"US Spotlight" blog series: demystifying Swiss arbitration for the US litigator (Volume 1 of 10)
This blog series provides the US litigator with a practical understanding of Swiss arbitration. It compares a Swiss arbitral proceeding under the Swiss Rules of International Arbitration ("Swiss Rules"), though other rules, e.g., the International Chamber of Commerce ("ICC") Rules, are often used, with a dispute in US Federal District Court ("USDC").
Why Swiss arbitration? Before reading beyond this sentence, American litigators may well ask themselves, "what does Swiss arbitration have to do with my practice?" Potentially, a great deal. Sophisticated parties increasingly look to avoid court proceedings. US domestic arbitration may work when both parties are US based, but when one party is not, parties tend to look for neutral turf. While many options exist, e.g., London, Paris, Vienna, and Singapore, Switzerland is a prime choice, with a well-deserved reputation for quality, neutrality, punctuality, and commercial-mindedness. It has been the preferred venue for disputes subject to the ICC Rules for many years, and hosts several dispute resolution institutions such as the World Intellectual Property Organization ("WIPO") and the Court of Arbitration for Sport ("CAS"). To the extent that a US company conducts business abroad, Swiss arbitration clauses may be in play.
Confidentiality is a salient factor of Swiss arbitration. Unless the parties agree otherwise, and in contrast with US litigation, all awards, orders, and materials submitted during the arbitral proceedings are to be kept confidential. Art. 44 Swiss Rules. Hearings are presumptively held in camera. Art. 25(6) Swiss Rules. The tribunal, its secretary, appointed experts, the Swiss Chambers' Arbitration Institution ("SCAI"), its secretariat and staff, and members of the arbitration court of the SCAI (the "SCAI Court") are absolved from any obligation to make statements about the arbitration. Art. 45(2) Swiss Rules. It is customary for a Swiss arbitral proceeding to come and go without a trace of exposure.
Initiating arbitration Once a Claimant has decided to exercise its rights under a Swiss arbitration clause, it must file a Notice with the secretariat of the SCAI. This is a bare bones document vaguer than an unverified Complaint. Federal Rule of Civil Procedure ("FRCP") 3. The Notice comments on the content of the arbitration clause, e.g., establishing venue, procedural rules, substantive law to be used, language, and whether or not a specific number of arbitrators is mandated. It also provides fundamental facts relevant for the proceedings such as contact information of the parties, the legal instrument(s) underpinning the dispute, a general nature of the claim, an indication of the amount involved, and the relief or remedy sought. Art. 3 Swiss Rules. It also may require the nomination of an arbitrator. Art. 3(3)(h) Swiss Rules. In certain circumstances, e.g., minimal amount in dispute or an interest in rapidly advancing the proceedings, a Claimant may choose to attach its Statement of Claim ("SOC") to the Notice. A nominal registration fee is paid.
Respondent has thirty days to file, with the SCAI, its Answer to the Notice of Arbitration ("ANA"). Art. 3(7) Swiss Rules. But Respondents do not choose from a suite of FRCP 12 styled approaches available to US litigants. Rather, the ANA accepts or takes issue with the procedural framework for the arbitration, e.g., number of arbitrators, language, seat of arbitration, jurisdiction of tribunal, and comments—albeit briefly—on the Claimant's substantive contentions and remedies sought. Any counterclaim or set-off defense should in principle be raised at this time. Art. 3(10) Swiss Rules. There is neither a standalone separate rule, such as FRCP 13, that must be invoked to bring a counterclaim nor a distinction between different types of counterclaims, e.g., permissive, FRCP 13(b), vs. compulsory, FRCP 13(a). If Claimant's Notice attached the SOC, Respondent's ANA would attach the Statement of Defence ("SOD"). Assuming a detailed arbitration clause and carefully plead Notice, there is little to fight about at this stage.
Empaneling the tribunal Once in receipt of the ANA, and assuming arbitrators were not nominated with the Notice and ANA, the secretariat of the SCAI will invite the parties to nominate arbitrators. If the arbitration clause is not explicit on the number of arbitrators, which can be "one" or "three", the parties are asked, in the first instance, to decide themselves. The Court can be summoned to settle disagreements, and, in the case of sole arbitrator proceedings, who the sole arbitrator should be. If the case warrants a tribunal, both parties nominate an arbitrator, who can be challenged, though not unreasonably, and the two party-nominated arbitrators select the president. Ensuring impartiality of the arbitrators is governed by Art. 9-11 Swiss Rules, and the IBA Guidelines on Conflict of Interest are often referenced. This blog series will proceed based on a tribunal model, preferred for complex disputes.
Parties can interview as many potential arbitrators as they like, discuss the parties and amount at stake, and attempt to get a feel for a potential arbitrator's relevant experience before deciding to nominate her. The highest standards of ethics are employed by counsel, party, and potential arbitrator during this vetting process, and no potential arbitrator would ever reveal how she would rule on an issue, but this process still nevertheless yields more information about the adjudicator than a US plaintiff could possibly know upon filing a claim in USDC. Experienced counsel spend time carefully evaluating potential arbitrators before deciding whom to nominate. All nominees must be confirmed by the SCAI Court.