Spotlight: Alternatives to court proceedings in Switzerland
All questions
Alternatives to court proceedings
i Overview of alternatives to court proceedings
Arbitration is the most commonly used procedure for alternative dispute resolution in Switzerland. Mediation and expert opinions are also available.
ii Arbitration
Switzerland is one of the world’s leading destinations for international arbitration. To illustrate, in 2020 Geneva and Zurich were among the top five cities chosen for arbitration administered by the ICC (along with Paris, London and New York). In 2020, well over 200 arbitration proceedings took place in Switzerland.61
Swiss law distinguishes between international arbitration (regulated in Chapter 12 of the IPRG) and domestic arbitration (regulated in Title 3 of the ZPO). Arbitration proceedings take place in Switzerland if both parties were domiciled in Switzerland at the time the contract was concluded; in all other cases, the arbitration shall be international. The most notable differences between the two lie in the definition of arbitrability (the definition in domestic arbitration is narrower) and the grounds for annulment of arbitral awards (domestic arbitral tribunals allow for a somewhat broader review). Swiss law allows parties to opt out of domestic arbitration in favor of international arbitration and vice versa. If all parties are non-Swiss, they can waive the judicial review of arbitral awards.62
Switzerland is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and regularly enforces foreign arbitral awards. Swiss courts are known for their arbitration-friendly and enforcement-friendly approach.
2021 was a particularly eventful year for international arbitration in Switzerland. Several important reforms related to arbitration were passed: the much-anticipated reform of the Swiss Law on International Arbitration (i.e. Chapter 12 of the IPRG), the revision of the Swiss Rules of International Arbitration and the transition of the Swiss Chambers’ Arbitration Institution into the new one Swiss Arbitration Centre.
The new international arbitration law retains all the essential features that have made arbitration in Switzerland successful and attractive to international parties, and achieves incremental improvements in selected areas. Key features of the new law include the ability to submit petitions to the federal court in English; more widely available court aid; as well as clarifications, modernizations and codifications of case law in certain areas.
The revised Swiss Rules of International Arbitration came into force on June 1, 2021. The most important changes concern multi-party and multi-contract proceedings, as well as changes aimed at streamlining arbitration proceedings through paperless filings and remote hearings. The new rules also address data protection and cyber security.
In addition, the Swiss Arbitration Center supported the Arbitration Toolbox developed by the Swiss Arbitration Association.63 The Toolbox is an innovative website that uses a questionnaire to guide users through the entire arbitration process and provides tools and solutions to questions that may arise during an arbitration process.
iii Mediation
Mediation is independent of the court system and is based solely on contracts. The CCP expressly provides that the parties may substitute private mediation for the mandatory conciliation procedure prior to court action.64 In practice, parties rarely make use of this possibility. Mediation is widely used in family law and inheritance matters, but less often in commercial disputes.
In a landmark case in 2016, the Federal Court ruled that failure to comply with a mandatory pre-arbitration requirement may result in a stay of arbitration until the arbitration requirement is satisfied.65 However, the Federal Court of Justice was less willing to stay court proceedings on the same ground, stating that the CCP did not mention failure to comply with a mediation obligation as an allowable ground for staying proceedings.66
iv Other Forms of Alternative Dispute Resolution
Another ADR mechanism encountered in practice is expert determination, in which an expert makes a determination of certain facts that the parties accept as binding.67 Expert determination clauses are particularly common in purchase price adjustment mechanisms in M&A agreements, but can also be found in shareholder agreements and joint venture agreements, among other things. There are no formal regulations for the expert opinions other than those provided for in the contract between the parties.
Parties sometimes combine multiple forms of alternative dispute resolution. In practice, multi-tiered dispute resolution clauses are quite common, with the first tier consisting of a cooling off period, settlement negotiations or mediation and the second tier consisting of binding arbitration. Hybrid mechanisms such as arbitration-arbitration-arbitration or arbitration-arbitration have also been proposed. The mediator and the arbitrator should not be the same person.