Swiss Parliament Updates the Swiss Arbitration Law — Key Changes and Benefits for International Business

On June 19, 2020, the Swiss Parliament enacted a revision of the Swiss arbitration law that governs international arbitrations seated in Switzerland. The revision is a welcome update that builds on the many strengths of Swiss arbitration while providing several helpful clarifications and improvements.

Importantly, the key features of Swiss arbitration have not changed, namely its liberal, pragmatic and flexible approach, all of which make Switzerland equally attractive for companies coming from common law and civil law jurisdictions. In many instances, the revision codifies longstanding case law of the Swiss Federal Supreme Court to provide greater transparency for non-Swiss users. The Swiss Parliament has also focused on addressing the evolving needs of international business, as exemplified by the decision to permit parties to file challenges against arbitral awards in English.

This Sidley Update provides an overview of the key changes and benefits for international business regarding (1) arbitration clauses, (2) the constitution of the arbitral tribunal, (3) the arbitration procedure and (4) challenges against arbitral awards.

1. ARBITRATION CLAUSES

Key continuity: The revised law continues to apply internationally recognized requirements for arbitration agreements in a pragmatic manner. For example, arbitration agreements concluded by email continue to be valid under Swiss law.

Key clarification: The revised law clarifies that its liberal regime applies if at least one party is domiciled outside Switzerland at the time of concluding the arbitration agreement (regardless of the situation when the arbitration commences). This provides greater legal certainty.

Key change: The revision introduces the possibility of arbitration clauses in unilateral legal instruments such as trust deeds, wills or articles of association (e.g., of companies and sport associations). This is a welcome addition, particularly as interest in the arbitration of trust and company disputes continues to grow.

2. CONSTITUTING THE ARBITRAL TRIBUNAL

Key continuity: The revised law continues to give priority to party autonomy, requiring the constitution of the arbitral tribunal in accordance with the parties’ agreement and the chosen arbitration rules. If necessary, the parties can seek the assistance of state courts at the seat of arbitration. This is particularly helpful in ad hoc arbitration where no institution has been designated to administer the case.

Key clarifications: The revision increases transparency by clarifying several key points:

• The revised law clarifies that a party can request a Swiss court to assist with the constitution of the tribunal if a party or arbitrator fails to take action for more than 30 days. This can prevent delaying tactics in ad hoc arbitrations.
• The revision also clarifies that an arbitrator has the duty to disclose without delay, and throughout the proceedings, any circumstances that may give rise to justifiable doubts as to his or her impartiality or independence. If an arbitrator is challenged, the revised law clarifies that the challenge does not have the effect of suspending the arbitration unless the parties have agreed or the tribunal orders otherwise.

Key changes: The revision brings helpful improvements that apply if the parties have not agreed on an arbitral institution or the procedure for constituting the arbitral tribunal:

• If the parties have not agreed on the number of arbitrators, a three-member panel will be constituted by default, with each party appointing one co-arbitrator and the two co-arbitrators appointing the presiding arbitrator.
• For multi-party arbitrations, the revised law now provides that a Swiss court can, if so requested, appoint all of the arbitrators in order to safeguard the equal treatment of all parties.
• If the parties have not agreed on a seat of arbitration, a party can request any Swiss court of its choice to assist with constituting the tribunal. This change will render arbitration clauses effective that would otherwise be difficult to implement.

3. ARBITRATION PROCEDURE

Key continuity: The arbitration proceedings remain subject to the parties’ agreement and, where there is no agreement, the discretion of the arbitral tribunal. Consistent with international best practice, Switzerland has always emphasized party autonomy with respect to the arbitration procedure, and the revision upholds this tradition.

Key clarification: The revised law clarifies that parties must object during the proceedings regarding any perceived violation of due process. This requirement ensures that parties raise procedural objections while the tribunal can address them and prevents parties from holding back objections to deploy them tactically if an award is subsequently made against them.

Key change: Swiss courts will continue to offer judicial assistance for the taking of evidence and to enforce interim measures, and will now provide the same assistance to arbitrations seated abroad once the revision enters into force. The revised law clarifies that a party can request judicial assistance directly, without involving the tribunal.

4. CHALLENGES AGAINST ARBITRAL AWARDS

Key continuity: Challenges against arbitral awards rendered in Switzerland continue to be decided directly by the Swiss Federal Supreme Court, which is the highest court in the country, very experienced in international arbitration and typically renders its decisions within four to six months. This is a major advantage over the other leading seats of arbitration. An award can be set aside only on very limited grounds that are consistent with international best practice and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Parties outside Switzerland can even waive challenges altogether.

Key clarifications:

• The revised law clarifies that an award can be challenged regardless of the amount in dispute.
• The revised law codifies longstanding case law on additional remedies, including revision and corrections of calculation and similar errors. Through an application for revision, a party may seek to reopen an arbitration (1) if the award was influenced by criminal offenses, (2) if new crucial evidence is discovered after the award was issued, or (3) if it is discovered only after the award, and despite proper attention during the arbitration, that an arbitrator was not impartial or independent. The remedy of revision remains subject to strict conditions and time limits.

Key change: Perhaps the most noteworthy change brought by the revised law is that parties will now be able to file written submissions to the Swiss Federal Supreme Court in English (currently parties must do so in either German, French or Italian). This applies to challenge proceedings against awards rendered after the new law enters into force as well as to applications for revision. This important change will save companies significant time, cost and effort in the future.

5. FINAL COMMENTS

The new Swiss arbitration law brings welcome clarifications and developments that further strengthen one of the world’s most highly regarded international arbitration laws. By enabling parties to bring challenges against arbitral awards in English, Switzerland has put the finishing touch on a challenge procedure that is already unrivaled in terms of expertise, efficiency and speed. This development, together with providing direct access to Swiss judicial assistance for foreign arbitrations, further cements Switzerland’s status as one of the most important and user friendly arbitration seats in the world.

The revised arbitration law is expected to enter into force on or around January 1, 2021, and will apply as from its entry into force, regardless of when the arbitration agreement was concluded and the arbitration commenced.