SWITZERLAND: An Introduction to Arbitration Counsel

Switzerland’s Leading Position in International Arbitration

Switzerland has a long-standing tradition of serving as a seat for international disputes thanks to its arbitration-friendly legal framework, stability and business minded environment. Switzerland also offers a large pool of highly qualified Swiss arbitrators often with a good command of several languages. Swiss law as the law governing the contract is a popular choice because Swiss contract law is business-friendly and emphasises party autonomy.

Switzerland has maintained its globally leading position in international arbitration for many years. The newly published ICC Dispute Resolution 2023 Statistics confirm the popularity of Switzerland, Swiss law and Swiss arbitrators in international arbitration:

• Switzerland is among the top three countries selected as place for arbitration;
• Swiss law is the second most frequently selected law by contract parties; and
• Switzerland was the third most common nationality of arbitrators.

The ICC statistics for 2023 reconfirm the trust that parties from all over the world place in Switzerland, Swiss law and Swiss arbitrators.

Recent Trends

Intra-EU disputes

In a widely reported decision, the Swiss Supreme Court recently confirmed jurisdiction of a Swiss-seated tribunal in an intra-EU investment arbitration. This decision comes amidst ongoing legal battles in various jurisdictions over the admissibility of intra-EU investor-State arbitration.

National courts within the EU are expected to deny the existence of a valid arbitration agreement in intra-EU disputes. Accordingly, national courts within the EU have set aside awards on intra-EU grounds and have refused to enforce intra-EU ICSID awards. As some commentators noted, intra-EU disputes face, within the EU, a hostile environment. In contrast thereto, national courts outside of the EU generally allow enforcement of intra-EU awards, albeit there are some legal uncertainties.

The decision of the Swiss Supreme Court has been lauded as well-reasoned, so courts outside of the EU faced with set-aside and enforcement requests might, therefore, take guidance from the reasoning of the Court. The decision could, thus, further tip the scale in favour of upholding jurisdiction and enforcement outside of the EU.

EU investors are, therefore, well advised to place the seat of the arbitration and to seek enforcement in a non-EU state. To increase protection, however, investors should consider taking proactive steps by structuring their investments within the EU through a non-EU state. Switzerland with its leading investment protection network is an excellent choice.

Environmental sustainability and arbitration

The transition from fossil fuels to renewable energy has given rise to a variety of disputes. Regulatory changes, the shift to cleaner technology and new infrastructure have led to both commercial and investor-state arbitrations.

That trend is expected to grow, and the likelihood of climate related disputes has further increased with the ruling by the European Court of Human Rights in Klimaseniorinnen v Switzerland. In Klimaseniorinnen, the European Court of Human Rights found that Switzerland had failed to take sufficient action to mitigate the adverse effects of climate change on human rights. Albeit Klimaseniorinnen is not an arbitration case, along with other cases such as Milieudefensie et al v Shell, such high-profile decisions confirm the trend of increased scrutiny of climate policies both of states and private entities and the increased risk for liability.

Of course, there is also a heightened awareness of environmental sustainability in the arbitration community. Recent amendments in institutional rules also reflect the goal to reduce travel and waste by shifting to electronic filings and conducting case management conferences and hearings remotely by videoconferencing.

New framework for arbitration in corporate law disputes

Corporate law reform on statutory arbitration clauses

On 1 January 2023, the Swiss legislature enacted a new regime on arbitration clauses in the articles of association of Swiss companies. The new Article 697n of the Swiss Code of Obligations (CO) allows Swiss companies limited by shares to provide in their articles of association that “corporate law disputes” shall be decided by an arbitral tribunal seated in Switzerland. The same provision applies mutatis mutandis to Swiss partnerships limited by shares and Swiss limited liability companies (Article 764(2) and Article 797a CO). The revision sought to ensure that parties to corporate law disputes may benefit from the advantages of arbitration including the appointment of arbitrators with special experience and expertise, as well as the flexibility and confidentiality of arbitration proceedings.

Article 697n of the CO provides clarity as regards the introduction and scope of statutory arbitration clauses. Under the new law, the introduction of an arbitration clause in pre-existing articles of association requires a resolution of the general meeting of shareholders combining at least two thirds of the votes represented and a majority of the nominal value of shares represented (Article 704(1) No 14, CO). New shareholders become automatically bound by the statutory arbitration clause upon acquisition of their shares. The existence of an arbitration clause (as further described in the company’s articles of association) is to be mentioned in the company’s Commercial Register entry.

The term “corporate law disputes” covers all claims arising out of a corporate law relationship. Arbitrable claims thus include:

• actions challenging resolutions of the general meeting of shareholders (ie, actions for annulment or declaration of nullity of general meeting resolutions);
• actions for payment and subsequent contribution of share capital;
• action for repayment of financial benefits that have been unduly obtained;
•  liability actions against board members; and
• actions for the dissolution of the company.

Unless the articles of association provide otherwise, the arbitration clause is binding on the company, its corporate bodies and their members, as well as all shareholders. The proceedings are governed by the Swiss lex arbitri for domestic arbitrations (Part 3 of the Swiss Code of Civil Procedure). Furthermore, the company’s articles of association (or the arbitration rules referred to therein) must ensure that “persons who may be directly affected by the legal consequences of the arbitral award” are informed about the commencement and the termination of the arbitration proceedings and may participate in the constitution of the arbitral tribunal and in the arbitration proceedings as interveners.

The Supplemental Swiss Rules for corporate law disputes

In parallel with the entry into force of the new legal provisions on statutory arbitration clauses, the Swiss Arbitration Centre has supplemented its Swiss Rules with a separate set of rules (the “Supplemental Swiss Rules”) for the purpose of administering and conducting arbitration proceedings in relation to corporate law disputes in accordance with the revised law. They regulate for specificities of such corporate law disputes, implement statutory requirements and ensure that corporate law disputes can be settled through Swiss Rules arbitration efficiently and effectively.

The Supplemental Swiss Rules propose a model statutory arbitration clause and are composed of six articles that deal with

• the scope of application of the Supplemental Swiss Rules;
• information regarding the commencement and the termination of arbitration proceedings;
• the appointment of the arbitral tribunal;
• the participation of third persons;
• information regarding the course of the arbitration proceedings; and
• interim measures and emergency relief.

They are accompanied by an Explanatory Note on the use of the Supplemental Swiss Rules.

The Supplemental Swiss Rules provide for a model statutory arbitration clause with both recommended content (including provisions on the scope of application of the arbitration clause, the seat of the arbitration, and the language of the arbitration) and proposed additional content corporate entities may wish to choose from depending on their preferences and needs.

The Supplemental Swiss Rules provide for procedural mechanisms to ensure that all persons who may be directly affected by the legal effects of the arbitral award (“Affected Persons”) are informed of the commencement of the arbitration within a short time limit and in due form, to allow them to assert their right to be heard without this causing any delay. This procedural safeguard may apply to shareholders but also to the company itself if it is not named as a party to the arbitration.

The corporate law reform, in combination with the Supplemental Swiss Rules for corporate law disputes, has brought clarity as regards the use of arbitration clauses by Swiss companies and is expected to boost arbitration as a means to settle corporate law disputes.