The lex arbitri of Switzerland is well-known for affording parties maximum autonomy and procedural flexibility. In line with these principles, parties to international arbitration proceedings have the possibility to opt out of the otherwise applicable Chapter 12 of the Swiss Private International Law Act ("PILA") and to opt into the statutory rules governing Swiss-seated domestic arbitration proceedings as set out in Section 3 of the Swiss Civil Procedure Code ("CPC"). The reversed option is available to parties to domestic arbitration proceedings as well, i.e. to opt out of the application of the CPC and to opt into the application of the PILA. This post will outline the practical aspects of this matter, with emphasis being put on the applicable case law from the Swiss Federal Supreme Court.
PILA v. CPC: Why Would Parties Prefer One Over the Other?
One of the main differences between the statutory rules of the PILA and the rules of the CPC is the more limited grounds to annul an arbitral award rendered in international arbitration proceedings. In domestic arbitration, an award can be annulled if the result of the award is arbitrary because the award is based on findings that are manifestly contrary to the facts on record, or because the award is based on a manifest violation of the applicable law or the principles of equity (Article 393(e) CPC). In international arbitration, however, a party may not challenge an award on the ground that the award is arbitrary. The only available ground allowing a substantive review of an arbitral award is the ground of incompatibility of the award with public policy (Article 190(2)(e) PILA), which is to be assessed more restrictedly than the ground of arbitrariness (see, e.g., the decision of the Federal Supreme Court, ATF 138 III 322, consid. 4.3.2). Furthermore, under the CPC, an award can also be annulled on the ground of manifestly excessive fees and expenses fixed by the arbitral tribunal (Article 393(f) CPC). No such ground exists under the PILA.
In certain instances, parties to international arbitration proceedings may thus have an interest to opt into the statutory rules available in domestic arbitration proceedings. In other instances, parties to domestic arbitration proceedings may prefer to have more limited grounds available to set aside an arbitral award and have thus an interest to apply the arbitration rules as set out in Chapter 12 of the PILA. For example, an international...