SWITZERLAND: STATUTE ON INTERNATIONAL ARBITRATION

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  • SWITZERLAND: STATUTE ON INTERNATIONAL ARBITRATIONAuthor(s): Charles Poncet and Emmanuel GaillardSource: International Legal Materials, Vol. 27, No. 1 (JANUARY 1988), pp. 37-57Published by: American Society of International LawStable URL: http://www.jstor.org/stable/20693184 .Accessed: 15/06/2014 05:21

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  • SWITZERLAND: STATUTE ON INTERNATIONAL ARBITRATION* [December 18, 1987]

    Cite as 27 I.L.M. 37 (1988)+

    Introductory Note

    Charles Poncet and Emmanuel Gaillard

    On December 18, 1987, after several years of

    deliberation, the Swiss Parliament adopted the definitive text of the Federal Statute on Private International Law. The

    statute will enter into force in the latter half of 1988, once

    the referendum period has expired. The statute will be

    reproduced in its entirety in 27 ILM N? 2 (1988).

    Chapter 12 of the federal statute, which deals with

    international arbitration, radically departs from the

    Intercantonal Arbitration Convention of March 27, 1969 (the

    "Concordat"). The Concordat contains numerous mandatory

    provisions that were felt to be somewhat outdated in today's more flexible and increasingly competitive international

    arbitration environment (cf. English 1979 Arbitration Act [18 ILM 1246 (1979)]; French Decree on International Arbitration

    of May 12, 1981 [20 ILM 917 (1981)]; Belgian reform of 1985 [25 ILM 725 (1986)]; July 2, 1986 Dutch statute on arbitration [26 ILM 921 (1987)]; the new Canadian statutes [26 ILM 714 (1987)]; Florida International Arbitration Act [26 ILM 949 (1987)]). The Concordat even falls short of the standards set forth by the UNCITRAL Model Law, which is generally considered to be

    *[The Introductory Note and translation were prepared for International Legal Materials by Charles Poncet, I.L.M. Corresponding Editor for Switzerland, Law Offices of Charles Poncet, Geneva, and Emmanuel Gaillard, I.L.M. Corresponding Editor for France, Professor of Law, University of Paris XII, European Counsel, Shearman & Sterling, Paris.]

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  • 38

    rather conservative [24 ILM 1302 (1985)]. (For a comparative

    analysis of recent statutes, see Gaillard, "The UNCITRAL Model

    Law and Recent Statutes on International Arbitration in Europe and North America", 2 ICSID Review N? 2 (1987)).

    The Swiss federal statute is in many respects more

    innovative than many of the recent statutes and far more

    innovative than the UNCITRAL Model Law. Its originality stems

    from (i) its scope, (ii) the autonomy granted to the parties in

    shaping the arbitral process and (iii) the limited role of

    Swiss courts in arbitral proceedings.

    I. Sgope

    A. In theory, the new federal statute does not supersede

    the Concordat, which, after Zurich adopted it on July 1, 1985,

    has been adopted in 22 out of the 26 Swiss cantons. The

    Concordat, as well as local law in the remaining four cantons,

    will still govern international arbitration if the parties so

    choose (article 176 (2)).

    In practice, however, the federal statute is likely to

    become the only relevant Swiss law on international arbitration.

    B. Whether the federal statute will apply to arbitration

    clauses entered into prior to the effective date of the statute

    is unclear. Unlike the Belgian act which applied retroactively

    to pending arbitration [25 ILM 726 (1967)], the Swiss statute

    does not address this issue.

    To cure such ambiguity, the parties may, prior to the

    effective date, stipulate in their arbitration agreement that

    the statute will apply to potential disputes. Given the

    importance accorded by the new statute to the intent of the

    parties, such a clause is likely to be upheld by the Swiss

    courts.

    C. The federal statute covers only international

    arbitration within the meaning of article 176(1) in contrast to

    the Dutch statute, which also applies to domestic arbitration.

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  • 39

    However, what constitutes "international arbitration"

    substantially differs from one country to another. While the

    French statute looks to the nature of the underlying transaction (see article 1492 NCCP, 20 ILM 917 (1981)), the

    Swiss statute determines the international character of the

    arbitration with respect to the domicile or habitual residence

    of the parties (article 176(1)), As a result, a dispute

    arising out of a cross-border sale of goods by two subsidiaries

    incorporated in Switzerland whose parent corporations are

    incorporated outside of Switzerland, may be deemed to be

    domestic and thus fall outside the scope of the act,

    D. On the other hand, the definition of arbitrable

    disputes is very broad under the federal statute, encompassing

    any claim related to a party's assets, rights or liabilities

    ["nature patrimoniale"] (article 177(1)). The statute thus

    avoids the difficulties that U.S. courts have encountered in

    determining whether antitrust and securities law issues are

    arbitrable. This provision goes as far as precluding states or

    state-owned entities from invoking their domestic law to

    challenge not only the arbitrability of the dispute but also

    their capacity to enter into an arbitration agreement (article 177 (2)). It is questionable whether this provision, which is neither a substantive rule nor a true choice of law rule, will

    suffice to resolve the difficult problems surrounding the

    possible impediments to arbitration in the concerned

    jurisdiction.

    II? Party Autonomy in the Arbitral Process.

    The following provisions are noteworthy:

    A. The rules clearly favor validity of the arbitration

    agreement (article 178).

    B. Following the general trend, the rules governing procedure grant large freedom of choice to the parties. However, equal treatment and the right to be heard in an

    adversary proceeding are mandatory (article 182 (3)).

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  • 40

    C. The law applicable to the dispute will be the "rules

    of law" chosen by the parties or the "rules of law" which have

    the closest connection with the transaction (article 187). Reference to the "rules of law" rather than the "law" suggests

    that the parties, or alternatively the arbitrators, may (i)

    select different laws to govern various aspects of the

    transaction, (ii) "freeze" the law at any point in time or

    (iii) resort to general principles of international law rather

    than the law of any particular jurisdiction. However, absent

    the parties' choice, the arbitrators' freedom to select

    applicable law is restricted by the nexus requirement, whereas

    under the French and Dutch statutes, for example, the

    arbitrators are granted complete freedom. Nevertheless, this

    provision is sufficiently flexible to lead, in practice, to

    similar results and offers the added advantage of precluding a

    comparative analysis of all the possible choice of law rules,

    as is sometimes required in other jurisdictions.

    m. court intervention in the Arbitral Processt

    The new statute reduces to a minimum the importance of

    court intervention.

    A. The cantonal court of the situs of the arbitral

    tribunal has jurisdiction to act as follows:

    1. assist, if necessary, in establishing the arbitral

    tribunal (article 179(2)(3));

    2. rule on the challenge of arbitrators, unless the

    parties have stipulated otherwise (article 180); or

    3. assist in the taking of evidence, if requested by the

    parties or by the arbitral tribunal (article 184).

    It is noteworthy that each of the foregoing rules will

    not apply if the arbitration Rules chosen by the parties or the

    arbitration clause provide'otherwise.

    B. Swiss courts may grant provisional measures but their

    jurisdiction is clearly subordinate to that of the arbitral

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  • 41

    tribunal. In contrast to the Concordat, the federal statute

    provides that provisional remedies, including the freezing of assets, should be referred to the arbitral tribunal itself. It

    is only in the event that a party refuses to comply with the arbitral tribunal's order that the arbitral tribunal may ask a

    court with proper jurisdiction to intervene (article 183).

    C. The Swiss Federal Tribunal has exclusive jurisdiction to set aside arbitral awards unless the parties have requested that jurisdiction be conferred to the court designated in each canton for that purpose (article 191).

    The grounds to set aside are far more limited under the federal statute than those enumerated in article 36 of the Concordat. In particular, the highly controversial ground based on arbitrary" has been dropped. This provision is now in line with French and Dutch law, the New York Convention and the UNCITRAL Model Law. Provided that the Federal Tribunal has a sound conception of "public policy" (see Lalive, "Transnational (or Truly International) Public Policy and International Arbitration", ICCA Congress Series, n? 3, Kluwer

    1987, 257) no review on the merits will take place.

    The Swiss legislature went even further by providing that if none of the parties has its domicile or habitual residence in Switzerland, they can exclude, partially or

    totally, the grounds to set aside (article 192(1)). In this

    respect, the Swiss approach differs from that of the Belgian statute, which reaches the same result without giving any

    option to the parties (see article 1717 of the Code of Civil Procedure [25 ILM 726 (1986)]). This provision also differs from English law under which the "exclusion agreement" cannot

    preclude the courts from reviewing the award if an arbitrator has, for example, "misconducted himself or the proceedings" [18

    ILM 1246 (1979)]. In the case of total exclusion, Swiss courts will only ensure that the award meets the requirements of the 1958 New York Convention on the Recognition and Enforcement of Arbitral Awards if enforcement is sought in Switzerland

    (article 192(2)). Although the statute is not clear in this

    respect, it would seem reasonable to assume that such approach

    also applies mutatis mutandis even where exclusion is partial

    (see Gaillard, supra p. 1, at IV).

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  • 42

    I.L.M. Content Summary

    CHAPTER 12 [of' the Swiss Statute on Private International Law]: INTERNATIONAL ARBITRATION

    I. Scope. Seat of the arbitral tribunal (Article 176) - I.L.M.

    Page 44 [This chapter applies when the tribunal seat is in Switzerland and one of the parties has neither domicile nor habitual residence in Switzerland; determination of the tribunal seat]

    II. Arbitrability (Article 177) - I.L.M. Page 45 [A state or

    state-controlled enterprise may not challenge arbitrability based on provisions of its own law]

    III. Arbitration agreement (Article 178) - I.L.M. Page 45 [Must be

    in writing; validity is determined by an applicable body of law and does not depend on the validity of the underlying contract]

    IV. Arbitral tribunal - I.L.M. Page 46 1. Establishment (Article 179) [Unless directed otherwise by

    the parties, appointment of arbitrators shall be according to the law of the canton where the tribunal seat is]

    2. Challenge of arbitrators (Article 180) [On grounds established by the parties; in any case, when independence of judgment is doubtful; the local canton court rules on challenges]

    V. Lis pendens (Article 181) - I.L.M. Page 48 [Proceedings begin

    when a claim is filed or procedure for appointment of the tribunal is initiated]

    VI. Procedure - I.L.M. Page 49 1. Principle (Article 182) [If not determined by the parties,

    then determined by the tribunal; in any case, equal treatment of the parties and right to be heard shall be guaranteed]

    2. Provisional and conservatory measures (Article 183) [May be issued by the tribunal, and the tribunal may require posting of bond by the requesting party; compliance is court enforceable]

    3. Taking of evidence (Article 184) [Court orders (subpoenas) may be sought]

    4. Other court assistance (Article 185) [Jurisdiction is with the court of the canton where the tribunal's seat is]

    VII. Jurisdiction (Article 186) - I.L.M. Page 51 [Challenge must be raised prior to raising any merits defenses; rulings by the tribunal on its own jurisdiction are interlocutory]

    VIII. Award on the merits - I.L.M. Page 52 1. Applicable law (Article 187) [The parties may authorize

    the tribunal to decide ex aequo et bono (on equitable grounds)]

    2. Partial award (Article 188) [May be issued unless prohibited by the parties]

    3. Arbitral award (Article 189) [Unless otherwise directed by

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  • 43

    the parties, the award shall be determined by a majority vote and reduced to writing]

    IX. Finality, action to set aside - I.L.M. Page 53

    1. Principle (Article 190) [Grounds of attack: A sole arbitrator was improperly selected; lack of jurisdiction; failure to rule on claim submitted; failure to grant a party equal treatment or a right to be heard. Interim awards may be attacked only on the first two listed grounds]

    2. Jurisdiction (Article 191) [An action to set aside for lack of jurisdiction must be brought before the Federal Tribunal or, if the parties so direct, the local canton court]

    X. Waiver (Article 192) - I.L.M. Page 55 [If neither party has domicile, habitual residence, or principle place of business i...

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