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International Arbitration 2022 – Arbitration & Dispute Resolution


1 Arbitration Agreements

1.1 What, if any, are the legal requirements of an
arbitration agreement under the laws of your
jurisdiction?

In Switzerland, international arbitration is governed by Chapter
12 of the 1987 Private International Law Act (“PILA”), in
force since 1989. The PILA underwent a light revision in 2020,
which entered into force on 1 January 2021.

According to Article 178(1) PILA, an arbitration agreement is
valid if it is made in writing or by any other means of
communication allowing it to be evidenced by text. As to its
substance, the principle “in favor validitatis” applies:
namely, the arbitration agreement is valid if it complies either
with the requirements of the law chosen by the parties, or with the
law governing the subject matter of the dispute and in particular
the law applicable to the main contract, or with Swiss law (Article
178(2) PILA).

The validity of an arbitration agreement may not be challenged
on the grounds that the main contract is invalid or that the
arbitration agreement concerns a dispute that has not yet arisen
(Article 178(3) PILA).

The 2021 revision also expressly provides that the provisions of
Chapter 12, including the above principles, also apply to an
arbitration contained in a unilateral deed or in articles of
association (Article 178(4) PILA).

1.2 What other elements ought to be incorporated in an
arbitration agreement?

It is recommended (although not mandatory) to also specify the
seat of the arbitration, the language of the proceedings, as well
the number and the procedure for the appointment of arbitrators.
Parties may also include a waiver (in the form specified in Article
178(1) PILA, see above question 1.1) of their right to challenge
the final award, as permitted by Article 192 PILA; provided,
however, that none of them has their domicile, habitual residence
or seat in Switzerland. Parties may not waive their rights to
request the revision of the award pursuant to Article 190a(1)(b)
PILA (see below question 10.4).

1.3 What has been the approach of the national courts to
the enforcement of arbitration agreements?

Switzerland is known to be an arbitration-friendly jurisdiction,
where valid arbitration agreements are duly enforced by the
courts.

In particular, pursuant to Article 7 PILA, if the parties have
entered into an arbitration agreement in respect of an arbitrable
dispute, the Swiss court seized shall decline jurisdiction unless:
(a) the respondent has proceeded on the merits without making a
reservation; (b) the court finds that the arbitration agreement is
null and void, inoperative or incapable of being performed; or (c)
the arbitral tribunal cannot be constituted for reasons clearly
attributable to the respondent to the arbitration.

2 Governing Legislation

2.1 What legislation governs the enforcement of
arbitration proceedings in your jurisdiction?

In accordance with Article 194 PILA, the recognition and
enforcement of foreign arbitral awards is governed by the 1958
Convention on the Recognition and Enforcement of Foreign Arbitral
Awards (“New York Convention” or “NYC”).

Arbitral awards rendered as a result of arbitration proceedings
seated in Switzerland are enforceable in Switzerland in the same
manner as Swiss court judgments, i.e., according to the provisions
of Articles 335 ff. of the Swiss Civil Procedure Code
(“CPC”) and, for monetary awards, the provisions of the
Federal Act on Debt Collection and Bankruptcy.

2.2 Does the same arbitration law govern both domestic
and international arbitration proceedings? If not, how do they
differ?

No, Switzerland has a dual system: international arbitration
proceedings are governed by the PILA (see above question 1.1),
while domestic arbitration proceedings are governed by Articles 353
ff. CPC.

Pursuant to Article 176(1) PILA, the provisions of Chapter 12
PILA apply to any arbitration if the seat of the arbitral tribunal
is in Switzerland and if at least one of the parties to the
arbitration agreement was not domiciled, habitually resident or
seated in Switzerland at the time of its conclusion. Article 176(2)
PILA provides that the parties may exclude the application of
Chapter 12 PILA and instead agree to the application of Articles
353 ff. CPC governing domestic arbitration proceedings. Such
declaration must satisfy the formal requirements of Article 178(1)
PILA (see question 1.1 above).

Conversely, in accordance with Article 353(2) CPC, parties to
domestic arbitration proceedings can opt out of Articles 353 ff.
CPC and apply instead the provisions of Chapter 12 PILA.

2.3 Is the law governing international arbitration based
on the UNCITRAL Model Law? Are there significant differences
between the two?

Chapter 12 PILA is unique to Switzerland and is not based on the
United Nations Commission on International Trade Law
(“UNCITRAL”) Model Law. There are, however, no major
differences or inconsistencies between the two.

2.4 To what extent are there mandatory rules governing
international arbitration proceedings sited in your
jurisdiction?

Although parties enjoy wide autonomy under Chapter 12 PILA and
can modify most rules by agreement, certain provisions are
mandatory, such as, e.g., the provisions on the arbitrability of
the dispute (Article 177(1) PILA), the form of the arbitration
agreement (Article 178(1) PILA), the challenge of arbitrators
(Article 180 PILA), the rule on lis pendens (Article 181 PILA) and
the principle of equality of the parties and their right to be
heard in adversarial proceedings (Article 182(3) PILA).

3 Jurisdiction

3.1 Are there any subject matters that may not be
referred to arbitration under the governing law of your
jurisdiction? What is the general approach used in determining
whether or not a dispute is “arbitrable”?

According to Article 177(1) PILA, any claim involving an
economic interest may be submitted to arbitration. The notion of
“economic interest” is interpreted broadly. For example,
unfair competition, antitrust claims or employment claims are
arbitrable. Family law issues such as adoption or divorce are not
arbitrable as they primarily concern personal rights. Debt
enforcement proceedings such as declarations of bankruptcy or
attachment orders are reserved to state courts and are thus not
arbitrable. It should finally be noted that, pursuant to Article
177(2) PILA, a state cannot invoke its own law to contest its
capacity to arbitrate or the arbitrability of the dispute.

3.2 Is an arbitral tribunal permitted to rule on the
question of its own jurisdiction?

Yes. According to Article 186(1) PILA, the arbitral tribunal
shall decide on its own jurisdiction. This principle of
compétencecompétence also applies when proceedings
between the same parties and with the same subject matter are
already pending before a state court or another arbitral tribunal,
unless there are substantial grounds for a stay of proceedings
(Article 186(1bis) PILA).

3.3 What is the approach of the national courts in your
jurisdiction towards a party who commences court proceedings in
apparent breach of an arbitration agreement?

The national court shall decline jurisdiction unless (a) the
respondent has proceeded on the merits without reservation, (b) the
court finds that the arbitration agreement is null and void,
inoperative or incapable of being performed, or (c) the arbitral
tribunal cannot be appointed for reasons that are clearly
attributable to the respondent in the arbitration (Article 7 PILA).
The review by the court will be made prima facie if the seat of the
arbitration is in Switzerland, but with a complete power of review
if the seat is abroad.

3.4 Under what circumstances can a national court
address the issue of the jurisdiction and competence of an arbitral
tribunal? What is the standard of review in respect of a
tribunal’s decision as to its own jurisdiction?

See question 3.3 above. Moreover, an arbitral tribunal’s
decision on jurisdiction can be reviewed by the Swiss Federal
Supreme Court in challenge proceedings with full power of review.
The Supreme Court will, however, not review the facts established
by the arbitral tribunal that are relevant for the question of
jurisdiction, such as, e.g., the actual intent of the parties,
unless those facts have been established in violation of the
fundamental procedural guarantees. The jurisdiction of a foreign
arbitral tribunal may also be reviewed in the context of
enforcement proceedings under the New York Convention.

3.5 Under what, if any, circumstances does the national
law of your jurisdiction allow an arbitral tribunal to assume
jurisdiction over individuals or entities which are not themselves
party to an agreement to arbitrate?

This question is not expressly addressed in Chapter 12 PILA.
According to case law, an arbitration agreement can bind a
non-signatory in exceptional circumstances when the relevant
applicable law (see question 1.1 above) allows it. Under Swiss law,
this can be the case, e.g., when the non-signatory intervened in
the conclusion and performance of the main contract in a way that
the other party had legitimate reasons to believe that the
non-signatory intended to be bound by the arbitration agreement.
The mere existence of a group of companies is, however, not
sufficient to extend an arbitration agreement to an affiliated
company. Arbitration agreements are also generally transferred to a
party’s legal successor or in case of assumption of debt.

Under Swiss law, provisions regarding time limitations are
deemed substantive rules. Therefore, the relevant time limitation
will be determined by the applicable substantive law. Under Swiss
law, the following limitation periods are provided by the Swiss
Code of Obligations (as of 1 January 2022):

  • a general limitation of 10 years for all claims unless
    otherwise provided by federal civil law;

  • five years for rent, interest and all period payments, for
    claims related to delivery of foodstuffs, board and lodging or
    hotel expenses, and for claims related to work carried out by
    craftsmen, purchase of retail goods, medical treatment,
    professional services provided by advocates, solicitors, legal
    representatives and notaries and work performed by employees for
    their employers;

  • three years for tort claims from the day a party has knowledge
    of the damage and of the perpetrator, and in any event 10 years
    after the damage. If the damage results from an offence for which
    criminal law provides a longer limitation period, the longer period
    is also applicable to the tort claim; and

  • three years for claims based on unjust enrichment from the date
    on which the person suffering the damage learned of his or her
    claim, and in any event 10 years after the date on which the claim
    first arose.

3.7 What is the effect in your jurisdiction of pending
insolvency proceedings affecting one or more of the parties to
ongoing arbitration proceedings?

According to case law, the effect of pending insolvency
proceedings on a party must be assessed pursuant to the general
conflict of law rules under the PILA. If an insolvent foreign
entity retains its legal capacity under the foreign applicable law,
it has capacity to be a party in Swiss arbitration proceedings.
That is also the case if the foreign law contains restrictions that
are only specifically related to arbitration proceedings, but the
foreign law maintains the general legal capacity of that party. For
Swiss entities, courts have also confirmed that the bankrupt party
remains bound by the arbitration agreement concluded prior to
bankruptcy.

4 Choice of Law Rules

4.1 How is the law applicable to the substance of a
dispute determined?

The substantive applicable law is determined according to the
rules of law chosen by the parties or, absent such choice,
according to the rules of law with which the case has the closest
connection (Article 187(1) PILA). The arbitral tribunal may also
decide ex aequo et bono if so authorised by the parties (Article
187(2) PILA)

4.2 In what circumstances will mandatory laws (of the
seat or of another jurisdiction) prevail over the law chosen by the
parties?

It is generally accepted that Swiss arbitral tribunals must
apply the mandatory norms of the lex causae. In certain
circumstances, Swiss arbitral tribunals may have to apply mandatory
norms of another jurisdiction based on criteria to be assessed on a
caseby-case basis. In general, arbitral tribunals are afforded a
certain flexibility in considering whether to apply mandatory norms
that do not belong to the lex causae.

4.3 What choice of law rules govern the formation,
validity, and legality of arbitration agreements?

Pursuant to the principle of favor validitatis, an arbitration
agreement is valid if it meets the requirements of the law chosen
by the parties, or the law governing the subject matter of the
dispute and, in particular, the law applicable to the main contract
or Swiss law (Article 178(2) PILA (see question 1.1 above).

5 Selection of Arbitral Tribunal

5.1 Are there any limits to the parties’ autonomy to
select arbitrators?

Article 179(1) PILA provides the parties with broad autonomy to
select, appoint or replace arbitrators in accordance with their
agreement. Their autonomy is, in principle, not limited except by
the requirements of independence and impartiality (Article 180
PILA). The parties are further free to agree on specific
qualifications to be met by the arbitrators.

5.2 If the parties’ chosen method for selecting
arbitrators fails, is there a default procedure?

In such case, the state court where the arbitral tribunal has
its seat can be seized to appoint the arbitrator(s) (Article 179(2)
PILA). Following its recent revision, the PILA now further provides
that if the parties have not agreed on a seat or have only agreed
that the seat of the arbitral tribunal be in Switzerland, the first
state court seized has jurisdiction (Article 179(2) in fine
PILA).

5.3 Can a court intervene in the selection of
arbitrators? If so, how?

As mentioned under question 5.2, the court at the seat of the
arbitral tribunal can assist in the constitution of the arbitral
tribunal at the request of one party. In the case of a multiparty
dispute, the state court may appoint all the members of the
arbitral tribunal (Article 179(5) PILA).

5.4 What are the requirements (if any) imposed by law or
issued by arbitration institutions within your jurisdiction as to
arbitrator independence, neutrality and/or impartiality and for
disclosure of potential conflicts of interest for
arbitrators?

A prospective arbitrator must disclose without delay – and
throughout the proceedings – the existence of circumstances that
could give rise to legitimate doubts as to his or her independence
and impartiality (Article 179(6) PILA). Similarly, an arbitrator
may be challenged if circumstances exist that give rise to
legitimate doubts as to his or her independence and impartiality.
The “legitimate doubts” must be assessed objectively. The
Swiss Federal Supreme Court has recognised that the International
Bar Association (“IBA”) Guidelines on Conflicts of
Interest constitute a useful tool in this respect.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure of
arbitration in your jurisdiction? If so, do those laws or rules
apply to all arbitral proceedings sited in your
jurisdiction?

The parties are free to determine the arbitral procedure, either
directly or by reference to arbitration rules or a procedural law
of their choice (Article 182(1) PILA). Absent such agreement, the
arbitral tribunal shall determine the procedure (Article 182(2)
PILA), provided that it guarantees the parties’ equal treatment
and their right to be heard in adversarial proceedings (Article
182(3) PILA).

6.2 In arbitration proceedings conducted in your
jurisdiction, are there any particular procedural steps that are
required by law?

The parties – and the arbitral tribunal – have broad autonomy to
determine the procedural steps, subject to the fundamental
procedural guarantees of Article 183(2) PILA (see question 6.1
above). In case of a breach of the rules of procedure, a party must
object immediately and will not be entitled to invoke such breach
later on (Article 182(4) PILA).

Originally Published by ICLG.

To read the full article click
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The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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