Form Requirements Revision for An Arbitration Clause in Switzerland’s International Arbitration Law

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Switzerland has amended the international arbitration law during summer 2020. The amendment revised provisions of the 12th Chapter of the Private International Law Act (“PILA”), which entered into force on 1 January 2021. This article offers a useful overview of amended Art. 178 PILA stipulates the form requirements from the detailed practical approach by focusing on the featured changes and international arbitration’s crucial developments.

Key changes and developments on written form requirements for an arbitration clause

The previous version of Art. 178(1) PILA stated that an arbitration clause is deemed formally valid if made in writing, by telegram, telex, fax, or any other means of communication that permits it to be evidenced by a text. According to the Swiss Federal Supreme Court (“SFSC”) case law, the arbitration form does not require the signature on the arbitration clause to validate the form [1]. However, the means to communicate the arbitration clause have to be generated in written form that may be kept and reproduced. Regarding the heated argument of whether all parties need to follow these formal requirements or not, SFSC had never ruled on this question. Nonetheless, pursuant to the prevailing doctrine, the receiving party of the written arbitration proposal must also affirm the consent through writing because the verbal consent may have inherent risk issues regarding the proof of the arbitration clause’s validity.

The means of communication listed in the previous version of the Article, such as telegram and telex, were explicitly mentioned to reflect international business customs at that time. Meanwhile, these communications had become obsolete. Fundamentally, any written document could be proof of evidence that there was an arbitration agreement. Therefore, emails, articles of incorporation, meeting minutes, or general conditions can also prove the validity of arbitration forms.

After the lengthy discussion in the parliament, the new Art. 178(1) PILA that was amended will stipulate on the form of an arbitration agreement with concise and more modern provision without stating the specific means of communication: “The arbitration agreement must be done in writing or in any other form allowing it to be evidenced by text.” Moreover, this provision will coincide with the definition of the form requirements in the Swiss Civil Procedure Code Art. 358 that applies to domestic arbitration.

Furthermore, the amended Art. 178(4) PILA will explicitly state that an arbitration clause may also be validly inserted in unilateral acts, including a will, a founding charter, a trust deed, or articles of incorporation. The newly revised article was based on the fundamental principle of disputed party autonomy to proceed with arbitration. When the substantive law allows a relationship to be under the autonomy of both parties, the parties would have a possibility to bring the disputes to resolve through arbitration. This revised provision is crucial development on corporate arbitration.

Simpler and more modern form requirements gear towards the more user-friendly approach

Switzerland’s international arbitration law had never been revised in the past 30 years because the 12^th Chapter of the Private International Law Act (“PILA”) had been proven successful in applying towards international arbitration throughout the years without having to be amended. Nevertheless, this modern and timely change that revised PILA recently will make the form requirements easier on a practical level and more user-friendly. However, legal certainty will be attained only when there are all-around, well-drafted arbitration clauses. Consequentially, the incomplete or obscure arbitration clauses may lead to eventual disputes between the parties.

Reference:

https://globalarbitrationnews.com/revision-of-form-requirements-for-an-arbitration-clause-in-swiss-international-arbitration-law/
[1] Decision of the SFSC 121 III 38 (45)

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Form Requirements Revision for An Arbitration Clause in Switzerland’s International Arbitration Law