization Arbitration and Mediation Centre, specialized in IP and technology disputes. 

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3 . Arbitration agreements

The cornerstone of arbitral proceedings in Switzerland is the existence of a valid arbitration agreement. Swiss law has a pro-favorem approach to arbitration agreements. 

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3.1. Requirements as to content and form

An arbitration agreement fulfils the formal conditions under Swiss law if it is made in writing or any other means of communication that establishes the terms of the agreement by a text, which includes email or any other form of modern communication (Art. 178(1) PILA). The arbitration agreement requires no signature and arbitration agreements by reference are valid (Arroyo, Art. 178, para. 24 and 27).

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3.2. Validity of arbitration agreements

Under Swiss law (Art. 1-2 Code of Obligations), for an agreement to be substantively valid, it must contain mutual expressions of intent by the parties on all the essential terms (essentiali negotii). An arbitration agreement must clearly contain the parties’ intention to submit their dispute to arbitration and must specify the object of the dispute or legal relationship which will be the subject matter of the arbitration clause (Arroyo, Art. 178, para. 48). A separate arbitration agreement is not required by Swiss law; it is sufficient if the arbitration agreement is contained in the main contract.

Swiss law recognises the doctrine of separability, pursuant to which the invalidity of the principal contract does not automatically render the arbitration agreement it contains unenforceable (Art. 178(3) PILA).

An arbitration agreement is invalid if a party lacks legal capacity, lacks the capacity to act, or if the party does not have the authority to initiate and conduct the arbitration.

The law of Switzerland prevents a state or a state-owned entity that is sued before an arbitral tribunal with its seat in Switzerland from invoking its own law to contest that certain issues are not arbitrable, or that it is not capable of being a party in arbitration proceedings (Art. 177(2) PILA).

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3.3. Special formalities

There are no special formalities for arbitration agreements in Switzerland.

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3.4. Governing law

Chapter 12 PILA establishes the conflict of law rule in favorem validitatis. Pursuant to this principle, the arbitration agreement is valid if it conforms to either the law chosen by the parties, the law governing the object of the dispute, or Swiss law (Art. 178(2) PILA). The law of the seat is thus only relevant if the arbitration agreement is deemed invalid under both the law chosen by parties and the law governing the object of the dispute. 

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4 . Arbitrability

In Switzerland, any claim involving an “economic interest” may be submitted to arbitration (Art. 177(1) PILA). The term “economic interest” is interpreted in a wide and liberal manner by the SFT — as the Swiss legislator intended to make international arbitration as accessible as possible — and encompasses any claim that ultimately pursues an economic purpose (Girsberger, International Arbitration (2021), para. 428). 

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4.1. Applicable restrictions

As explained above, every claim that pursues an economic purpose can be arbitrated. There are, however, some disputes that are not arbitrable under Swiss law, e.g., disputes that must be handled by Swiss state courts pursuant to provisions that are mandatory in light of public policy, such as criminal proceedings, pure debt collection and bankruptcy proceedings (which are exclusively governed by state courts), or family law disputes like marriage, adoption, or divorce.

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5 . Enforcing arbitration agreements

While anti-suit injunctions are not available in Switzerland, a party can try to stay court proceedings that have been started in breach of an arbitration agreement. An arbitral tribunal can also proceed with the arbitration with limited exceptions. 

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5.1. Stay of proceedings

If a party seizes a state court despite a valid arbitration agreement, the respondent may raise the plea that an arbitration agreement has been concluded between the parties. Accordingly, a state court has the obligation to decline jurisdiction after a prima facie examination of the arbitration agreement, unless:

  • the respondent has proceeded on the merits without reservation; 
  • the court finds that the arbitration agreement is null and void, inoperative or incapable of being performed; or 
  • the arbitral tribunal cannot be constituted for reasons that are clearly attributable to the respondent in the arbitration.

(Art. 7 PILA.)

In such situations where the court is seized first, an arbitral tribunal with its seat in Switzerland can, regardless of the action pending before the state court, proceed with the arbitration and decide on its jurisdiction, unless there are serious reasons to stay the proceedings (Art. 186(1bis) PILA). An example of such a serious reason could be if proceedings were only initiated when they had already reached an advanced stage in a foreign state court (Arroyo, Art. 186, paras. 19 and 24). 

An arbitral tribunal may also threaten sanctions against a passive party and may even conduct the arbitration proceedings and render an enforceable award in the absence of such a party (Arroyo, Art. 178, para. 83).

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5.2. Anti-suit injunctions

Swiss courts would generally deny motions for an anti-suit injunction to restrain a party from commencing or continuing legal proceedings abroad in breach of an arbitration agreement as there is no legal tradition for this measure in Switzerland. Swiss law recognizes the principle of Kompetenz-Kompetenz, according to which it is not the state courts, but the arbitral tribunal itself that decides whether or not it has jurisdiction. 

Swiss doctrine and jurisprudence support this approach. For example, the first instance state court of Geneva has declined a request for an anti-arbitration injunction (Arroyo, Art. 186, para. 15-16 / BGE 138 III 304, para. 5.3.1 / Cf. Tribunal de première instance, Geneva, decision of 2 May 2005, ASA Bull. 2005, pp. 728–737).

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6 . Arbitral Tribunal

In accordance with the principle of party autonomy, the parties enjoy freedom in the selection, removal and replacement of arbitrators (Art. 179 PILA). The newest revision of the PILA includes an explicit provision for multiparty arbitrations in cases where the parties fail to appoint the arbitrators. In such cases, the state court now has the authority to appoint all members of the arbitral tribunal (Art. 179(5) PILA).

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6.1. Restrictions on the parties’ freedom to choose arbitrators

Swiss law does not impose any restrictions on the parties’ freedom to choose arbitrators. In Switzerland, anyone may serve as an arbitrator. Aside from the requirements of independence and impartiality, the parties are free to agree on any additional qualifications they want.

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6.2. Requirement of arbitrator independence and impartiality

Arbitrators may be challenged if there are circumstances which give rise to legitimate doubt that the arbitrator is not sufficiently independent or impartial (Art. 180(1)(c) PILA). The SFT sets the required degree of legitimate doubt as to an arbitrator’s independence and impartiality at a very high level, which is in line with its liberal jurisprudence in international arbitration. 

In practice, the IBA Guidelines on Conflicts of Interest, being soft law, are also a valuable working tool for assessing an arbitrator’s independence and impartiality, as confirmed by the SFT (SFT Decision No. 4A_506/2007, para. 3.3.2.2).

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6.3. Mandatory rules applicable to the appointment process

There are no mandatory rules applicable to the appointment process.

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6.4. Appointment mechanism in the absence of party agreement or applicable institutional rules

Swiss law provides that if the parties have not agreed otherwise, the tribunal shall consist of three members, whereby the parties each nominate one member and these members nominated by the parties unanimously nominate the president of the tribunal (Art. 179(1) PILA).

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6.5. Mandatory rules applicable to the replacement process

There are no mandatory rules applicable to the replacement process.

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6.6. Mandatory disclosure obligations

Under Swiss Law (Art. 179(6) PILA) a person requested to become a member of the arbitral tribunal shall without delay disclose the existence of circumstances that could give rise to legitimate doubt as to his or her independence or impartiality. This obligation applies throughout the entire proceedings.

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6.7. Grounds for challenge

A member of the arbitral tribunal may be challenged (Art. 180(1) PILA) if:

  • they lack the qualifications agreed upon by the parties;
  • there is a ground for challenge in accordance with the rules of arbitration adopted by the parties; or
  • circumstances exist that give rise to legitimate doubt as to his or her independence or impartiality.
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6.8. Mandatory rules governing the challenge of arbitrators

There are no mandatory rules governing the challenge of arbitrators. However, if the parties have not agreed otherwise and the proceedings have not yet been concluded, an arbitrator must be challenged within thirty days of the date on which the party became aware of the grounds for challenge (Art. 180a (1) PILA).

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6.9. Removal

Members of the tribunal can either be removed by agreement of the parties or by filing a written request with the state court in case a member of the tribunal is unable to carry out his or her duties within a reasonable time or with due care (Art. 180b PILA).

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6.10. Liability and immunity of arbitrators

Arbitrators are, in principle, only liable if they have caused damage as a result of intentional or grossly negligent behaviour (Art. 100(1) Code of obligations). The setting aside of an award by a court is not sufficient to establish liability. However, arbitrators may be liable for damages arising out of a resignation at an inappropriate time or failure to disclose facts constituting a valid ground for challenging their appointment.

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7 . Assistance by the State courts

The arbitral tribunal’s power to order interim measures comes primarily from the arbitration agreement. If the parties have not specifically agreed on the arbitral tribunal’s power in this regard, the tribunal has the authority to order such measures. However, arbitral tribunals, as private bodies, cannot enforce their own interim measures. Therefore, Swiss law provides for assistance of state courts in enforcing tribunal-ordered interim measures (Berger/Kellerhals, Art. 183, para. 5 and 29). 

With the newest revision of the PILA, arbitral tribunals with their seat outside of Switzerland can directly access Swiss state courts at the place where enforcement is sought. Therefore, there is no distinction between arbitral tribunals with their seat in Switzerland or those with the seat abroad. This right applies to interim or conservatory measures and for the taking of evidence. (Art. 185a PILA). These requests for assistance will be addressed by way of summary proceedings (Dasser, Pfisterer, Revision of the PILA, p. 2).

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7.1. Interim measures

Overview of interim measures

The SFT classifies interim measures into three categories by reference to their objectives (SFT Decision No. 136 III 200, para. 2.3.2., Berger/Kellerhals, para. 1256):

  • conservatory measures: aimed at securing the enforcement of the final award;
  • regulatory measures: aimed at regulating and stabilizing the relationship between the parties during the arbitration proceedings (maintaining the status quo); and
  • performance measures: measures ordering interim performance of an obligation aimed at ensuring the temporary enforcement of a claim.

However, tribunals have a broad discretion and may also order interim measures unknown to Swiss law, for example, freezing orders or an order to provide a bank guarantee as security for a disputed claim.

Relevance of availability of emergency arbitrator mechanism

Parties in Switzerland are free to submit to the jurisdiction of an “emergency arbitrator” as a private instance to hear an application for provisional measures. However, following the principle of concurrent jurisdiction, whereby a state court can grant interim relief even in matters subject to an arbitration agreement, unless the parties have explicitly agreed otherwise, they remain free to apply to either the emergency arbitrator or to a competent state court for obtaining an interim measure (Berger/Kellerhals, para. 1286). 

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7.2. Taking of evidence

There are three requirements for judicial assistance to the taking of evidence – first, the evidence must be requested, second, the request for evidence must be admissible and third, the state court seized must have jurisdiction (Arroyo, Art. 184, para. 69).

Arbitral tribunals in Switzerland are generally hesitant to apply to state courts for judicial assistance in connection with the taking of evidence and only revert to this possibility as a last resort. Most tribunals simply take non-compliance into account when assessing the evidence (Arroyo, Art. 184, para. 68).

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7.3. Appointment or challenge of arbitrators

Under Swiss law, if the procedure for appointing the arbitrator(s) fails, the parties may apply to the state court judge at the place of arbitration (juge d’appui) and request the appointment of the arbitral tribunal. If the parties have not designated a seat or have designated that the seat should be in Switzerland (without any further specification), the state court first seized by a party shall have jurisdiction (Art. 179(2) PILA).

Regarding the challenge of arbitrator(s), once the parties have challenged the arbitrator(s), they may, within a period of 30 days, request the state court to reject a challenged member of the tribunal. The state court’s decision on the challenge is final (Art. 180a PILA).

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7.4. Other available assistance

Swiss law provides that state courts can provide “any other judicial assistance” if required by the arbitral tribunal, without further specification. This liberal and catch-all approach by the legislator further enhances the arbitration friendliness of the Swiss legal framework (Arroyo, Art. 185, para. 1-2).

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8 . General procedural (minimum) requirements

Chapter 12 PILA is premised on the principle of party autonomy, and it recognizes the freedom of the parties to determine the arbitral procedure, directly or by reference to arbitration rules (Art. 182(1) PILA). The parties can also submit the arbitration to a procedural law of their choice. However, where they have not (or have only partially) decided upon the procedure, the arbitral tribunal can determine, to the extent necessary, the applicable procedural rules (Art. 182(2) PILA). 

Regardless of the procedural rules chosen, the arbitral tribunal must ensure equal treatment of the parties and their right to be heard in adversarial proceedings (Art. 182(3) PILA). The right to be heard requires equal treatment, in the event of a hearing, but the same does not imply that the arbitral tribunal is obliged to hold hearings under any circumstances. Depending on the circumstances of the case, it may instead be more appropriate to refrain from convening a hearing and to decide the case based on documentary evidence (Berger/Kellerhals, para. 1147, pg. 402). 

Swiss law does not contain any requirement for the arbitral tribunal to conduct hearings at the seat/in-person/remotely. It may hold hearings anywhere convenient. Since the Covid-19 pandemic, remotely held hearings have become standard practice. 

The non-participation of the respondent does not paralyze the arbitration and the arbitral tribunal may proceed with the arbitration, after ensuring that such party was afforded reasonable opportunity to present its case and that its fundamental procedural rights were not violated. 

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9 . Confidentiality

The PILA is silent with regard to confidentiality in arbitration. According to legal doctrine, the legal basis for the rules on privacy and confidentiality in arbitral proceedings with a seat in Switzerland is an explicit agreement between the parties providing for confidentiality, if any, including by reference to arbitration rules (for instance, the 2021 Swiss Rules of International Arbitration, Art. 44). 

There is controversy as to whether, in the absence of an explicit agreement, there is an implied obligation to respect confidentiality. Many leading Swiss scholars agree that there exists a general principle of confidentiality covering arbitration proceedings, submissions, documents and awards, although they are divided as to the source of the obligation, i.e., whether it arises as a result of the arbitration agreement, or the parties’ obligation of good faith under Swiss law, or the parties’ expectations when agreeing to resort to arbitration. Other scholars deny the existence of such a duty under Swiss law absent an express agreement by the parties or absent the parties’ presumed intention in view of the particular facts of the case.

The legal doctrine recognizes certain exceptions to confidentiality. The parties may use the award, and other materials produced in the arbitral proceedings to protect their legitimate interests, including in setting aside or enforcement proceedings, and even against third parties to the extent necessary. Furthermore, it is accepted that, in certain cases, parties can be under an obligation to disclose the existence of arbitration proceedings, for example, to shareholders, corporate auditors, board members, insurers, banks, tax authorities, stock-exchange regulatory bodies, etc. 

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10 . Awards

Unless the parties agree otherwise, an arbitral tribunal may render partial awards covering its decision on some of the claims submitted to it and deferring any decision on the remaining claims to subsequent partial awards or the final award (Art. 188 PILA). 

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10.1. Requirements as to content and form

Art. 189 PILA prescribes requirements as to the content and form of the award. The arbitral award must be rendered in conformity with the rules of procedure and in the form agreed upon by the parties. The drafters of the arbitration agreement should endeavour to specify form requirements whenever it is likely that the award will have to be enforced in a jurisdiction which requires special formalities (such as the signatures of the arbitrators on all pages of the awards) for recognising and enforcing the award. 

In the absence of such agreement as to special formalities, the award must comply with the following requirements: 

  • it must be made by a majority decision, or in the absence of a majority, by the president of the tribunal; and
  • it must be reasoned and in writing, dated and signed (the signature of the president is sufficient).
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10.2. Time limit

Chapter 12 PILA does not impose a time limit within which the tribunal must render its award. However, if the tribunal and the parties have agreed on a specific timeline for the rendering of the award, the tribunal must render the award within such timeline, as such agreement is binding on the parties and the arbitrator. 

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10.3. Remedies

The arbitral tribunal may award damages, relief for specific performance, as well as interim and declaratory relief, pursuant to the law governing the contract. In awarding these remedies, the tribunal seated in Switzerland must remain within the parameters of Swiss ordre public (or public policy). 

The tribunal cannot, however, award any remedies for claims that fall outside the scope of arbitration (see above Section 4.1). 

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11 . Post-award proceedings

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11.1. Interpretation and correction of awards

Art. 189a(1) PILA provides that in the absence of a contrary agreement entered into by the parties, either party may, within 30 days of the notification of the award request the arbitral tribunal to:

  • correct any clerical or computational errors in the award; or 
  • interpret certain parts of the award which are unclear or ambiguous; or 
  • issue a supplement to the award on claims which were raised in the arbitral proceedings but not dealt with in the award.

The arbitral tribunal may, of its own accord, correct, interpret or supplement the award, within the same time limit.

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11.2. Challenge of an award

Chapter 12 of the PILA envisages two possible recourses against an award – challenge and revision before the SFT (Art. 190, 190a and 191 PILA). 

Arbitral awards, whether final or partial, may be challenged within 30 days from the notification of the award on the following limited grounds: 

  • irregular constitution of the arbitral tribunal;
  • wrong decision on jurisdiction;
  • the award goes beyond the claims submitted or fails to decide all of the claims; 
  • violation of the right to be heard or equal treatment; or
  • incompatibility with Swiss public policy.

Preliminary awards, however, can be challenged within 30 days from the notification of the award only on the ground of irregular constitution of the arbitral tribunal and a wrong decision on jurisdiction. 

The grounds for revision of an award are limited and include:

  • discovery of new material facts/conclusive evidence on which a party was unable to rely in the arbitration proceedings;
  • discovery of new circumstances that give rise to justifiable doubts as to an arbitrator’s independence or impartiality; or
  • criminal offence(s) that influenced the award.

A request for revision must be filed within 90 days of the discovery of the abovementioned ground. Except in cases where it is alleged that a criminal offence influenced an award, the right to request revision shall expire ten years from the date on which the award came into force. 

If neither party has its domicile, place of habitual residence, or seat in Switzerland, it may, by an express declaration in the arbitration agreement or in a subsequent written agreement, explicitly waive challenge/revision proceedings. Such agreement would not, however, waive the right to request revision on the ground that a criminal offence influenced the award (Art. 192 (1) PILA). 

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11.3. Recognition and enforcement proceedings

An arbitral award seated in Switzerland is final and binding from the time when it is notified (Art. 190(1) PILA) and has the same legal effect as a decision rendered by a state court. Thus, an award is enforceable throughout Switzerland. The ordinary limitation period for the enforcement of an arbitral award is ten years (Art. 127 Code of Obligations). 

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11.4. Cost of enforcement

Swiss law has different regimes for the enforcement of monetary and non-monetary awards. While monetary awards are enforceable as per Art. 38 to 55 of the Debt Collection and Bankruptcy Act, non-monetary awards are governed by Art. 335 to 346 of the Code of Civil Procedure. 

The fee for an application to a Swiss debt collection office to enforce a monetary award is calculated according to the amount of the claim. This amounts to CHF 400 for a claim of more than CHF 1 million (Art. 16 Fees Ordinance to the Debt Collection and Bankruptcy Act). If the debtor files a formal opposition, the applicant must pay a court fee of around CHF 2,000, which may vary depending on the canton where enforcement is sought to commence summary court proceedings. 

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11.5. Enforcement of orders of emergency arbitrators

The orders issued by emergency arbitrators can be later modified, suspended or terminated by the arbitral tribunal. Since they are provisional in nature, they may be enforced in Switzerland by seeking the assistance of the state court, upon the request of the emergency arbitrators or the party (Art. 183(2) PILA). As for enforcement outside of Switzerland, states that have adopted the revised UNCITRAL Model Law, including its Art. 17H and 17I, may take a favourable stance towards the enforcement of an order issued by emergency arbitrators (Arroyo, Art. 43 Swiss Rules, para. 44). 

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12 . Enforcement of foreign awards

The recognition and enforcement of a foreign arbitral award is governed by the New York Convention (Art. 194 PILA). 

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12.1. Process for enforcing New York Convention awards

Although Switzerland had initially made the reciprocity reservation noting that it would only apply the New York Convention to the recognition and enforcement of awards made in the territory of other signatory states, this reservation was later withdrawn.

A party applying for recognition and enforcement of a foreign award in Switzerland is required to fulfil the limited number of formal conditions prescribed in Art. IV of the New York Convention. These conditions require filing of the original or a certified copy of the award and arbitration agreement, together with their translation into the official language of the canton at which the enforcement is sought. Swiss courts, in practice, have adopted a liberal, practical, and pro-recognition and pro-enforcement approach and only insist upon strict compliance with the above formal requirements if the authenticity of any of the documents filed is disputed. In case of English awards, Swiss courts generally require a translation of the operative part of the award and do not require a full translation.

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12.2. Grounds for resisting enforcement of New York Convention awards

Art. V of the New York Convention sets forth the limited and exhaustive grounds on which recognition and enforcement of a foreign arbitral award may be refused by Swiss courts. Art. V(1), in particular, provides the following grounds based on which the debtor may object to any recognition or enforcement action:

  • party incapacity or invalidity of the arbitration agreement; 
  • improper notice of the appointment of the arbitrator or arbitration proceedings, or a party was otherwise unable to present its case;
  • the award deals with a difference not contemplated by or not falling within the scope of the arbitration agreement; 
  • the arbitral tribunal was irregularly constituted or the arbitral procedure was not held in accordance with the arbitration agreement; or
  • the award has not yet become binding on the parties or has been set aside at the seat.

The burden of proof for the abovementioned grounds lies with the debtor. Additionally, Art. V(2) provides two additional grounds which a state court may consider even on its own motion: non-arbitrability of the dispute and violation of public policy.

Swiss courts adopt a pro-recognition and pro-enforcement approach and the threshold to successfully object to the recognition and enforcement of a foreign arbitral award is extremely high and as such, can be met only under exceptional circumstances. The ground of public policy, in particular, is successful in only a very limited number of cases, where there is serious incompatibility with law and morality, for example, where the award is rendered in violation of fundamental principles of Swiss procedural law. 

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12.3. Enforcing Non-Convention awards

Since Switzerland has withdrawn its reciprocity reservation, the New York Convention applies to the recognition and enforcement of all foreign arbitral awards, irrespective of whether the state in which the award was made is a party to the New York Convention. 

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13 . Professional and ethical rules

The Federal Act on the Free Movement of Lawyers (FMLA) sets out the professional and ethical rules for practising as a lawyer in Switzerland. These are applicable to persons who are Swiss, UK and EU lawyers (Art 2(2), FMLA), who hold a lawyer’s practising certificate, and who represent parties before judicial authorities in Switzerland (Art. 2(1), FMLA). 

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13.1. Applicable to counsel

Parties are generally free to appoint lawyers as well as non-lawyers as their representatives before the arbitral tribunal. According to Art. 12 of FMLA, lawyers are required to follow professional rules that include duties to practice their profession diligently and independently, avoid conflicts of interest, maintain professional confidentiality and preserve client-attorney privilege. In addition, the Swiss Bar Association has specified various professional rules that its members should follow.

International “soft law” such as the IBA Guidelines on Party Representation in International Arbitration and IBA International Principles on Conduct for the Legal Profession do not seem to have gained much acceptance. 

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13.2. Applicable to arbitrators

Parties are also generally free to appoint lawyers as well as non-lawyers as arbitrators in the arbitral tribunal. The arbitrators must be and remain impartial and independent from the parties and their counsels (Art. 180(1)(c) PILA). They have a duty to disclose circumstances that may give rise to justifiable doubts as to their impartiality/independence (Art. 179(6) PILA). They are also required to ensure that the parties are treated equally and their fundamental procedural rights, including the right to be heard, are not violated (Art. 182(3) PILA).

While acting as an arbitrator is not within the scope of a lawyer’s traditional activities, lawyers who do act as arbitrators in Switzerland, in practice, follow the professional rules applicable to lawyers (as noted in Section 13.1 above). International “soft law” such as the IBA Guidelines on Conflicts of Interest in International Arbitration are generally followed by the arbitral tribunal.  

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14 . Third-party funding

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14.1. Applicable regulatory requirements

While Swiss law does not specifically address third-party funding, the SFT has, in 2004, held that the same is generally permissible if the funder acts independently of the client’s attorney (2P.4/2004, para. 4.6.6). The court, in 2014, confirmed its 2004 decision and ruled that it is one of the lawyer’s duties to draw the client’s attention to the possibility of financing options and to advise and represent it in concluding the litigation financing agreement (2C_814/2014, para. 4.3.1). 

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14.2. Overview of the third-party funding market in this jurisdiction

Third-party funding is still a relatively novel concept in Switzerland. The reasons behind this may be the late entry of funders in Switzerland compared with other nations and the fact that collective redressal mechanisms such as class actions do not form part of the civil procedural law of Switzerland. 

That said, there are a few arbitration finance providers based in the country alongside foreign companies — in the UK, the Netherlands, Germany and the US, for example — who have shown that they are prepared to fund claimants who are based in Switzerland or are participating in arbitrations seated in Switzerland.

The conditions for obtaining third-party funding in Switzerland vary from one provider to another, but generally include the following:

  • a claim for damages exceeding a certain amount, ranging from CHF 300,000 to CHF 800,000 (EUR 190,000 to EUR 500,000) depending on the provider; 
  • a very good prospect of success; and
  • enforceability of the eventual award against the defendant.
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15 . Trends and recent developments

In a recent decision rendered in 2022, the Cantonal Court of Graubünden dealt in detail with the question of whether a Russian arbitral award could be declared enforceable in Switzerland if the arbitral award in the state of origin (Russia) had been set aside by a state court in the meantime. The court concluded that the Swiss recognition and enforcement court has no discretion and thus no power to substantively review the foreign annulment decision (Cantonal Court of Graubünden, Decision KSK 21 9, 25 May 2022, p. 20 et seq., para. 8.3). Swiss courts will, as a rule, refuse to enforce an award if it has been set aside in the country of origin or if its effects have been stayed.

The decision of the SFT in an investment arbitration case between Yukos and the Russian state also supports the SFT’s strict approach to challenges, including the narrow interpretation of Swiss public policy, as it upheld the award of the arbitral tribunal. Swiss public policy is only violated by an award if it disregards the essential and widely recognised values that prevail in Switzerland (4A_492/2021, para. 10.1). 

EXPERT ANALYSIS

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Samuel Kay

Brazil

Anna-Katharina Scheffer da Silveira
Paulo Macedo
Rafael Alves

Colombia

Juan Felipe Merizalde
Juan Pablo Gómez-Moreno

Ecuador

Adriana Rodas
David Toscano
Gabriela Ortega

England and Wales

Gregory Fullelove
Katie Bewlock

France

Carl Szymura
Julie Spinelli

Hong Kong

Kim M. Rooney

India

Sanskriti Sidana
Shaneen Parikh
Tushar Karkaria

Italy

Gregorio Baldoli
Massimo Benedettelli

Nigeria

Igonikon Adekunle
Konyinsola Osipitan
Sesan Sulaiman

Saudi Arabia

Fahad N. AlArfaj

Singapore

Joel Quek
Koh Swee Yen SC
Wendy Lin

South Africa

Clement Mkiva
Jackie Lafleur
Jonathan Barnes
Tori Herholdt

South Korea

Brandon Bang
Hangil Lee
In Hyuk Hwang
Tony DongWook Kang

United States

Benjamin Guthrie
Carlos Hafemann
Daniela Páez
Emma McGrath
Lucila Marchini
Louis Thivierge

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