The International Arbitration Review: Switzerland
For decades, Switzerland has been a preferred location for conducting international arbitrations. This tradition, also attributable to its neutrality, has not been impaired by the ending of the East–West division. Today, the decisive factor is the very arbitration-friendly legal environment, in particular the attitude of the state courts to arbitration, as shown by the fast set aside proceedings before the Swiss Federal Supreme Court.
ii Different laws for international and domestic arbitration
Swiss law distinguishes between international and domestic arbitration. International arbitrations are subject to the 12th Chapter on International Arbitration of the Swiss Federal Private International Law Act (PILA), which entered into force on 1 January 1989.2 On 1 January 2011, the Swiss Federal Code on Civil Procedure (CCP) entered into force. Part 3 of this, on arbitration (Articles 353 to 399), governs all domestic arbitrations and replaces the cantonal Concordat on Arbitration. Most significantly, Part 3 abolished the list of mandatory provisions contained in the Concordat, and now provides a modern arbitration law with an emphasis on flexibility and party autonomy.3
Under Article 353(2) of the CCP, parties may opt out and subject their arbitration to Chapter 12 of the PILA. This is to be recommended in multiparty situations where parties are domiciled both in Switzerland and abroad. There is also the possibility to opt out of Chapter 12 of the PILA and to subject an arbitration to the rules of the CCP.
iii International arbitration in Switzerland
Although Chapter 12 is formally part of the PILA, it stands alone and is autonomous; the provisions in the other chapters of the PILA do not apply to international arbitration. While Chapter 12 is not based on the UNCITRAL Model Law, in substance it does not vary significantly from it. Chapter 12 consists of a mere 19 articles. Its most salient features are as follows.
The provisions of Chapter 12 of the PILA apply to all arbitrations 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.4 The parties may, however, agree in the arbitration agreement or in a later agreement that the provisions of Chapter 12 are excluded and that Part 3 of the CCP should apply.5 The seat of the arbitral tribunal shall be determined by the parties or the arbitral institution designated by them, or, failing both, by the arbitrators.6
Pursuant to Article 177(1) of the PILA, any dispute of financial interest may be the subject of an arbitration in Switzerland. This objective arbitrability is to be determined without regard to the substantive law governing the substance of the dispute, or the parties' national law. This provision is therefore not a conflict-of-laws rule but a substantive rule of international private law. Primarily excluded are matters concerning the determination of legal status, such as in family law, insolvency law and intellectual property. Furthermore, certain actions in debt enforcement and bankruptcy proceedings are not arbitrable. Under Article 177(2) of the PILA, a state or an enterprise held by or an organisation controlled by a state that is party to an arbitration agreement cannot invoke its own law to contest its capacity to arbitrate or the arbitrability of a dispute covered by the arbitration agreement.
Article 178(1) of the PILA provides that the arbitration agreement must be made in writing, or by telegram, telex, telecopier or any other means of communication that permits it to be evidenced by text. This independent substantive rule of international private law avoids any reference to domestic or foreign provisions on writing requirements. The arbitration agreement does not have to be signed; nor are there any requirements for an exchange of documents. Pursuant to Article 178(2) of the PILA, an arbitration agreement is valid if it conforms either to the law chosen by the parties or to the law governing the subject matter of the dispute, in particular the main contract, or to Swiss law. Finally, Article 178(3) of the PILA expressly stresses the autonomy of the arbitration clause in line with the separability principle.
With regard to the constitution of the arbitral tribunal, party autonomy is guaranteed, while in the absence of any agreement the judge at the seat of the arbitral tribunal may be seized.7 An arbitrator may be challenged if he or she does not meet the qualifications agreed upon by the parties; if a ground for challenge exists under the rules of arbitration agreed upon by the parties; or if circumstances exist that give rise to justifiable doubts as to his or her independence. The ground for challenge must be notified to the arbitral tribunal and to the other party without delay.8
Article 182 of the PILA on procedure gives the parties full autonomy to determine the arbitral procedure, directly or by reference to rules of arbitration, or also by submitting the arbitral procedure to a procedural law of their choice. In the absence of any determination by the parties, the arbitral tribunal shall determine the procedure to the extent necessary, either directly or by reference to a statute or to rules of arbitration. The only limit is the mandatory rule that, regardless of the procedure chosen, the arbitral tribunal shall ensure equal treatment of the parties and the right of both parties to be heard in adversarial proceedings.9
The arbitral tribunal may, on the motion of one party, order provisional or conservatory measures; this is, however, not an exclusive jurisdiction of the arbitral tribunal. Furthermore, if the party concerned does not voluntarily comply with these measures, the arbitral tribunal may request the assistance of the state judge, who will apply his or her law.10
The arbitral tribunal shall itself conduct the taking of evidence. The arbitral tribunal (or a party with the consent of the arbitral tribunal) may request the assistance of the state judge at the seat of the arbitral tribunal, who will apply his or her law.11 In practice, when arbitral tribunals take guidance from the IBA Rules on the Taking of Evidence in International Arbitration, they will usually do so with some restrictions and adaptations.12
The Kompetenz-Kompetenz of the arbitral tribunal is embodied in Article 186(1) of the PILA on jurisdiction. The Swiss legislator responded to the Fomento decision of the Swiss Federal Supreme Court13 by adding a paragraph to Article 186 of PILA, with effect as of 1 March 2007, according to which the arbitral tribunal shall decide on its jurisdiction notwithstanding an action on the same matter between the same parties already pending before a state court or another arbitral tribunal, unless there are serious reasons to stay the proceedings.14 The lack of jurisdiction must be raised before any defence on the merits, and the arbitral tribunal shall, as a rule, decide on its jurisdiction by preliminary award.15
As for the determination of the law applicable to the merits of a case, Article 187(1) of the PILA provides that the arbitral tribunal shall decide the case according to the rules of law chosen by the parties or, in the absence thereof, according to the rules of law with which the case has the closest connection. This is an independent conflict-of-law rule creating a specific private international law system for international arbitration in Switzerland. The conflict-of-law rules that are contained in other chapters of the PILA do not apply.
Subject to a different agreement by the parties, the arbitral award shall be made by a majority or, in the absence of a majority, by the chair alone. The signature of the chair is sufficient. The arbitral tribunal may render partial awards.16
Article 190(2) of the PILA lists the exclusive and very limited grounds for an action for the annulment of an award:
- if the sole arbitrator was not properly appointed or if the arbitral tribunal was not properly constituted;
- if the arbitral tribunal wrongly accepted or declined jurisdiction;
- if the arbitral tribunal's decision went beyond the claims submitted to it, or failed to decide one of the items of the claims;
- if the principle of equal treatment of the parties or the right of the parties to be heard was violated; and
- if the award is incompatible with public policy.
As for item (e), the Swiss Federal Supreme Court has consistently held that this relates not to domestic public policy but to international public policy; furthermore, the concrete result of the award must be contrary to public policy. Wrong or arbitrary findings of fact or a clear violation of rules of law will not suffice. Preliminary and interim awards can only be annulled on grounds (a) and (b); the time limit runs from the notification of the preliminary award (Article 190(3) of the PILA). An action for annulment has to be filed within 30 days of the notification of the arbitral award with the Swiss Federal Supreme Court, which is the only judicial authority and instance to decide set-aside actions, and which renders its decisions on average within six months.17 An action for annulment does not have any suspensive effect unless a specific application to this end has been granted by the Supreme Court.
If none of the parties have their domicile, habitual residence or a business establishment in Switzerland, they may, by an express statement in the arbitration agreement or by subsequent written agreement, fully waive an action for annulment, or they may limit it to one or several of the aforementioned annulment grounds.18 The Swiss Federal Supreme Court has constantly held that such a waiver has to be agreed upon clearly and unequivocally. The term appeal such as in some standard arbitration clauses ('without any appeal') is insufficient to constitute a valid waiver.19
Chapter 12 of the PILA does not contain any provisions on the revision of arbitral awards. However, the Swiss Federal Supreme Court had decided already in 1992 that by analogy to the statutory grounds for revision of the Supreme Court's own decisions, awards by international arbitral tribunals are susceptible to an application for revision either if an award was obtained or influenced by a criminal offence or when a fact of evidence has been discovered after the award was rendered that existed at the time of the award and would have likely influenced the outcome of the proceedings.20
The recognition and enforcement of foreign arbitral awards is governed in Switzerland by the New York Convention of 1958, which entered into force in Switzerland on 30 August 1965.21 The reservation of reciprocity originally made was later withdrawn.
Switzerland is also a party to the Geneva Protocol of 1923 and to the Geneva Convention of 1927, whose practical importance are, however, today rather limited.
iv Institutional arbitration in Switzerland: Swiss Chambers' Arbitration Institution
The revised Swiss Rules of International Arbitration (Swiss Rules) entered into force on 1 June 2012.22 They brought some changes and additions to the very successful 2004 Swiss Rules to further enhance the efficiency of arbitral proceedings, although no general overhaul was necessary.
The 2004 Swiss Rules harmonised and replaced the former rules for international arbitration of the seven chambers of commerce and industry of Basle, Berne, Geneva, Neuchâtel, Ticino, Vaud and Zurich. The chambers have now changed the name of their arbitration institution to the Swiss Chambers' Arbitration Institution (SCAI). The administering body (formerly the Arbitration Committee) is now named the Arbitration Court (Court). The Court is composed of experienced international arbitration practitioners. In addition to the tasks and decisions delegated to the Court as specified in the various provisions of the Swiss Rules, it is now also expressly provided that the parties confer on the Court – to the fullest extent permitted under the law applicable to an arbitration – all of the powers required for the purpose of supervising the arbitral proceedings otherwise vested in the competent judicial authority.23 The Court is assisted by the Secretariat.
The 2012 Swiss Rules still provide for a light administration. There is no scrutiny of the award itself. However, before rendering an award, a termination order, an additional award or an interpretation or correction of the award, the arbitral tribunal shall submit to the Secretariat a draft thereof for approval or adjustment by the Court of the determination on costs. Such approval or adjustment is binding upon the arbitral tribunal.24
The award is communicated to the parties by the arbitral tribunal.
The Swiss Rules shall govern arbitrations where an agreement to arbitrate refers to them or to the arbitration rules of the different chambers of commerce that have adhered to them.25 Unless the parties have agreed otherwise, the Swiss Rules shall apply to all arbitral proceedings in which the notice of arbitration is submitted on or after 1 June 2012;26 references in contracts to the former arbitration rules of the chambers will thus lead to an application of the Swiss Rules unless the parties have agreed otherwise. The parties are free to designate the seat of the arbitration in Switzerland or in any other country.27
The 2004 Swiss Rules were originally based on the UNCITRAL Arbitration Rules 1976. Changes and additions were made to adapt the UNCITRAL Arbitration Rules to institutional arbitration, and to reflect modern practice and comparative law in the field of international arbitration. However, the new 2012 Swiss Rules do not reflect the amendments made by the 2010 revision of the UNCITRAL Arbitration Rules, as the practice under the Swiss Rules has, since 2004, developed independently from the UNCITRAL Arbitration Rules.
The following are specificities of the Swiss Rules.
Article 8(3) to (5) of the Swiss Rules provides for the constitution of the arbitral tribunal in multiparty proceedings. If the parties have not agreed upon a procedure, the claimant or group of claimants shall designate an arbitrator, and subsequently the respondent or group of respondents shall designate an arbitrator. Unless the parties' agreement provides otherwise, the two arbitrators so appointed shall designate the presiding arbitrator. Failing such designation, the court shall appoint the presiding arbitrator. If a party or group of parties fails to designate an arbitrator, the court may appoint all three arbitrators and shall specify the presiding arbitrator.
In line with Article 187(1) of the PILA, the arbitral tribunal shall decide the case in accordance with the rules of law agreed upon by the parties or, in the absence of a choice of law, by applying the rules of law with which the dispute has the closest connection.28
Article 4 of the Swiss Rules provides the possibilities of consolidation and joinder for multiparty arbitration and multi-contract arbitration situations. Pursuant to Article 4(1) of the Swiss Rules, where a notice of arbitration is submitted between parties already involved in other arbitral proceedings under the Swiss Rules, the Court may decide, after consulting with the parties and any confirmed arbitrator in all proceedings, that the new case shall be consolidated with the pending arbitral proceedings. The Court may proceed in the same way where a notice of arbitration is submitted between parties that are not identical to the parties in the pending arbitral proceedings. When rendering its decision, the Court shall take into account all relevant circumstances, including the links between the cases and the progress already made in the pending arbitral proceedings. Where the Court decides to consolidate the new case with the pending arbitral proceedings, the parties to all proceedings shall be deemed to have waived their right to designate an arbitrator, and the Court may revoke the appointment and confirmation of arbitrators, and apply the provisions on the composition of the arbitral tribunal.
The joinder of third parties is dealt with in Article 4(2) of the Swiss Rules: where one or more third persons request to participate in arbitral proceedings already pending under the Swiss Rules, or where a party to pending arbitral proceedings under the Swiss Rules requests that one or more third persons participate in the arbitration, the arbitral tribunal shall decide on such request after consulting with all the parties, including the person or persons to be joined, taking into account all relevant circumstances.
More generally, the Swiss Federal Supreme Court upholds the extension of an arbitration agreement to a non-signatory if such party participated in the negotiation, conclusion or performance of the contract and thereby showed its intent to be bound by the arbitration agreement in the contract. However, the existence of a group of companies alone does not suffice. The Swiss Federal Supreme Court already held in 2003 that the form requirements under Article 178(1) of the PILA need to be met only by the original parties to the arbitration agreement and not by third parties who join at a later stage of the contract execution.29 In 2019, the Supreme Court confirmed that this view also applies to the form requirements under Article II (2) of the New York Convention.30
According to Article 21(5) of the Swiss Rules, the arbitral tribunal shall have jurisdiction to hear a set-off defence even if the relationship out of which the defence is said to arise is not within the scope of the arbitration clause, or falls within the scope of another arbitration agreement or forum-selection clause.
The new Article 15(7) of the Swiss Rules provides that all participants in arbitral proceedings shall act in good faith, and make every effort to contribute to the efficient conduct of the proceedings and to avoid unnecessary costs and delays.
The provision regarding settlements is also novel.31 With the agreement of each of the parties, the arbitral tribunal may take steps to facilitate the settlement of the dispute before it. Any such agreement by a party shall constitute a waiver of its right to challenge an arbitrator's impartiality based on the arbitrator's participation and knowledge acquired in taking the agreed steps.
As regards interim measures of protection,32 it is now expressly provided that, upon the application of any party or, in exceptional circumstances and with prior notice to the parties, on its own initiative the arbitral tribunal may also modify, suspend or terminate any interim measures granted. Furthermore, in exceptional circumstances, the arbitral tribunal may rule on a request for interim measures by way of a preliminary order before the request has been communicated to any other party, provided that such communication is made at the latest together with the preliminary order and that the other parties are immediately granted an opportunity to be heard. Therefore, in exceptional circumstances, an arbitral tribunal may order ex parte interim measures. However, by submitting their dispute to arbitration under the Swiss Rules, the parties do not waive any right that they may have under the applicable laws to submit a request for interim measures to a judicial authority.
Article 42 of the Swiss Rules provides for an expedited procedure in all cases where the amount in dispute does not exceed 1 million Swiss francs. The parties may also agree, even after a dispute has arisen, to submit their dispute to an expedited procedure. The time limits are shortened: there shall be in principle only one statement of claim, one statement of defence and a single evidentiary hearing. The award shall be made within six months and the arbitral tribunal (a sole arbitrator for amounts in dispute that do not exceed 1 million Swiss francs) shall state the reasons in summary form, unless the parties have agreed that no reasons are to be given.
The 2012 Swiss Rules newly provide for emergency relief proceedings.33 Before an arbitral tribunal is constituted, a party may submit to the Secretariat an application for emergency relief proceedings requesting interim measures. The application is submitted to a sole emergency arbitrator who shall render his or her decision within 15 days. The decision of the emergency arbitrator shall have the same effect as a decision of an arbitral tribunal on interim measures of protection pursuant to Article 26 of the Swiss Rules. Any interim measure granted by the emergency arbitrator may be modified, suspended or terminated by the emergency arbitrator or, after transmission of the file to it, by the arbitral tribunal. The emergency arbitrator may not serve as arbitrator in any arbitration relating to the dispute in respect of which the emergency arbitrator has acted, unless otherwise agreed by the parties.
The parties may derogate from the provisions in Articles 4, 21(5), 26, 42 and 43, as they may from almost all other provisions of the Swiss Rules, as long as fundamental principles are not undermined, such as the duty of the arbitrators to remain impartial and independent of the parties at all times,34 the equal treatment of the parties and the right to be heard,35 and certain provisions concerning the organisation of the arbitral proceedings by the Court.
In its Guidelines for Arbitrators, effective 1 January 2020, the Court summed up its practice on administrative secretaries, conduct of the proceedings, deposits as an advance for costs, guidelines for accounting of expenses, fees of the arbitral tribunal, as well as advance payments and payments to replaced or former arbitrators.36
v The Court of Arbitration for Sport
The Court of Arbitration for Sport (CAS) was created in 1984 under the administrative and financial authority of the International Council of Arbitration for Sport (ICAS). It provides services for the settlement of sports-related disputes by offering arbitration and mediation rules adapted to the specific needs of the sports world. It is independent of any sports organisation.37
The seat and head office of the CAS are in Lausanne. There are two decentralised offices in Sydney and New York. Unlike the Swiss Chambers' Arbitration Institute, the CAS has a list of about 393 arbitrators from 85 countries with specialist knowledge of arbitration and sports law. Of these arbitrators, 88 are also on a separate football list.
The CAS administers disputes directly or indirectly linked to sport. Disputes arising from contractual relations or torts are administered in ordinary arbitration procedures; disputes resulting from decisions taken by the internal bodies of sports organisations (e.g., of a disciplinary nature) are dealt with in appeals arbitration procedures. Accordingly, the CAS comprises an Ordinary Arbitration Division, an Appeals Arbitration Division and an Anti-Doping Division. Furthermore, the CAS establishes an ad hoc division with special procedural rules for specific occasions, such as for the Olympic Games, the Commonwealth Games and other major events.
Any individual or legal entity with capacity to act may have recourse to the services of the CAS. This includes athletes, clubs, sports federations, organisers of sports events, sponsors and television companies.
An award pronounced by the CAS is subject only to annulment proceedings before the Swiss Federal Supreme Court and can be enforced under the New York Convention.
The Code of Sports-related Arbitration, now in its version in force as from 1 January 2019, comprises the Statutes of the Bodies Working for the Settlement of Sports-Related Disputes (Provisions S1 to S26) and Procedural Rules (Provisions R27 to R70). Separate Arbitration Rules of 2003 are applicable to the CAS ad hoc division for the Olympic Games, and form an integral part of the Code of Sports-related Arbitration. There are also Arbitration Rules applicable to the CAS Anti-Doping Division of 2018 and the Legal Aid Guidelines of 2013. The consultation procedure that allowed sports organisations to request an advisory opinion from the CAS, rarely used in the past, was abrogated in 2012. New CAS Emergency Guidelines are in force since 16 March 2020, already modified on 15 May 2020, to cope with the covid-19 situation.
It is CAS policy to update its Code of Sports-related Arbitration regularly to address the demands of modern arbitration procedures. Major amendments to the Code of Sports-related Arbitration entered into force on 1 January 2012. In establishing a list of CAS arbitrators, the ICAS can call upon personalities with full legal training, recognised competence with regard to sports law or international arbitration, a good knowledge of sport in general and a good command of at least one CAS working language, and whose names and qualifications are brought to the attention of the ICAS, including by the International Olympic Committee, the International Federations (IFs) for the Summer and Winter Olympics and the NOCs. A new Subsection of Article 39 of the Procedural Rules now allows, after consulting with the parties, the consolidation of two arbitration procedures. Further, appeals against decisions issued by national federations are no longer free of charge for the parties: only appeals against decisions of a disciplinary nature issued by IFs will remain free of charge for parties.
The International Council of Arbitration for Sports also adopted the CAS Mediation Rules in 2013, which were amended in 2016. CAS has a list of 58 mediators.
As of 1 March 2013, further amendments of the CAS Rules came into force. In line with other arbitration institutions, the word impartiality has been added in all provisions where the independence of the CAS and its members are concerned. It will now be possible for a party to ask for interim measures from the CAS immediately after the notification of a final decision by a sports federation even before the filing of a formal appeal at the CAS. To issue the operative part of an award before rendering the reasons is now also possible in the ordinary arbitration procedure; this has so far only been possible in the appeal arbitration procedure. Further, CAS panels may exclude evidence that could have already been produced before the first instance tribunal.
In 2016, 2017 and 2019, various procedural provisions have been amended. A copy of the operative part of an award, if any, and of the full award, shall be communicated to the authority or sports body that has rendered the challenged decision, if that body is not a party to the proceedings. As regards the publication of proceedings, the CAS Court Office may publicly announce the initiation of any appeals arbitration procedure and, at a later stage and where applicable, the composition of an arbitral panel and a hearing date, unless the parties agree otherwise.
vi The WIPO Arbitration and Mediation Center
The WIPO Arbitration and Mediation Center in Geneva was established in 1994 for the resolution of international commercial disputes between private parties. It is an independent and impartial body forming part of the World Intellectual Property Organization. Its arbitration, expedited arbitration, mediation and expert determination rules are drafted specifically for disputes in technology, entertainment and other intellectual property matters.38 The cases filed include not only contractual disputes, such as patent and software licences, trademark coexistence agreements, and research and development agreements, but also noncontractual disputes such as patent infringements. With its database of over 1,500 neutrals, the WIPO Center assists parties in the selection of mediators, arbitrators and experts. The Center has had an office in Singapore since 2010.
The WIPO Center provides procedural guidance to parties to facilitate their direct settlement or the submission of their dispute to WIPO ADR ('good offices' requests).
Considering, inter alia, the 2010 revision of the UNCITRAL Arbitration Rules, the Center decided to slightly revise the four sets of rules. The 2014 WIPO Arbitration, Expedited Arbitration, Mediation and Expert Determination Rules entered into effect on 1 June 2014. The new 2014 Arbitration Rules and 2014 Expedited Arbitration Rules allow joinder orders by the arbitral tribunal if all the parties involved, including the joining party, so agree. These two sets of rules now also provide that the Center may order, under certain conditions, the consolidation of a new (expedited) arbitration with pending arbitration proceedings. Conditions are the consent by all parties and any appointed arbitral tribunal, as well as that the subject matter is substantially related to, or the same parties are involved in, new and pending proceedings. Further, the preparatory conference has now become a mandatory stage of the arbitration proceedings; it has to be convened within 30 days after the establishment of the arbitral tribunal. Finally, the new 2014 Arbitration Rules and 2014 Expedited Arbitration Rules introduce an emergency relief procedure before the establishment of a tribunal. However, this will, unless the parties agree otherwise, only apply to arbitration agreements concluded on or after 1 June 2014. Further, it does not exclude the possibility to file for emergency relief with state judicial authorities. In 2017, the WIPO Center put a detailed Commentary on the WIPO Arbitration Rules by Phillip Landolt and Alejandro García on its website. The Expert Determination Rules were updated as per 1 January 2016, and revised versions of the WIPO Arbitration, Expedited Arbitration and Mediation Rules entered into force on 1 January 2020.
In 2015, the WIPO Center published the WIPO Guide on Alternative Dispute Resolution Options for Intellectual Property Offices and Courts, which provides a broad overview of ADR for intellectual property disputes, and presents options for interested intellectual property offices, courts and other bodies adjudicating intellectual property disputes to integrate ADR processes into their existing services.
In 2017, WIPO published the document 'Guidance on WIPO FRAND Alternative Dispute Resolution (ADR)' on its website, which was developed by the WIPO Center and takes into account comments by telecom stakeholders, the European Telecommunications Standards Institute legal department, WIPO arbitrators and mediators, and the Munich IPDR Forum.
The WIPO Center also administers the domain name administrative dispute resolution procedures under the Uniform Domain Name Dispute Resolution Policy (UDRP). The UDRP applies primarily to international domains. The WIPO Center has been appointed by 76 country code top-level domains as their service provider for their domain name disputes. It also administers cases under the sunrise period policy relating to registrations in the start-up phase of new domains, as well as cases under the ICANN legal rights objection mechanism for new generic top-level domains.
The 2018 International Chamber of Commerce (ICC) statistical report shows that Switzerland was the second most commonly chosen place of arbitration (78 arbitrations: 38 in Geneva, 32 in Zurich, three in Lausanne, one in Basel, one in Fribourg, one in Lugano, one in Bern and one in Zug), and that 9.25 per cent of the arbitrators were from Switzerland. Regarding the parties, 23 claimants and 18 respondents were from Switzerland, accounting for 1.8 per cent of the total number of parties in ICC arbitrations.
In 2019, 96 new arbitration cases and six new mediation cases were submitted to the SCAI. Of the 2019 arbitration cases, 228 parties were involved in total from 44 different countries. Regarding the parties, 69 per cent were from Europe (including 34 per cent from Switzerland), 14 per cent from Asia and the Middle East, 6 per cent from North America and 11 per cent from other countries. Of the new arbitrations, 77 per cent were held in English, 12 per cent in French, 8 per cent in German, 3 per cent in Italian and zero per cent in another language. As for the seat of the arbitration, 41 per cent of the arbitrations were conducted in Zurich, 36 per cent in Geneva, 7 per cent in Lugano, 2 per cent in Basle and 8 per cent in other Swiss cities (Lausanne, Bern or Neuchatel). Five per cent of the arbitrations had a seat outside Switzerland, or were undetermined, in 2019. Of the arbitrations, 40 per cent were conducted before a panel of three arbitrators and 60 per cent before a sole arbitrator; 52 per cent were normal procedures; 43 per cent were expedited; in 1 per cent of the arbitrations, the SCAI was asked to be the appointing and fund-holding authority; and 1 per cent were not determined. There were three emergency relief requests under the Swiss Rules in 2019.
The latest available data for the CAS stems from 2016: 599 new cases were submitted to the CAS: 100 ordinary procedures, 458 appeal procedures, 28 ad hoc procedures and 13 anti-doping procedures. Regarding awards and advisory opinions, 142 were rendered in 2016, while 457 cases were pending or terminated without an award.
Up to 1 January 2020, the WIPO Center has administered over 880 mediation, arbitration and expert determination cases. Of its mediation and arbitration cases, 25 per cent concerned patents, 22 per cent information and communication technology (ICT) law, 20 per cent trademark, 20 per cent commercial and 13 per cent copyright matters. Regarding industry areas, 32 per cent were in ICT, 15 per cent in life sciences, 14 per cent in mechanical, 11 per cent in entertainment, 5 per cent in luxury goods and 2 per cent in chemistry areas, while 21 per cent were in other areas (data for 2017). Of the mediation and (expedited) arbitration cases filed with the WIPO Center, some 35 per cent included an escalation clause providing for WIPO mediation followed by WIPO (expedited) arbitration. In the arbitration cases, the settlement rate was 33 per cent, and in the mediation cases 70 per cent.
The WIPO Center assisted parties in over 550 good offices requests.
The WIPO Center has administered some 46,000 cases under the UDRP and related policies, having involved parties from 180 countries and some 85,000 internet domain names. The WIPO Center has also administered over 15,000 cases under sunrise policies and 69 cases filed under the ICANN legal rights objection mechanism.
Furthermore, every year a substantial number of ad hoc arbitrations take place in Switzerland that do not appear in any statistics.
The Swiss Arbitration Association (ASA) is a non-profit association with more than 1,200 individual members from Switzerland and abroad. The ASA itself does not administer arbitrations. It publishes the quarterly ASA Bulletin, which includes awards, court decisions, materials and articles.39
The year in review
i Developments affecting international arbitration
There were no legislative changes affecting international arbitration in Switzerland in 2019. The 2017 draft bill of the government on the revision of Chapter 12 of the PILA was debated in the two chambers of the Swiss Parliament in December 2019 and March 2020. A revised draft bill has been approved, but is not yet final. It provides for a light revision instead of a general overhaul. Some case law of the Swiss Federal Supreme Court on procedural issues shall be codified. Generally, the amendments are moderate. That is also the position taken by the ASA and the leading arbitration practitioners in the official consultation process. There were also no changes to the new Swiss Rules of 2012.
ii Arbitration developments in local courts
In the past year, the Swiss Federal Supreme Court rendered more than 40 decisions in set aside proceedings.
CAS award upheld despite violation of the right to be heard
Conventionally, the Swiss Federal Supreme Court has considered the right to be heard to be to be of a formal nature. It was therefore applied rather strictly. An award showing a violation of the right to be heard was set aside without further examination of whether such violation had actually affected the outcome of the case. However, in 2018 the Supreme Court had already departed from its strict practice of considering only the formal nature of the right to be heard. It had also required the applicant to show that the asserted violation had influenced the outcome of the case.40
The Supreme Court confirmed this new approach in a decision of last year. 41 It held that a challenged award does not have to be set aside if the violation of the right to be heard did not affect the outcome of the proceedings. The Supreme Court refused to set aside an award rendered by the Court of Arbitration for Sport (CAS). It found that the CAS had violated the applicant's (a professional tennis player) right to be heard. However, it noted that the player had not shown that the violation of her right to be heard had affected the outcome of the case. The Supreme Court dismissed the challenge.
Limits to the right to be heard
An alleged violation of the right to be heard was also one of the grounds invoked in a challenge by a party in another case. The applicant argued that the arbitral tribunal breached the right to be heard since it did not hear a witness which that party had proposed for testimony. In a decision of 17 January 2019,42 the Swiss Federal Supreme Court found that an arbitral tribunal is only obliged to address those issues which are relevant to the case. Not hearing a witness whose testimony was offered when a party has not established that the witness would address relevant questions is not a violation of the right to be heard.
Prerequisites for validly opting out of domestic arbitration law
As already explained above in Section I.ii, parties may opt out from the provisions on arbitration of the CCP and subject their arbitration to Chapter 12 of the PILA. On 7 May 2019, the Swiss Federal Supreme Court addressed again the conditions for such an exclusion of the applicability of Part III of the CPC. The opting out clause was contained in an order of procedure that the CAS Secretariat had sent the parties during the arbitration and that both parties had signed.43 It contained, inter alia, the following wording:
In accordance with the terms of the present Order of Procedure, the parties agree to refer the present dispute to the Court of Arbitration for Sport (CAS), subject to the Code of Sports-related Arbitration (2017 edition) (Code). Furthermore, the provisions of Chapter 12 of the Swiss Private International Law Statute (PILS) shall apply, to the exclusion of any other procedural law.
According to the Supreme Court, a valid opting out clause must fulfil three legal prerequisites: the application of Part III of the CPC must be expressly excluded; the exclusive application of the provisions of Chapter 12 of the PILA must be agreed; and such express declaration of the parties must be in written form. The Supreme Court held that the opting out clause does not need to expressly mention either Part III of the CPC or Chapter 12 of the PILA as long as it is sufficiently clear that the parties had the common intention to exclude Part III of the CPC in favour of Chapter 12 of the PILA. This requirement was met by the wording 'to the exclusion of any other procedural law' in the signed order of procedure.
The background for this decision is that the challenge grounds under Article 393 of the CPC are not identical to those of Article 190(2) of the PILA. Article 393 (e) of the CPC provides that an arbitral award may be set aside on the ground that the award is arbitrary in its result because it is based on findings that are obviously contrary to the facts as stated in the case files or because it constitutes an obvious violation of law or equity. No such challenge ground exists under Article 190(2) of the PILA. It was this ground for a set aside that the applicant based its challenge on. By finding that the parties had validly agreed on international arbitration under Chapter 12 of the PILA, the applicant was barred from arguing arbitrariness as a challenge ground.
Legal reasoning of the Swiss Supreme Court is binding on the arbitral tribunal to which a case is remanded
In a decision of 4 July 2019,44 the Swiss Federal Supreme Court addressed the scope of review when a case is remitted to an arbitral tribunal. If the Supreme Court sets aside an arbitral award, the arbitral tribunal must follow the Supreme Court's finding in the challenge decision and may not reopen a discussion on the issue already decided by the Court. The Supreme Court's decision is binding. That general procedural principle also applies to arbitration. By having failed to adhere to this binding effect of the challenge decision of the Supreme Court, the arbitral tribunal had violated the applicant's right to be heard.
State not bound by arbitration clause signed by state-owned entity
In a decision of 24 September 2019,45 the Swiss Federal Supreme Court decided that a non-signatory state is not bound by an arbitration clause signed by a state-owned entity unless specific prerequisites are met. This was not the case here. The dispute arose from a contract between a Turkish joint venture as contractor and a Libyan state-owned entity as employer over the construction of a water pipeline in Libya. About 70 per cent of the project had been completed when the joint venture decided to stop its work after riots had started in Libya in the spring of 2011. In 2015, the joint venture initiated an arbitration against the state-owned entity and Libya. Libya contested the jurisdiction of the arbitral tribunal. In a partial award, the arbitral tribunal refused to accept jurisdiction for the claims against Libya, and partially accepted the claims against the state-owned entity.
The arbitral tribunal rejected the two main arguments of the claimants. It found, first, that the Libyan state had not intervened in the negotiation or performance of the contract in such a way that the state would have to be considered to be bound by the arbitration clause. Second, the fact that a company is a state-owned entity does not suffice to extend an arbitration clause to a non-signatory state. The arbitral tribunal had referred to the landmark Westland decision of the Swiss Federal Supreme Court,46 which rejected the extension of an arbitration clause entered into by state-owned entities to the state owning such entities. In the set aside proceedings, the claimants had tried to argue that the Westland case was outdated, but to no avail. The Supreme Court confirmed the arbitral tribunal's conclusion from the Westland case that the legal independence of a legal person established under public law is recognised by Swiss law and that arbitration agreements concluded by such legal persons may not be attributed to the state owning or controlling them. This general principle as established in the Westland decision had not changed.
It may be noted that the Swiss Supreme Court also referred in its decision to its rule that it may not correct or supplement the factual findings established by an arbitral tribunal, even if they were manifestly incorrect and infringed rights. The arbitral tribunal had held that there were no indications of interference by the Libyan state in the contractual relationship.
Partial setting aside on grounds of ultra petita
The Swiss Federal Supreme Court combined the two challenges of two parties in a factually rather complex dispute between three parties over a contract for the procurement of four wheel drive armoured vehicles.47 The decision is noteworthy because both the partial setting aside of an award as well as the challenge ground of ultra petita are rather uncommon. As one of its various prayers for relief, the claimant had sought a declaration of liability only. However, the arbitral tribunal had also ruled on the amount of damages. The Supreme Court held that the order by the arbitral tribunal was ultra petita . It dismissed the respondent's argument that the claimant had no legitimate interest in the challenge of the damages decision because the damages granted to the claimant were limited, and thus the claimant would have been barred from claiming higher damages because of the res judicata given to the award.
The decisions also dealt with the issue of contractual penalties, which are allowed under Article 163 of the Swiss Code of Obligations (CO). This Article, however, provides that an excessive penalty must be reduced by the judge. The Supreme Court found that an arbitrator who fails to reduce the penalty does not violate the substantive public order, as long as the penalty does not amount to a prohibited limitation of the personal freedom in the sense of Article 27 of the Swiss Civil Code. A violation of Article 163 of the CO does not automatically constitute a violation of public policy in the sense of the challenge ground of Article 190(2) (e) of the PILA.
iii Investor–state disputes
Switzerland is a contracting state to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention), which entered into force for Switzerland on 14 June 1968. Switzerland has also concluded among the highest numbers of bilateral investment treaties (BITs).
In the past year, no awards rendered in Switzerland involving investors or states have been published. While in particular ad hoc investment treaty arbitrations are regularly seated in Switzerland, the Swiss Federal Supreme Court seldom needs to decide on annulment actions against awards rendered in BIT matters. Last year the Supreme Court rejected one challenge of an investment treaty award rendered in Switzerland.
Swiss Federal Supreme Court upholds two investment treaty arbitration awards
In two decisions of 12 December 2019,48 the Swiss Federal Supreme Court dismissed Russia's challenges to two UNCITRAL awards, which had ordered Russia to pay US$80 million to Ukrainian oil and gas companies as compensation for the expropriation of their assets in Crimea.
The arbitral tribunal had found that the Russian Federation had violated the Ukrainian–Russia BIT when expropriating the claimant's petrol stations and other assets following the Russian occupation of the Crimea peninsula in 2014. Previously, in two decisions of 16 October 2018, the Swiss Federal Supreme Court had refused to set aside two interim awards accepting jurisdiction that were rendered by the same arbitral tribunal in these two investor–state arbitrations.49
In set aside proceedings against the merit awards, Russia argued that the tribunal erroneously failed to determine that the Crimea peninsula is a sovereign territory of Russia. This preliminary issue of the status of sovereignty would not be arbitrable pursuant to Article 177(1) of the PILA. The Swiss Federal Supreme Court rejected Russia's argument. Article 177(1) of the PILA provides that all disputes of financial interest are arbitrable. In this case, the subject matter of the dispute was the claim for damages and interest, and was thus arbitrable under Swiss law.
Further, Russia argued that the claimants' investments were acquired by corruption and illegal means, including through corporate takeovers and illegal privatisations, and thus were tainted and contrary to Swiss substantive public policy. The Swiss Supreme Court recalled that it may neither correct nor supplement the facts established in an arbitral award, even if they were obviously wrong. This could only be overcome by showing a violation of the right to be heard for which the applicant would have to demonstrate, by reference to the file, that it had made a factual allegation that was not considered by the arbitral tribunal. As illegality had not been alleged during the arbitration proceedings and was not mentioned in the awards, invoking the set-aside ground of violation of public policy was inadmissible, and the Supreme Court did not have to examine the merits of the application in this respect.
Cases involving Swiss parties pending in ICSID proceedings
In the ICSID arbitration of Koch Minerals Sàrl and Koch Nitrogen International Sàrl v. Bolivarian Republic of Venezuela50 concerning the construction and operation of a fertiliser plant, the proposal for the disqualification of the three members of the tribunal had been declined by the Chair of the Administrative Council. The parties filed their post-hearing briefs on 30 January 2015 and their statements of costs on 13 February 2015. Following the passing away of one arbitrator, the arbitral tribunal had been reconstituted with the appointment of a new arbitrator on 1 February 2016. On 30 October 2017, the tribunal rendered its award with a partial dissenting opinion by one arbitrator. It found Venezuela liable under its BIT with Switzerland for the expropriation of Koch Minerals' 35 per cent interest in Fertinitro, the country largest fertiliser producer, which had been nationalised. On 18 December 2017, Venezuela filed a request for rectification of the award, upon which the tribunal issued on 11 April 2018 a decision on the rectification of the award. The tribunal also ruled that the second claimant, Koch Nitrogen, should be compensated for the loss of its rights under an associated long-term agreement for the purchase of ammonia and urea produced at the Fertinitro plant. After a stay of the annulment proceedings, initiated by Venezuela on 17 August 2016, the ad hoc committee issued its Procedural Order No. 2 concerning procedural matters on 14 March 2020.
In the ICSID arbitration Alpiq AG v. Romania51 concerning cancelled energy supply contracts, the tribunal rendered its award on 9 November 2018 and a rectification of the award on 21 March 2019. It rejected the US$450 million claim brought by Alpiq under the Romania–Switzerland BIT and the Energy Charter Treaty. After rejecting a number of jurisdictional objections raised by Romania, the tribunal concluded on the merits that Romania was not liable for the decision of its state-owned energy company Hidroelectrica to terminate two energy supply contracts with the local subsidiaries of the claimant, Alpiq RomIndustries and AlpiqEnergie. These decisions had not been taken by the government but by the judicial administrator appointed after the insolvency of Hidroelectrica. The arbitral tribunal found that this decision making was not controlled by the government. Alpiq had also failed to establish a denial of justice, as the Romanian courts decided sometimes in favour of and sometimes against Hidroelectrica. On 23 July 2019, Alpiq AG filed an application for partial annulment. It filed its memorial on annulment on 14 February 2020.
In the ICSID arbitration OperaFund Eco-Invest SICAV PLC and Schwab Holding AG v. Kingdom of Spain52 regarding a renewable energy generation enterprise under the Energy Charter Treaty, the tribunal rendered its award on 6 September 2019 (with a dissenting opinion by one arbitrator) and a rectification of the award on 28 October 2019. The tribunal ordered Spain to pay about €30 million to the Maltese and Swiss investors. On 3 March 2020, Spain filed an application for annulment.
In the ICSID arbitration Glencore International AG and CI Prodeco SA v. Republic of Columbia,53 the claimants asserted that the Columbian authorities had sought to revoke an amendment to a concession agreement after it was signed, and after significant investments had been made to expand the Calenturitas thermal coal mine on the basis of the amendment. On 27 August 2019, the tribunal rendered its award. Colombia was ordered to pay a US$19 million as restitution of a fine. The tribunal dismissed most of Columbia's jurisdiction and admissibility objections, and also alternative claims by Glencore for US$575 million plus interest under the previous royalty regime, whose reinstatement the tribunal rejected. On 30 December 2019, Columbia filed an application for annulment. The ad hoc committee has been constituted, and it issued its Procedural Order no.1 concerning procedural matters on 28 April 2020.
In the ICSID arbitration Pawlowski AG and Project Sever sro v. Czech Republic54 concerning a real estate development, the tribunal held a hearing on jurisdiction, merits and quantum in Paris in January 2020.
The ICSID arbitration Mabco Constructions SA v. Republic of Kosovo55 concerns a dispute about the acquisition of shares in a company in the tourism industry under the BIT between Switzerland and the Republic of Kosovo of 2011 and the investment law of the Republic of Kosovo of 2014. On 23 January 2020, a hearing on jurisdiction was held. In February 2020, the parties filed their post-hearing briefs and submissions on costs.
In the ICSID arbitration DCM Energy GmbH & Co. Solar 1 KG and others v. Kingdom of Spain,56 four German claimants and one Swiss claimant filed a claim concerning a renewable energy generation enterprise in Spain under the Energy Charter Treaty. In February 2020, a hearing was held on jurisdiction and merits in Paris.
In the ICSID arbitration EBL (Genossenschaft Elektra Baselland) and Tubo Sol PE2 SL v. Kingdom of Spain57 regarding a renewable energy generation enterprise in Spain filed under the Energy Charter Treaty, the claimants filed a reply on the merits and a counter-memorial on jurisdiction on 21 March 2020.
The ICSID arbitration Glencore International AG, CI Prodeco SA and Sociedad Portuaria Puerto Nuevo SA v. Republic of Columbia58 concerns a dispute about the construction and maintenance of an access channel for the public service port, Puerto Novo, in Ciénaga on Colombia's northern coast. Note that it is unrelated to ICSID case No. ARB/16/6 discussed above. A president has yet to be appointed.
In the ICSID arbitration United Agencies Limited SA v. People's Democratic Republic of Algeria59 concerning a dispute about the acquisition of shares, the tribunal was constituted on 12 May 2020.
Outlook and conclusions
The revised Swiss Rules 2012 continue to be very well received. More than 1,200 cases have now been conducted under the Swiss Rules with their successful system of light administration. The newly introduced emergency arbitrator, together with the already well-established expedited procedure and the pioneering approach to multiparty situations, all promise that the Rules will remain some of the most attractive dispute resolution rules to be stipulated in international commercial contracts. In addition, Chapter 12 of the PILA, in the entire 30 years of its existence, has only seen one change in response to a decision of the Federal Supreme Court60 and a few adaptations following new federal acts with the abolition of one provision of no practical use, and thus has proven to be effective in addressing all new issues in arbitration.
1 Martin Wiebecke is an attorney at law at Anwaltsbüro Wiebecke.
4 PILA, Article 176(1).
5 PILA, Article 176(2).
6 PILA, Article 176(3).
7 PILA, Article 179.
8 PILA, Article 180.
9 PILA, Article 182(3).
10 PILA, Article 183(1) and (2).
11 PILA, Article 184.
12 For example, if written witness statements are filed, there will be only a short direct examination of the witnesses.
13 DFT 127 III 279 of 14 May 2001.
14 PILA, Article 186(1 bis).
15 PILA, Article 186(2) and (3).
16 PILA, Articles 188 and 189.
17 F Dasser and P Wójtowicz, 'Challenges of Swiss Arbitral Awards – Updated Statistical Data as of 2017', 36 ASA Bulletin 2/2018, p. 276 (282).
18 PILA, Article 192(1).
19 See, for example, decision 4A_53/2017 of 17 October 2017.
20 Decision DTF 118 II 199 of 11 March 1992.
21 PILA, Article 194.
23 Swiss Rules, Article 1(4).
24 Swiss Rules, Article 40(4).
25 Swiss Rules, Article 1(1).
26 Swiss Rules, Article 1(3).
27 Swiss Rules, Article 1(2).
28 Swiss Rules, Article 33(1).
29 Decision 4P_115/2003 of 16 October 2003.
30 Decision 4A_646/2018 of 17 April 2019.
31 Swiss Rules, Article 15(8).
32 Swiss Rules, Article 26.
33 Swiss Rules, Article 43.
34 Swiss Rules, Article 9.
35 Swiss Rules, Article 15(1).
40 Decision 4A_247/2017 of 18 April 2018.
41 Decision 4A_424/2018 of 29 January 2019.
42 Decision 4A_438/2018 of 17 January 2019.
43 Decision 4A_540/2018 of 7 May 2019.
44 Decision 4A_462/2018 of 4 July 2019.
45 Decision 4A_636/2018 of 24 September 2019.
46 Decision 4P_1675/1987 of 19 July 1988.
47 Decisions 4A_294/2019 and 4A_296/2019, both of 13 November 2019.
48 Decisions 4A_244/2019 and 4A_246/2019, both of 12 December 2019.
49 Decisions 4A_396/2017 and 4A_398/2017, both of 16 October 2018; see last year's chapter, ii. 3.
50 ICSID case No. ARB/11/19.
51 ICSID case No. ARB/14/28.
52 ICSID case No. ARB/15/36.
53 ICSID case No. ARB/16/6.
54 ICSID case No. ARB/17/11.
55 ICSID case No. ARB/17/25.
56 ICSID case No. ARB/17/41.
57 ICSID case No. ARB/18/42.
58 ICSID case No. ARB/19/22.
59 ICSID case No. ARB/20/1.
60 See Section I.iii.