Recognition and enforcement of arbitral awards in Switzerland


Arbitration

Recognition and enforcement of arbitral awards in Switzerland

7 July 2020

Fabio Leonini studied law at University of Geneva and Zurich in Switzerland. He is a Swiss-qualified lawyer and has five years of experience working either as a white-collar crime litigator in various Swiss and International criminal proceedings or as a legal counsel at the Prosecution Office in Geneva in the same field of law.


INTRODUCTION

Switzerland has been, for several years, one of the preferred venues for hosting international arbitrations, whether in ad hoc proceedings or in proceedings administered under the rules of the leading arbitration institutions such as ICC and ICSID.

Switzerland is a politically neutral country. As such, it hosts many international organizations and dispute settlement institutions, such as the United Nations, the World Trade Organization (WTO), the International Federation of Consulting Engineers (FIDIC), the Court of Arbitration for Sport (CAS/TAS).

The Swiss Chambers of Commerce have been offering arbitration services for many years. With the Swiss Rules of International Arbitration, they offer uniform, efficient and cost-effective means of binding dispute resolution based on best practices and international standards. Arbitration under the Swiss Rules is administered by the Swiss Chambers’ Arbitration Institution (SCAI), a neutral body, which acts with complete independence and is comprised of experienced international arbitration practitioners.

Arbitration practice has illustrated that many international contracts referring to arbitration in Switzerland are governed by Swiss substantive law as a neutral law, easily accessible and intelligible for lawyers and non-lawyers alike.

legal framework

What is the applicable procedural law/arbitration act for recognition and enforcement of an arbitral award in your jurisdiction and which is the relevant Section?

As a preliminary note, a distinction must be made between (i) Swiss international arbitral awards (international awards), (ii) foreign arbitral awards and (iii) domestic arbitral awards. An international award is defined as an award rendered in arbitral proceedings seated in Switzerland where, at the time of the conclusion of the arbitration agreement, at least one of the parties did not have its domicile or habitual residence in Switzerland within the meaning of Art. 176 of the Private International Law Act (PILA). The meaning of foreign arbitral awards can be conflated with the meaning of Swiss international awards. And yet, foreign awards only concern arbitration proceedings that are not seated in Switzerland and in which the parties are not domiciled in Switzerland. Awards are considered domestic, on the other hand, when the seat of arbitration is in Switzerland and both parties have their domicile or habitual residence in Switzerland.

As regards domestic awards, Swiss law makes a distinction between the enforcement of monetary and non-monetary relief in awards. Monetary relief in awards is enforced under the Debt Collection and Bankruptcy Act of 11 April 1889 (DCBA), Arts. 46 to 55, with assistance from local debt collection offices (each canton has its own office). Non-money relief is enforced under the Code of Civil Procedure (CCP), Arts. 353 to 399 CCP, with assistance from the civil courts.

The recognition of international awards in Switzerland is governed by Chapter 12 (Arts. 176 to 194) of the PILA and, where applicable, bilateral or multilateral treaties. Art. 194 of the PILA provides that the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the New York Convention) is directly applicable to the recognition and enforcement of foreign awards.

The New York Convention, for its part, is directly applicable as Swiss law. However, it is possible for the parties to opt-out from the PILA and apply the relevant section of the CCP by expressly providing for this either in the arbitration agreement or at a later stage in written form according to Art. 176 (2) of the PILA.

Is your jurisdiction party to the 1958 New York Convention? If yes, what is the date of entry into force of the Convention? Was there any reservation made under Art. I (3) (reciprocity reservation) of the Convention?

Switzerland is a signatory to the New York Convention. It ratified the New York Convention on June 1st, 1965. It withdrew its reciprocity reservation in 1993 when section 12 of the Swiss Private International Law Act (PILA) entered into force. According to this article, all international awards are recognised and enforced under the New York Convention, regardless of whether the state of the seat of the arbitration is a signatory to the New York Convention or not.

Furthermore, Switzerland has concluded several bilateral agreements with other contracting states on the issue of the enforcement of international awards. Treaties have been concluded with, among others, Sweden, the Principality of Liechtenstein, Austria, Spain, Italy and Germany (Treaty dated November 2nd, 1929, ref. 0.276.191.361) in order to simplify the process.

Jurisdiction & procedure before court

Which national court has jurisdiction over an application for recognition and enforcement of arbitral awards? And How does one initiate court proceedings for the enforcement of an award in your home jurisdiction?

For recognition and enforcement of domestic, international and foreign awards granting monetary relief, a request for debt collection must be filed with the local debt collection office located, in general, at the award debtor’s place of domicile or registered office, pursuant to Arts. 46 to 55 DCBA. If the award debtor objects to payment, then the creditor can request the competent court at the place of the debt collection proceedings to set aside the debtor’s objection. The competent court within a particular canton is determined by cantonal legislation.

Whereas, for recognition and enforcement of domestic, international and foreign arbitral awards granting non-monetary relief, under Art. 339 (1) CCP, the award creditor must file its request with the court located (i) at the domicile or seat of the unsuccessful party, or (ii) where the measures are to be taken, or (iii) where the decision to be enforced was rendered.

Though not necessary considering the possibility of direct enforceability of arbitral awards, for mere recognition (stand-alone exequatur) of international arbitral awards, a request must be filed with the court defined by Art. 339 CCP and the applicable cantonal legislation.

How high are the court fees that must be paid? What kind of criteria is used to determine their amount? Amount in dispute? Or are there also other criteria?

Regarding domestic and international awards, the enforcement proceedings concerning monetary awards are governed by the statutory tariffs on debt enforcement and bankruptcy. A maximum filing fee of CHF 400 for a claim over CHF 1 million is provided. If the award debtor files a formal opposition, the applicant must pay a maximum court fee of CHF 2,000 to commence summary court proceedings. Court fees for the enforcement on non-monetary awards are provided for in the cantonal court fee ordinances and may differ depending on which canton is involved based on the location of the competent court.

When it comes to foreign awards, court fees are low compared to other states for debt enforcement proceedings, depending on the amount of the claim, it may reach a maximum of
CHF 2,000. Non-monetary proceedings will also give rise to court fees depending on the estimation of the value of the claim and can reach several thousand Swiss francs according to the applicable cantonal tariff.

How are the costs of the enforcement proceedings allocated?

The costs of recognition and enforcement of awards, being either domestic, international, or foreign are provided exclusively by the CCP. The costs must be advanced by the creditor of the award pursuant to Art. 98 CCP. With that said, only the final enforcement decision allocates the costs to the parties. Usually, the losing party must bear the costs, but the court can also allocate the costs differently depending on the outcome of the proceeding according to Art. 106 CCP. Also, the costs must not necessarily be allocated only to one party. In fact, they can be allocated to both parties equally depending on the circumstances of the case pursuant Art. 107 CCP.

Are the proceedings in your jurisdiction adversarial or ex parte?

The proceedings following an application for enforcement of domestic and international awards are adversarial. Enforcement is granted in summary proceedings. The award debtor will be called by the court to make a short submission on the question of enforceability (Art. 351 CCP). The state court has the possibility of ordering protective measures before hearing the respondent if such notification could seriously impede or defeat the enforcement application.

Similarly, foreign awards are recognised and enforced in adversarial proceedings following an application by the applicant. The application is dealt with in summary proceedings with the award debtor being granted an opportunity to make a response to the application.

Formal and practical requirements

What documentation is required to obtain recognition of an arbitral award? For instance, must the award be submitted in original or a certified copy? Does the original arbitration agreement have to be submitted?

A domestic or international award is enforceable from the moment it is served on the parties. A certified copy of the arbitration agreement, the award and a power of attorney must be provided. As for the award, Swiss courts do not take a formalistic approach to the specific form of the award that must be provided by the award creditor. In fact, an authentication of the award is not needed if the award debtor does not dispute its authenticity. Furthermore, Switzerland is a party to the Apostille Convention. Requirements for translation of awards drafted in other national official languages vary from one canton to another. The more exotic the language, the more likely the need for certification of the translation. For monetary judgments, conversion of the value of the domestic award into Swiss francs is necessary.

An application for recognition of a foreign award must be accompanied by the following documents, as per Art. IV of the New York Convention by reference of Art. 194 of the PILA:

  • the duly authenticated original award, or a duly certified copy thereof (Art. IV (1)(a));
  • the original of the arbitration agreement or a duly certified copy thereof (Art. IV (1)(b));
  • and translations of the award and the arbitration agreement into one of the official languages of Switzerland: German, French or Italian (Art. IV (2)).

If the required documentation is drafted in another language than the official language of your jurisdiction, is it necessary to submit a translation together with an application to obtain recognition of an arbitral award? If yes, in what form is the translation required to be?

Swiss courts may dispense with the requirement of submitting the award and the arbitration agreement in an official language of Switzerland in accordance with Art. IV (2) of the New York Convention. Nonetheless, Swiss courts have not made use of this discretion. According to Swiss legal scholars and the practice of Swiss courts, the Swiss enforcement court must accept a translation of a foreign award into either one of the three official languages of Switzerland (German, French or Italian), even if the translation is not in the official language of the enforcement court.

Rules on authentication and certification vary from canton to canton. Some cantons provide for sworn translators; other cantons authorise public notaries to certify translations as to their correctness; in yet other cantons, the court may appoint a translator to prepare a translation. Swiss consular and diplomatic agents can also certify translations. Consistent with the less formalistic approach of Swiss courts, in general, it is only necessary that the consular agent certify the correctness of the first and last page of the translation of an arbitral award, including the particulars of the parties and the dispositive part of the award.

What are the other practical requirements relating to recognition and enforcement of arbitral awards? For instance, do you need to be represented by a lawyer from the particular jurisdiction?

Unless the parties have agreed otherwise, Art. 189 (2) of the PILA provides that the award shall be in writing, reasoned, dated and signed. The signature of the chairman is sufficient. Though extremely rare in practice, the parties are free to waive the written-form requirement and can agree that the award be rendered orally. If the presiding arbitrator is in the minority and declines to sign, the award is still valid with the signatures of the two other arbitrators.

Although the PILA does not mention any other elements that the award must contain, in practice tribunals tend to follow the rules set out in Art. 384 CCP, which regulates domestic arbitration. As such, an award would also usually contain the composition of the arbitral tribunal, the seat of the arbitration, the designation of the parties and their representatives, the parties’ prayers for relief, the operative part of the award, and the amount and allocation of the costs and party compensation.

Regarding the capacity to take legal action, disputing parties do not need to be represented by representatives such as a lawyer since Art. 67 CCP does not require this for both recognition and enforcement of domestic and international awards.

When is service of judicial and extrajudicial documents deemed to be affected in your home jurisdiction and what does the procedure and legal framework look like? What about service to a party outside of your jurisdiction? 

Domestic service
Service of judicial documents in Switzerland – which means documents issued within state court proceedings – is governed by Arts. 136 to 141 CCP. In general, service is affected through the court by means of registered mail and/or mail against return receipt or, upon agreement of the recipient, by electronic means. In addition, in case the recipient’s domicile in Switzerland is unknown or service of process is impossible or impracticable, or the recipient has not named a representative such as a lawyer for service of process, then service may be effected by publication in the official cantonal or federal gazette.

International service
Switzerland is a party to the HCCH Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters 1965 (Hague Service Convention). Subject to those provisions on international service outside of Switzerland, a domestic decision is served by registered email and is deemed served when received (Arts. 138 (1) and (2) CCP). Exceptions can apply. E-service is permitted only with the consent of the party concerned pursuant to Art. 139 CCP. Service by publication is only possible in exceptional circumstances according to Art. 141 CCP.

Are there any differences in the procedure of the enforcement of domestic and foreign arbitral awards?

Unlike domestic or international arbitral awards, the documents required to enforce a foreign arbitral award are specified in Art. IV (1) of the New York Convention, plus a power of attorney. This article provides that the award creditor shall supply: “(a) The duly authenticated original award or a duly certified copy thereof; (b) The original agreement referred to in article II or a duly certified copy thereof”.

Substantial requirements

Do courts recognize and enforce partial or interim awards or only final awards?

Swiss courts do recognise and enforce partial awards that dispose of one or more of the claims and finally resolve a part of the dispute. Such awards have res judicata effect.

In contrast, interim or preliminary awards, understood as decisions that clarify a preliminary issue, are not enforced but may be recognised. For example, a preliminary award by a tribunal in Switzerland regarding its jurisdiction has res judicata effect and will bind a court or tribunal later seized of the matter.

The determination of whether a decision constitutes an “award” depends not on the words used to describe it, but rather on its content. Procedural orders and orders of provisional measures are not enforceable as such, but costs awards are considered final decisions constituting awards. A settlement embodied in a consent award that finally resolves one or more of the claims may be recognised and enforced as an award.

What are the grounds on which an award may be refused recognition? Do the relevant provisions differentiate between domestic and foreign arbitral awards? If yes, what are the differences in their requirements?

The grounds for refusing enforcement of domestic and international awards include (i) that the obligation for which enforcement is sought has been performed, (ii) has become objectively impossible, or (iii) has become time-barred by statute. They can also be refused if the dispute is not arbitrable. A contrario, any claim that the parties can freely dispose of can be subject to an arbitration agreement within a domestic arbitration dispute (Art. 354 CCP). As regards international awards, any dispute involving an economic interest can be subject to arbitration (Art. 177 (1) PILA).

Regarding foreign awards, the grounds enumerated in Art. V of the New York Convention are the exclusive grounds based on which a Swiss court may refuse recognition and enforcement. Swiss courts interpret these grounds restrictively. Even where one of the grounds is found to have been established, Swiss courts have discretion to grant enforcement and recognition if they comply with relevant Swiss public policy considerations.

How does your home jurisdiction interpret and construe the public policy violation defence?

An award debtor cannot invoke public policy exceptions where enforcement of a domestic or international arbitration award is sought (Art. 354 CCP and Art. 177 PILA). Such defence must be brought under the heading of arbitrariness.

As for foreign awards, their enforcement is denied for violation of public policy under Art. V (2)(b) of the New York Convention. From a Swiss public policy perspective, enforcement is denied either for violation of procedural public policy principles, or violation of substantive public policy principles.

The violation of procedural public policy relates to cases in which the arbitration proceedings are seen to be so deficient and lacking in generally accepted principles that there is no other solution but to refuse enforcement. Such reasons can be severe breaches of the right to be heard or the right to an impartial and independent arbitral tribunal.

Violations of substantive public policy, on the other hand, pertain to awards that, due to their material content, are irreconcilable with Swiss notions of justice, such as awards with punitive damages elements. Moreover, awards can be unenforceable, if they (i) do not respect the principle of the binding character of contracts, (ii) do not honour the prohibition of abuse of law, or (iii) give effect to expropriations without compensation.

Effects, remedies & procedural requests

What is the effect of a decision recognizing the award in your jurisdiction? Is it immediately enforceable?

There are three possible ways for all types of awards (domestic, international and foreign) to be recognized.

First, it is possible to request from a competent court (as defined by Art. 339 CCP and by cantonal legislation) a stand-alone exequatur decision, confirming the recognition and enforceability of an award without further proceedings. Such decision gives the award res judicata effect and makes the award immediately enforceable.

Second, an award creditor may initiate execution proceedings for monetary or non-monetary relief without requesting a declaration of recognition and enforceability. In this case, exequatur is decided as a preliminary question. It does not appear in the operative part of the court’s decision and lacks res judicata effect.

Third, a party may be willing to combine its request for exequatur with execution proceedings.

Are any remedies available against a decision recognizing an arbitral award in your jurisdiction and, if yes, what are they?

The below concerns all types of awards (domestic, international or foreign awards).

A party may appeal a decision granting exequatur to the higher cantonal court. If the appeal is unsuccessful, the party concerned may appeal to the Swiss Federal Supreme Court. The appeal, however, has no automatic suspensive effect on the decision on exequatur or the decision on execution.

As regards the specific case of monetary claims, a party may appeal a decision to set aside the debtor’s objection in debt enforcement proceedings to the higher cantonal court and, if unsuccessful, to the Swiss Federal Supreme Court.

What remedies, if any, are available against a decision refusing to recognize an arbitral award in your jurisdiction?

The below concerns all types of awards (domestic, international or foreign).

If exequatur is denied, the requesting party may appeal to the higher cantonal court, and then to the Swiss Federal Supreme Court as a last resort. A decision granting the debtor’s objection in debt enforcement proceedings may be appealed to the higher cantonal court. If unsuccessful, this decision may also be appealed before the Swiss Federal Supreme Court.

Are any additional defences such as a set-off claim possible in enforcement proceedings?

When it comes to domestic awards, the only available defences are that the amount of the claim was wholly or partially paid or suspended, is statute-barred, or was miscalculated. For international awards, the award debtor has no additional defence means at its disposal according to PILA. As for foreign awards, the New York Convention does not provide any specific rules when it comes to possible set-off claims either.

Is it possible to obtain the recognition and enforcement of an award that has been fully or partly set aside at the seat of the arbitration? In case the award is set aside after the decision recognizing the award has been issued, what remedies, if any, are available against this decision?

An award that has been fully set aside at the seat of arbitration will, in general, be denied recognition and enforcement in Switzerland, consistent with Art. V (1)(e) of the New York Convention. Although obiter dictum in recent Swiss decisions indicates that it cannot entirely be excluded that an award that was set aside at the seat of the arbitration might be enforced nonetheless under extraordinary circumstances, Swiss courts have not been called upon to finally resolve this question yet.

If an award has been partly set aside at the seat of the arbitration, and where the portion that is set aside is severable from the portion that has not been set aside, leading Swiss scholars reason that it is possible to obtain recognition and enforcement of the portion that has not been set aside.

If the award is set aside at the seat of the arbitration after a Swiss court has issued a decision recognising or granting enforcement of the award, legal scholars support the view that the award debtor may request cancellation of the decision granting enforcement, applying Art. V (1)(e) of the New York Convention by analogy.

Are interim measures against assets in your jurisdiction available? And if yes, what kind of measures are they?

As regards interim measures, there is no difference between domestic, international or foreign awards.

As for monetary relief in awards, the courts may order the attachment of assets as an interim measure in Switzerland, on an ex parte basis, pursuant to Arts. 271 to 281 DCBA. This measure leads to a temporary freezing of assets located in Switzerland. It secures a basis for subsequent enforcement, before a claim is filed, but also at any time after filing the main action in Switzerland or abroad as an ancillary remedy, and as a post-trial conservatory order after the creditor has obtained judgment. The monetary claim for which an attachment order is sought must be prima facie due and payable.

Alternatively, but exclusively in the case of fraudulent or criminal acts, an award creditor may request a freezing order from the prosecutor in charge under Swiss criminal procedure law. A decision is then rendered by the prosecutor, which is subject to appeal before the cantonal criminal court.

Furthermore, an award creditor may obtain interim measures against assets owned by a sovereign state, provided that the assets are not subject to immunity. This means that the assets at stake do not pertain to activities of the sovereign state in the exercise of its sovereign powers.

In which cases may a security for costs be requested?

Concerning domestic but also foreign awards, since the latter also apply the same procedural rules as the former ones, the court may request the payment of a security from either the award creditor or debtor who has requested interim measures if these may harm the other party pursuant to Art. 374 (3) CCP.

In the same manner as security for costs is requested and ordered in the context of the enforcement of a domestic or foreign award, the court may also request the payment of a security for costs when an international award is at stake according to Art. 183 (3) PILA.

The practice of courts regarding the ordering of security for costs may vary substantially from one canton to another. Generally, the security needs to be paid in cash or provided in the form of a bank guarantee issued by a Swiss bank according to Art. 100 (1) CCP.






About the author

Fabio Leonini, LL.M.

Fabio Leonini studied law at University of Geneva and Zurich in Switzerland. He is a Swiss-qualified lawyer and has five years of experience working either as a white-collar crime litigator in various Swiss and International criminal proceedings or as a legal counsel at the Prosecution Office in Geneva in the same field of law.


About Wagner Arbitration

The law firm WAGNER Arbitration has its offices in Berlin and specializes in dispute resolution with a focus on arbitration. In addition, the firm offers comprehensive counseling services related to domestic and international business disputes and transactions.

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The answers provided in this questionnaire are as of July 2020. Please note that the relevant legal provisions may be subject to amendments.