The Swiss Chambers’ Arbitration Institution has recently revealed its revised Arbitration Rules, which are set to enter into force as of June 1st, 2012 (the “Swiss Rules” or the “Rules”). The Rules build on the success of their 2004 predecessor, yet introduce some interesting and well-received changes. This contribution provides a brief overview of some of the more significant amendments.
The former version of the Swiss Rules, adopted in 2004 (“2004 Swiss Rules“), was based on the 1976 Arbitration Rules of the United Nations Commission on International Trade Law (“UNCITRAL Rules“), adapting the latter to administered arbitrations and taking into account modern arbitral practice at the time. Since their entry into force, some 500 cases have been settled under the 2004 Swiss Rules. The aim in revising the 2004 Swiss Rules was to undertake a “light” revision, taking into consideration the revised 2010 UNCITRAL Rules, recent developments in arbitral practice and the experiences gained under the previous rules. The three main goals were (a) to further enhance the efficiency of the arbitral process, particularly in terms of time and cost; (b) to give certain additional powers to the institution administering the arbitration proceedings, again mainly in view of the efficiency of the process; and (c) to preserve the flexibility of the proceedings and the autonomy of the parties on the one hand and the arbitral tribunal on the other to the largest extent possible.
Strengthening of the Institution
One of the changes brought about by the 2012 revision of the Swiss Rules is the strengthening of the Swiss Chambers’ Arbitration Institution (the “Institution”).
Still comprised of the Chambers of Commerce and Industry of Basel, Bern, Geneva, Neuchâtel, Ticino, Vaud and Zurich, the Institution has established the Arbitration Court (the “Court”). As compared to the powers vested in the previous Arbitration Committee and Special Committee, the competences of the Court have been broadened in the interest of the efficient and smooth running of the arbitration proceedings under the Swiss Rules. Thus, new Article 1(4) of the Rules provides in general terms that by submitting their dispute to arbitration under the Swiss Rules, the parties confer on the Court, to the fullest extent permitted under the law applicable to the arbitration, all of the powers required for the purpose of supervising the arbitral proceedings otherwise vested in the competent judicial authority, including specifically the power to extend the term of office of the arbitral tribunal and to decide on the challenge of an arbitrator on grounds not provided in the Swiss Rules.
Furthermore, the Court has been given extended powers with respect to the constitution of the arbitral tribunal. For instance, pursuant to Article 2(3) of the Rules, the Court may extend or shorten any time-limit it has fixed or has the authority to fix or amend if the circumstances so justify. This can include the shortening of the time-limits for the appointment of arbitrators. Moreover, the Court has the power to ensure the due and prompt constitution of an arbitral tribunal in the event of any failure in such constitution under the Swiss Rules, which includes the express power to revoke any appointment already made, to appoint or reappoint any of the arbitrators and to designate one of them as the presiding arbitrator (Article 5(3)).
The Court has also been vested with extended powers with respect to any decision of the arbitral tribunal on costs. Whereas under the 2004 Swiss Rules cost decisions were only to be submitted to the Chambers for consultation, Article 40(4) of the 2012 Rules provides for the submission of cost decisions to the Court for approval or adjustment, expressly stipulating that any decision in this respect by the Court is binding upon the arbitral tribunal.
The Court is assisted in its work by the Secretariat of the Court (the “Secretariat”). As a general rule, it is now also the Secretariat and no longer the arbitral tribunal that holds the deposits to be paid by the parties (Article 4(1) of Appendix B).
Time and Cost Efficiency
One of the main goals of the revision was to further increase the efficiency of the proceedings. Unlike other recently revised sets of arbitration rules, the drafters of the Swiss Rules decided not to introduce a separate catalogue of case management tools. Instead, the existing rules were partially modified where deemed necessary.
The key provision in this regard is Article 15(7) of the Rules, providing that all participants in the arbitral proceedings shall act in good faith and shall make every effort to contribute to the efficient conduct of the proceedings and to avoid unnecessary costs and delays. Unlike for instance Article 37(5) of the 2012 ICC Rules, the Swiss Rules do not contain an express provision that a party not having conducted the arbitration in an expeditious and cost-effective manner may be faced with consequences as to the bearing of costs. However, Article 40 of the Swiss Rules, providing that the arbitral tribunal may apportion any of the costs of the arbitration among the parties if it determines that such apportionment is reasonable, taking into account the circumstances of the case, does not exclude that the parties’ behavior with respect to efficiency and cost-effectiveness is a circumstance to be taken into account by the tribunal when apportioning the costs of the proceedings.
Besides this general provision, the revised Rules provide for several additional, yet more minor amendments geared towards time and cost efficiency, such as the competence of the Court stipulated in Article 2(3) to shorten time-limits, the appointment of party-appointed arbitrators together with the Notice of Arbitration and the answer thereto, respectively (Article 3(3)(h) and 3(7)(f)), the introduction of a 15 day deadline for the challenge of an arbitrator after the circumstances giving rise to the challenge became known to that party (Article 11), the general rule that the Statement of Claim and the Statement of Defence shall include all documents and other evidence on which the parties rely (Articles 18(3) and 19(2)), or the express provision of witness or expert examination “through means that do not require their physical presence at the hearing (including by videoconference)” (Article 25(4)).
Consolidation and Joinder
Article 4 of the 2012 Swiss Rules introduces some amendments to the existing provisions on consolidation of and joinder of additional parties to pending arbitration proceedings.
Article 4(1) further increases flexibility with respect to consolidation of arbitration proceedings by vesting the Court with the power to revoke the appointment and confirmation of arbitrators and to appoint arbitrators itself if necessary to enable consolidation. It is noteworthy that the Swiss Rules are less restrictive in terms of the prerequisites for granting consolidation from the ICC Rules in that they give the Court greater discretion. This being said, it is to be expected that the Court will exercise this discretion with appropriate restraint, giving due consideration to the privity of the contractual relationships in question.
Article 4(2) brings about only minor changes to the provision on joinder. In particular, by amending the wording from “third parties” to “third persons”, the Rules clarify that the provision includes third persons who are not yet and may not become “full” or principal parties to the arbitral proceedings, but can act as secondary parties (Nebenpartei). Moreover, the 2012 Swiss Rules allow for the participation of third persons in arbitral proceedings without a claim being raised against such third person. It is noteworthy that the Swiss Rules offer more options with respect to joinder than the ICC Rules, which do not allow for a third party to join proceedings on its own motion or to request the joinder of a third party without filing a claim against it.
Interim Relief and Emergency Arbitrator
The 2012 Swiss Rules also introduce some changes with respect to interim relief.
Many of the changes to the wording of Article 26 on tribunal-ordered interim relief reflect current arbitral practice in Switzerland. Thus, Article 26(1) now expressly states that upon the application of any party or, in exceptional circumstances and with prior notice to the parties, on its own initiative, the arbitral tribunal may modify, suspend or terminate any interim measures granted. Furthermore, new Article 26(4) stipulates that the arbitral tribunal may rule on claims for compensation for any damage caused by an interim measure which later proves to have been unjustified. Also, Article 26(5) now expressly recognized the concurrent jurisdiction enshrined in many arbitration laws between state courts and arbitral tribunals to grant interim relief in support of arbitration, and provides that by submitting their dispute to arbitration under the Rules, the parties do not waive any right that they may have under the applicable laws to submit a request for interim measures to a judicial authority.
Article 26(3) of the Swiss Rules is an entirely new provision and reads as follows: “In exceptional circumstances, the arbitral tribunal may rule on a request for interim measures by way of a preliminary order before the request has been communicated to any other party, provided that such communication is made at the latest together with the preliminary order and that the other parties are immediately granted an opportunity to be heard.” In other words, the Swiss Rules expressly allow for ex parte interim relief, provided that the party against whom the ex parte measure is directed is immediately granted the right to be heard. This provision, which strongly resembles the provision on preliminary orders in the UNCITRAL Model Law in its 2006 version, reflects the common view in Switzerland that, in order to prevent frustration of the purpose of the requested interim relief and to effectively protect the parties’ rights, it is necessary in exceptional circumstances to grant such interim relief on an ex parte basis.
Finally, Article 43 of the Swiss Rules introduces a new emergency relief procedure, enabling a party to a Swiss Rules arbitration agreement requiring urgent interim measures pursuant to Article 26 before the arbitral tribunal is constituted to submit to the Secretariat an application for emergency relief proceedings. The emergency arbitrator provisions under the revised Swiss Rules resemble other recently introduced emergency arbitrator regimes (see, e.g., the emergency arbitrator under the 2012 ICC Rules), but introduce some provisions specific to the Swiss Rules. For instance, the emergency arbitrator under the Swiss Rules, by reference to Article 26 of the Rules as a whole, has the power to grant preliminary orders in exceptional circumstances, a power not vested in the emergency arbitrator under other comparable rules. Furthermore, pursuant to Article 43(2)(b) of the Rules, it is at the Court’s discretion to refrain from appointing an emergency arbitrator if it appears more appropriate in a given case to proceed with the constitution of the arbitral tribunal and refer the application for urgent interim measures to the arbitral tribunal.
In sum, the recent “light” revision of the Swiss Rules constitutes a successful attempt at reflecting current arbitral practice and time and cost efficiency of the arbitral process whilst at the same time maintaining the core attributes of Swiss Rules arbitration, which has over the past eight years proven to be a highly successful means of dispute resolution. Compared to other institutional arbitration rules, the Swiss Rules continue to offer a leaner and more flexibility, yet effective administration of arbitration proceedings.
Dr. Christopher Boog is a Partner in Schellenberg Wittmer in Zurich and a member of its International Arbitration Practice Group. He is a member of the Zurich bar and a graduate from the Law Schools of the Universities of Fribourg (Master of Law, with honors), Amsterdam (International Law Certificate) and Zurich, where he obtained his doctorate summa cum laude. Christopher Boog was a research fellow at Columbia Law School in New York and regularly publishes and speaks on topics of international arbitration and transnational litigation.