A. LEGISLATION AND RULES
A.1 Legislation
The Code of Civil Procedure of Switzerland was revised as per 1 January 2025. The revisions include some minor adaptations of the law applicable to the National Arbitration (Lex Arbitri for Arbitral Tribunals between Swiss Domiciled Parties). In particular, the new law foresees that a party can ask for the revision of an arbitral award if it gets to know subsequently relevant facts or evidence which it was unable to produce in a previous proceeding despite of proper diligence; excluded are new facts or evidence which occurred only after the arbitral award. The reference to proper diligence is new.
A.1.1 Identical actions before the arbitral tribunal and the state court (article 372 paragraph 2 E-ZPO)
Under previous law, when the same case was brought before both a state court and an arbitration court between the same parties, the second court had to wait until the first court decided on its jurisdiction. With the revision of the Code of Civil Procedure, this rule has been removed.
Now, an arbitral tribunal in Switzerland does not have to pause its proceedings until a state court rules on its jurisdiction. Instead, the arbitral tribunal can directly assess its own jurisdiction and continue the arbitration if needed.
A.2 Institutions, rules and infrastructure
Although the Swiss Rules of International Arbitration (“Swiss Rules“) have remained unchanged since 2021, a new version of the “Guidelines for Arbitrators” and the “Internal Rules of the Arbitration Court” were issued in 2024. The “Internal Rules of the Court” were adopted in accordance with the Swiss Rules with the aim of organizing the work of the court.
B. CASES
B.1 SFSC Decision 4A_172/2023 – affirmation of ICSID tribunal’s restrictive rationale in upholding China’s jurisdictional objection
On 11 January 2023, the Swiss Federal Supreme Court (SFSC) upheld the ICSID tribunal’s restrictive approach to arbitration clauses in a case involving the China-Singapore Bilateral Investment Treaty (BIT). The case originated from ICSID arbitration proceedings held in Geneva, Switzerland, where Singaporean companies operating phosphate mines in China’s Sichuan province claimed that China’s policy banning phosphate mining caused expropriation damages.
The ICSID tribunal denied jurisdiction over the expropriation claims, with one arbitrator dissenting. The claimants challenged this decision before the SFSC, arguing that the tribunal misinterpreted the dispute settlement provisions of the China-Singapore BIT. The SFSC, however, upheld the tribunal’s decision, stating that arbitration clauses require clear and explicit consent.
The SFSC emphasized that the narrow dispute resolution clause in the China-Singapore BIT only covered disputes involving the amount of compensation and not the occurrence or legality of expropriation. Such matters had to be resolved in domestic courts. The court noted that the mere association of delimitation difficulties did not broaden the jurisdiction of the arbitral tribunal.
This ruling highlights the importance of clear and precise arbitration clauses in international investment treaties. The contracting states of the China-Singapore BIT could have included a comprehensive arbitration clause but chose not to, reinforcing a strict interpretation of the agreement. The SFSC concluded that the relevant dispute resolution clause could not be interpreted to favor the appellants by invoking the general purpose of protection against expropriation without compensation.
B.2 SFSC Decision 4A_597/2021 – no possibility to challenge award due to calculation error in a self-submitted exhibit
In Decision 4A_597/2021, the Swiss Federal Supreme Court (SFSC) dismissed a challenge of an arbitral award by an arbitral tribunal based in Lugano, Switzerland. The arbitral tribunal had to decide on the allocation of the purchase and sale proceeds of a real estate transaction based on a cooperation agreement concluded between the parties. The respondent had submitted a real estate gains tax return including a summary table showing the relevant acquisition costs. In its award, the arbitral tribunal relied on this summary table and ultimately ordered the respondent to pay a specific amount.
The respondent thereafter challenged the award and argued among others that the summary table, on which the arbitral tribunal relied for its award, contained a calculation error. Due to this error, the acquisition costs were undervalued, resulting in a disadvantageous outcome for the respondent. In this decision, the SFSC held that the arbitral tribunal could not be expected to cross-reference the calculations contained in the summary table submitted by the respondent with the supporting documentation. As a consequence, the arbitrator’s failure to identify errors in a document prepared and submitted by a party and unfavorable to that party did not represent sufficient grounds for the SFSC to challenge an arbitral award.
B.3 SFSC Decision 4A_5/2023 – replacement of an arbitration agreement by a subsequent choice of forum agreement
In Decision 4A_5/2023, the SFSC dismissed an appeal against an award rendered by a sole arbitrator based in Lugano, Switzerland. In this decision, the SFSC had to assess whether the parties intended to replace an arbitration agreement and submit their disputes to the exclusive jurisdiction of state courts. Specifically, in 2008, the parties had included an arbitration clause in a contract. The clause was written in English and specified that the seat of the arbitral tribunal was to be in Lugano, Switzerland. Following the passing of one of the parties, his legal successors assumed the responsibilities stipulated in the contract. In 2012, they signed documents, which included, among other provisions, a clause designating Lugano as the “exclusive forum” for any disputes (orig. Italian wording: “Foro esclusivo: Lugano”).
Later, one of the parties initiated arbitration proceedings, however, the sole arbitrator declared herself incompetent to decide on the dispute, determining that the parties had agreed to a jurisdiction clause favoring the state courts in Lugano, which superseded the original arbitration agreement. In the challenge brought against this award, the claimants argued that the original arbitration clause remained in force and that the clause included in the documents signed in 2012 merely affirmed the seat of the arbitral tribunal.
The SFSC upheld the sole arbitrator’s ruling that the clause included in the documents signed in 2012 replaced the original arbitration agreement with a choice of forum agreement in favor of the state courts in Lugano. It stated that the term “forum” or “foro” in Italian could only be understood as referring to state courts rather than arbitral tribunals, unless it was expressly supplemented by specific wording, such as “place of arbitration”. Thus, the SFSC decided that the arbitration agreement was revoked by a choice of forum agreement and that the state courts in Lugano had exclusive jurisdiction over the dispute.
B.4 SFSC Decision 4A_244/2023 / 150 III 280 – jurisdiction of arbitral tribunal’s over intra-EU disputes under the Energy Charter Treaty (ECT)
In Decision 4A_244/2023 / 150 III 280, the SFSC addressed a dispute between Spain and a French investor operating several photovoltaic plants in Spain. The dispute originated from regulatory modifications implemented by Spain, which resulted in the reduction of the initially promised feed-in tariffs for renewable energy sources. The French investor invoked the arbitration clause outlined in article 26 of the Energy Charter Treaty (ECT) and initiated ad hoc arbitration proceedings in Switzerland.
Spain challenged the jurisdiction of the arbitral tribunal claiming that the arbitration clause was incompatible with EU law as had been confirmed by the European Court of Justice (ECJ) in the case Republic of Moldova v. Komstroy LLC of 2 September 2021 (“Komstroy decision“). Considering that the dispute was of intra-EU nature, Spain thus argued that the arbitral tribunal did not have jurisdiction over the dispute. The arbitral tribunal rejected this argument and affirmed its jurisdiction. Spain thereafter challenged the relevant award in front of the SFSC.
The SFSC dismissed Spain’s challenge of the arbitral award and determined that, as a Swiss court evaluating the jurisdiction of a Swiss-seated arbitral tribunal, it was not obligated to follow the ECJ’s approach in the Komstroy decision, according to which the ECT does not apply to intra-EU disputes. Typically, Swiss courts defer to the highest court of the country that enacted the foreign law in question. However, this approach was deemed inappropriate in this case, as the court deciding whether EU law superseded the ECT was an EU institution, which might be inclined to prioritize its own law over the international treaty, effectively making a decision in its own favor.
Moreover, the SFSC made it clear that it did not deem the ECJ’s reasoning in the Komstroy decision persuasive, considering that the ECJ relied solely on the unique nature of EU law and did not consider international law or treaty interpretation rules. After thoroughly analyzing the relevant ECT provisions, EU and international law, and applying the Vienna Convention on the Law of Treaties, the SFSC concluded that there was no reason to conclude that the unconditional consent to arbitrate given by Spain in article 26 of the ECT excluded intra-EU disputes. The SFSC thus rejected Spain’s challenge to the arbitral award. This decision will set an important precedent for other intra-EU disputes under the ECT.
B.5 SFSC Decision 4A_621/2023 – recognition and enforcement of a state-court decision adopted in breach of an arbitration agreement
In Decision 4A_621/2023, the SFSC dealt with a dispute, which arose between a Swiss and a Slovenian company from a distribution agreement. The distribution agreement contained an agreement to arbitrate potential disputes in arbitration proceedings in front of the Slovenian Chamber of Commerce. However, despite this, the arbitral tribunal denied its jurisdiction over the actual dispute arguing that the Swiss respondent was not party to the arbitration agreement.
The Slovenian claimant thereafter initiated state-court proceedings in Switzerland, but the Commercial Court of the Swiss canton of Aargau declared itself incompetent to decide on the dispute because the parties had agreed to submit disputes arising from the distribution to arbitration. This decision was also upheld by the SFSC (SFSC decision 4A_646/2018 of April 17, 2019). Rather than appealing to the arbitration court again, the Slovenian claimant filed a claim to the District Court of Koper in Slovenia. The Slovenian court affirmed its jurisdiction and ordered the Swiss respondent to pay a certain amount to the Slovenian claimant. Following this Slovenian judgment, the claimant initiated enforcement actions against the Swiss respondent in Switzerland.
The Swiss courts of first and second instance allowed the enforcement to proceed, despite the respondent’s argument that the Slovenian judgment was rendered in breach of the arbitration agreement contained in the distribution agreement. Also, the SFSC rejected an appeal of the Swiss respondent, affirming that Swiss courts were obliged to recognize and enforce a decision rendered by a member state of the Lugano Convention even if such decision was adopted in breach of an arbitration agreement concluded by the parties. In such case, according to the SFSC, the exclusion of arbitration from the scope of application of the Lugano Convention pursuant to its article 1 paragraph 2 (d) does not apply.
Moreover, the SFSC also held that the first and second instance courts did not breach their obligation pursuant to article II paragraph 3 of the New York Convention to refer parties to a valid arbitration agreement to arbitration. According to the SFSC, the arbitral award issued by the Slovenian arbitral tribunal was also binding in Swiss recognition and enforcement proceedings. Therefore, the competent Swiss courts were neither obliged nor entitled to refer the parties once more to arbitration.
B.6 SFSC Decision BGE 150 III 238 / 4A_603/2023 of March 25, 2024 – right to be heard
In Decision 4A_603/2023, the SFSC dealt with an appeal against a decision made by the rabbinical arbitral tribunal. The SFSC supported one of the parties (the same rabbinical arbitration was already subject to previous appeal proceedings (see section B.4 of last year’s edition of this yearbook). This time, the SFSC held the appellant’s right to be heard was violated. The arbitral tribunal should have granted the appellant the right to be heard before it issued an award clarifying its previous award.
B.7 SFSC Decision BGer 4A_575/2023 of April 18, 2024 – impartiality of arbitrators
In Decision 4A_575/2023, the SFSC rejected an appeal (setting aside request) raised against the award of a sole arbitrator. The appellant had claimed partiality since the arbitrator was repeatedly nominated by the respondent’s legal representative. Moreover, the arbitrator was also assisted by a law clerk who was later presumably employed by the respondent’s legal representative. Nevertheless, these arguments were not sufficiently persuasive, leading the SFSC to dismiss this claim.
Furthermore, the SFSC also rejected the argument of a breach of public order (ordre publique) since allegedly excessive interests of 1.5% per month were claimed. The appellant had alleged that the interests should be qualified as punitive damages. This argument did not persuade the court, resulting in the arbitration tribunal’s decision being upheld.
B.8 SFSC Decision BGer 4A_73/2024 of 6 May 2024
In Decision 4A_73/2024, an appellant claimed payments based on a memorandum of understanding and additional documents. The respondent, on the other hand, had alleged that these agreements were based on corruption and, furthermore, had breached the public procurement law of Kosovo. The SFSC dismissed the appeal. It stated that the arbitral tribunal had considered the allegations made by the appellant and granted due to rights to be heard. Accordingly, the SFSC will not review this a second time.
B.9 SFSC Decision BGer 4A_313/2024 of 30 October 2024
In Decision 4A_313/2024, the SFSC considered whether a contractually agreed on dispute review board (DRB) should have been consulted prior to the start of arbitration proceedings between a Russian company and a Finish company for the construction of a power plant in Finland. The SFSC dismissed the appeal. It concluded that the arbitral tribunal had assessed that it was the factual will of the parties that the consultation of the DRB was not a mandatory requirement before starting arbitration proceedings. Since the arbitral tribunal had already assessed these facts, they are binding to the SFSC and it will not review this a second time.
