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SWITZERLAND: STATUTE ON INTERNATIONAL ARBITRATION Author(s): Charles Poncet and Emmanuel Gaillard Source: International Legal Materials, Vol. 27, No. 1 (JANUARY 1988), pp. 37-57 Published by: American Society of International Law Stable URL: http://www.jstor.org/stable/20693184 . Accessed: 15/06/2014 05:21 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp . JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected]. . American Society of International Law is collaborating with JSTOR to digitize, preserve and extend access to International Legal Materials. http://www.jstor.org This content downloaded from 62.122.76.45 on Sun, 15 Jun 2014 05:21:13 AM All use subject to JSTOR Terms and Conditions

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Page 1: SWITZERLAND: STATUTE ON INTERNATIONAL ARBITRATION

SWITZERLAND: STATUTE ON INTERNATIONAL ARBITRATIONAuthor(s): Charles Poncet and Emmanuel GaillardSource: International Legal Materials, Vol. 27, No. 1 (JANUARY 1988), pp. 37-57Published by: American Society of International LawStable URL: http://www.jstor.org/stable/20693184 .

Accessed: 15/06/2014 05:21

Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at .http://www.jstor.org/page/info/about/policies/terms.jsp

.JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range ofcontent in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new formsof scholarship. For more information about JSTOR, please contact [email protected].

.

American Society of International Law is collaborating with JSTOR to digitize, preserve and extend access toInternational Legal Materials.

http://www.jstor.org

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Page 2: SWITZERLAND: STATUTE ON INTERNATIONAL ARBITRATION

SWITZERLAND: STATUTE ON INTERNATIONAL ARBITRATION* [December 18, 1987]

Cite as 27 I.L.M. 37 (1988)+

Introductory Note

Charles Poncet and Emmanuel Gaillard

On December 18, 1987, after several years of

deliberation, the Swiss Parliament adopted the definitive text of the Federal Statute on Private International Law. The

statute will enter into force in the latter half of 1988, once

the referendum period has expired. The statute will be

reproduced in its entirety in 27 ILM N? 2 (1988).

Chapter 12 of the federal statute, which deals with

international arbitration, radically departs from the

Intercantonal Arbitration Convention of March 27, 1969 (the

"Concordat"). The Concordat contains numerous mandatory

provisions that were felt to be somewhat outdated in today's more flexible and increasingly competitive international

arbitration environment (cf. English 1979 Arbitration Act [18 ILM 1246 (1979)]; French Decree on International Arbitration

of May 12, 1981 [20 ILM 917 (1981)]; Belgian reform of 1985 [25 ILM 725 (1986)]; July 2, 1986 Dutch statute on arbitration [26 ILM 921 (1987)]; the new Canadian statutes [26 ILM 714 (1987)]; Florida International Arbitration Act [26 ILM 949 (1987)]). The Concordat even falls short of the standards set forth by the UNCITRAL Model Law, which is generally considered to be

*[The Introductory Note and translation were prepared for International Legal Materials by Charles Poncet, I.L.M. Corresponding Editor for Switzerland, Law Offices of Charles Poncet, Geneva, and Emmanuel Gaillard, I.L.M. Corresponding Editor for France, Professor of Law, University of Paris XII, European Counsel, Shearman & Sterling, Paris.]

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38

rather conservative [24 ILM 1302 (1985)]. (For a comparative

analysis of recent statutes, see Gaillard, "The UNCITRAL Model

Law and Recent Statutes on International Arbitration in Europe and North America", 2 ICSID Review N? 2 (1987)).

The Swiss federal statute is in many respects more

innovative than many of the recent statutes and far more

innovative than the UNCITRAL Model Law. Its originality stems

from (i) its scope, (ii) the autonomy granted to the parties in

shaping the arbitral process and (iii) the limited role of

Swiss courts in arbitral proceedings.

I. Sgope

A. In theory, the new federal statute does not supersede

the Concordat, which, after Zurich adopted it on July 1, 1985,

has been adopted in 22 out of the 26 Swiss cantons. The

Concordat, as well as local law in the remaining four cantons,

will still govern international arbitration if the parties so

choose (article 176 (2)).

In practice, however, the federal statute is likely to

become the only relevant Swiss law on international arbitration.

B. Whether the federal statute will apply to arbitration

clauses entered into prior to the effective date of the statute

is unclear. Unlike the Belgian act which applied retroactively

to pending arbitration [25 ILM 726 (1967)], the Swiss statute

does not address this issue.

To cure such ambiguity, the parties may, prior to the

effective date, stipulate in their arbitration agreement that

the statute will apply to potential disputes. Given the

importance accorded by the new statute to the intent of the

parties, such a clause is likely to be upheld by the Swiss

courts.

C. The federal statute covers only international

arbitration within the meaning of article 176(1) in contrast to

the Dutch statute, which also applies to domestic arbitration.

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39

However, what constitutes "international arbitration"

substantially differs from one country to another. While the

French statute looks to the nature of the underlying transaction (see article 1492 NCCP, 20 ILM 917 (1981)), the

Swiss statute determines the international character of the

arbitration with respect to the domicile or habitual residence

of the parties (article 176(1)), As a result, a dispute

arising out of a cross-border sale of goods by two subsidiaries

incorporated in Switzerland whose parent corporations are

incorporated outside of Switzerland, may be deemed to be

domestic and thus fall outside the scope of the act,

D. On the other hand, the definition of arbitrable

disputes is very broad under the federal statute, encompassing

any claim related to a party's assets, rights or liabilities

["nature patrimoniale"] (article 177(1)). The statute thus

avoids the difficulties that U.S. courts have encountered in

determining whether antitrust and securities law issues are

arbitrable. This provision goes as far as precluding states or

state-owned entities from invoking their domestic law to

challenge not only the arbitrability of the dispute but also

their capacity to enter into an arbitration agreement (article 177 (2)). It is questionable whether this provision, which is neither a substantive rule nor a true choice of law rule, will

suffice to resolve the difficult problems surrounding the

possible impediments to arbitration in the concerned

jurisdiction.

II? Party Autonomy in the Arbitral Process.

The following provisions are noteworthy:

A. The rules clearly favor validity of the arbitration

agreement (article 178).

B. Following the general trend, the rules governing procedure grant large freedom of choice to the parties. However, equal treatment and the right to be heard in an

adversary proceeding are mandatory (article 182 (3)).

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40

C. The law applicable to the dispute will be the "rules

of law" chosen by the parties or the "rules of law" which have

the closest connection with the transaction (article 187). Reference to the "rules of law" rather than the "law" suggests

that the parties, or alternatively the arbitrators, may (i)

select different laws to govern various aspects of the

transaction, (ii) "freeze" the law at any point in time or

(iii) resort to general principles of international law rather

than the law of any particular jurisdiction. However, absent

the parties' choice, the arbitrators' freedom to select

applicable law is restricted by the nexus requirement, whereas

under the French and Dutch statutes, for example, the

arbitrators are granted complete freedom. Nevertheless, this

provision is sufficiently flexible to lead, in practice, to

similar results and offers the added advantage of precluding a

comparative analysis of all the possible choice of law rules,

as is sometimes required in other jurisdictions.

m. court intervention in the Arbitral Processt

The new statute reduces to a minimum the importance of

court intervention.

A. The cantonal court of the situs of the arbitral

tribunal has jurisdiction to act as follows:

1. assist, if necessary, in establishing the arbitral

tribunal (article 179(2)(3));

2. rule on the challenge of arbitrators, unless the

parties have stipulated otherwise (article 180); or

3. assist in the taking of evidence, if requested by the

parties or by the arbitral tribunal (article 184).

It is noteworthy that each of the foregoing rules will

not apply if the arbitration Rules chosen by the parties or the

arbitration clause provide'otherwise.

B. Swiss courts may grant provisional measures but their

jurisdiction is clearly subordinate to that of the arbitral

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41

tribunal. In contrast to the Concordat, the federal statute

provides that provisional remedies, including the freezing of assets, should be referred to the arbitral tribunal itself. It

is only in the event that a party refuses to comply with the arbitral tribunal's order that the arbitral tribunal may ask a

court with proper jurisdiction to intervene (article 183).

C. The Swiss Federal Tribunal has exclusive jurisdiction to set aside arbitral awards unless the parties have requested that jurisdiction be conferred to the court designated in each canton for that purpose (article 191).

The grounds to set aside are far more limited under the federal statute than those enumerated in article 36 of the Concordat. In particular, the highly controversial ground based on arbitrary" has been dropped. This provision is now in line with French and Dutch law, the New York Convention and the UNCITRAL Model Law. Provided that the Federal Tribunal has a sound conception of "public policy" (see Lalive, "Transnational (or Truly International) Public Policy and International Arbitration", ICCA Congress Series, n? 3, Kluwer

1987, 257) no review on the merits will take place.

The Swiss legislature went even further by providing that if none of the parties has its domicile or habitual residence in Switzerland, they can exclude, partially or

totally, the grounds to set aside (article 192(1)). In this

respect, the Swiss approach differs from that of the Belgian statute, which reaches the same result without giving any

option to the parties (see article 1717 of the Code of Civil Procedure [25 ILM 726 (1986)]). This provision also differs from English law under which the "exclusion agreement" cannot

preclude the courts from reviewing the award if an arbitrator has, for example, "misconducted himself or the proceedings" [18

ILM 1246 (1979)]. In the case of total exclusion, Swiss courts will only ensure that the award meets the requirements of the 1958 New York Convention on the Recognition and Enforcement of Arbitral Awards if enforcement is sought in Switzerland

(article 192(2)). Although the statute is not clear in this

respect, it would seem reasonable to assume that such approach

also applies mutatis mutandis even where exclusion is partial

(see Gaillard, supra p. 1, at IV).

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I.L.M. Content Summary

CHAPTER 12 [of' the Swiss Statute on Private International Law]: INTERNATIONAL ARBITRATION

I. Scope. Seat of the arbitral tribunal (Article 176) - I.L.M. Page 44 [This chapter applies when the tribunal seat is in Switzerland and one of the parties has neither domicile nor habitual residence in Switzerland; determination of the tribunal seat]

II. Arbitrability (Article 177) - I.L.M. Page 45 [A state or state-controlled enterprise may not challenge arbitrability based on provisions of its own law]

III. Arbitration agreement (Article 178) - I.L.M. Page 45 [Must be in writing; validity is determined by an applicable body of law and does not depend on the validity of the underlying contract]

IV. Arbitral tribunal - I.L.M. Page 46 1. Establishment (Article 179) [Unless directed otherwise by

the parties, appointment of arbitrators shall be according to the law of the canton where the tribunal seat is]

2. Challenge of arbitrators (Article 180) [On grounds established by the parties; in any case, when independence of judgment is doubtful; the local canton court rules on challenges]

V. Lis pendens (Article 181) - I.L.M. Page 48 [Proceedings begin when a claim is filed or procedure for appointment of the tribunal is initiated]

VI. Procedure - I.L.M. Page 49 1. Principle (Article 182) [If not determined by the parties,

then determined by the tribunal; in any case, equal treatment of the parties and right to be heard shall be guaranteed]

2. Provisional and conservatory measures (Article 183) [May be issued by the tribunal, and the tribunal may require posting of bond by the requesting party; compliance is court enforceable]

3. Taking of evidence (Article 184) [Court orders (subpoenas) may be sought]

4. Other court assistance (Article 185) [Jurisdiction is with the court of the canton where the tribunal's seat is]

VII. Jurisdiction (Article 186) - I.L.M. Page 51 [Challenge must be raised prior to raising any merits defenses; rulings by the tribunal on its own jurisdiction are interlocutory]

VIII. Award on the merits - I.L.M. Page 52 1. Applicable law (Article 187) [The parties may authorize

the tribunal to decide ex aequo et bono (on equitable grounds)]

2. Partial award (Article 188) [May be issued unless prohibited by the parties]

3. Arbitral award (Article 189) [Unless otherwise directed by

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43

the parties, the award shall be determined by a majority vote and reduced to writing]

IX. Finality, action to set aside - I.L.M. Page 53 1. Principle (Article 190) [Grounds of attack: A sole

arbitrator was improperly selected; lack of jurisdiction; failure to rule on claim submitted; failure to grant a party equal treatment or a right to be heard. Interim awards may be attacked only on the first two listed grounds]

2. Jurisdiction (Article 191) [An action to set aside for lack of jurisdiction must be brought before the Federal Tribunal or, if the parties so direct, the local canton court]

X. Waiver (Article 192) - I.L.M. Page 55 [If neither party has domicile, habitual residence, or principle place of business in Switzerland, grounds of attack may be waived]

XI. Deposit and issuance of certificate of enforceability (Article 193) - I.L.M. Page 56 [With the Swiss court where the tribunal's seat is; certification by the tribunal shall be equivalent to such a filing]

XII. Foreign arbitral awards (Article 194) - I.L.M. Page 57 [Recognition and enforcement is governed by the New York Convention of 1958]

TRANSLATION OF CHAPTER 12 OF THE SWISS STATUTE ON

PRIVATE INTERNATIONAL LAW

* * * *

Notice to reader:

In Switzerland, all legislation is passed in French, German

and Italian. The following text was adopted by the Swiss

Parliament on December 18, 1987 in French and German; the

Italian text has not yet been submitted to the Parliament.

The French and German versions, although approved by the

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drafting committee, still show some discrepancies. These

have been marked and explained in footnotes where necessary.

CHAPTER U; IPTERPAT?ONAE ARBITRATION

Art, 176

I. Scope. Seat of 1. The provisions of the present the arbitral tribunal chapter shall apply to every

arbitration when the seat of the

arbitral tribunal is located in

Switzerland and when at least one of

the parties, at the time of the

conclusion of the arbitration

agreement, had neither its domicile

nor its habitual residence in

Switzerland.

2. The provisions of this chapter do

not apply when the parties have

excluded in writing its application

and have agreed to apply only the

cantonal procedural rules with

respect to arbitration.

3. The parties themselves or the

arbitration institution designated by

them, or in default thereof, the

arbitrators, shall determine the seat

of the arbitral tribunal.

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II. Arbitrability

III. Arbitration agreement

45

1. Any claim related to a party's

assets, rights or liabilities may be

submitted to arbitration^.

2. A state or an enterprise or

organization under state control

which is a party to an arbitration

agreement may not invoke its own law

in order to challenge the #. (2)

arbitrability of the dispute* ' or

its capacity to be a party to the

arbitration.

Art, 178

1. An arbitration agreement is

formally validN ' if it is made in

writing, or by cable, telex,

(1) The French text refers to "toute cause de nature

patrimoniale", the German text, to "jeder

verm?gensrechtliche Anspruch". The concept of "patrimoine" is particularly broad, encompassing all kinds of rights and liabilities. Accordingly, all types of claims, whether contractual, tortious, commercial or financial, are arbitrable.

(2) The German version adds "... within the scope of the arbitration agreement." ("... die Gegenstand der Schiedsvereinbarung ist.")

(3) The French version opposes the formal requirements of 178(1) ("... Quant ? la forme ...") to the substantive requirements of 178(2) ("... Quant au fond ..."). The German version simply adds "moreover" ("im ?brigen") to the formal requirement of 178(1).

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telecopy, or any other means of

communication providing proof of its

existence in a text,

2. Every arbitration agreement

shall be valid as to its substance,

provided it meets the requirements

dictated either by the law chosen by

the parties, or by the law governing

the subject matter of the dispute

and notably the law applicable to

the main contract, or by Swiss law.

3. The validity of an arbitration

agreement cannot be challenged on

the basis that the main contract is

invalid or that the arbitration

agreement relates to a dispute which

has not yet arisen.

Art, 179

Arbitral tribunal

1. Establishment 1. The arbitrators shall be

appointed, dismissed or replaced in

accordance with the agreement of the

parties.

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2. Failing such an agreement, an

application may be made to the court

of the canton in which the arbitral

tribunal has its seatv ,? such

( court shall apply by analogy*

'

the provisions of cantonal law as to

the appointment, dismissal or

replacement of arbitrators.

3. When a court is called upon to

appoint an arbitrator, it shall do

so, unless a summary examination

demonstrates that no arbitration

agreement exists between the parties.

Art, 180

2. Challenge of 1. An arbitrator may be challenged: arbitrators

a. when he does not meet the

qualifications agreed upon by

the parties;

b. when the arbitration rules

adopted by the parties provide

for a ground for challenge; or

(4) In French, "... juge du si?ge du tribunal arbitral ...",? in German, "... Richter am Sitz des

Schiedsgerichts ... " .

(5) The German text says "sinngem?ssH, i.e., "according to its meaning".

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48

c. when the circumstances may

legitimately lead to doubt about

his independence,

2. A party may only challenge the

arbitrator it has appointed on a

ground of which it became aware

after the appointment. The arbitral

tribunal and the other party must be

informed immediately of the ground

for challenge.

3. The court of the canton in which

the arbitral tribunal has its seat

shall make a final decision on the

challenge, unless otherwise provided

by the parties.

Art, 181

V. Lis pendens The arbitration proceedings are

deemed to be pending from the moment

one of the parties files a claim

before one or all of the

arbitrators^ designated in the

arbitration agreement or, in the

absence of such designation, when one

(6) In French, "saisit le ou les arbitres".

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49

of the parties initiates the

procedure for the appointment of the

arbitral tribunal*

Art. 182

VI. Procedure

1. Principle 1. The parties may agree upon the

rules of procedure, either directly,

or by reference to the rules of an

arbitration institution; they may

also subject the proceedings to a

procedural law of their choice.

2. If the rules of procedure have

not been agreed upon by the parties,

they may be determined by the

arbitral tribunal to the extent

necessary, either directly or by

reference to a law or to arbitration

rules.

3. Irrespective of the procedure

chosen by the parties, the arbitral

tribunal shall in all cases guaranty

equal treatment of the parties and

their right to be heard in adversary

proceedings.

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Art, 183

1. Unless otherwise agreed by the

parties, the arbitral tribunal may

issue provisional or conservatory

orders if requested by one of the

parties.

2. If the opposing party does not

voluntarily comply with the order

issued by the arbitral tribunal, the

latter may seek the assistance of

the court* , which shall apply

its own law.

3. The arbitral tribunal or the

court may grant provisional or

conservatory measures subject to the

receipt of adequate security from

the requesting party.

Art, 184

Taking of 1. The arbitral tribunal shall conduct evidence /g\

the taking of evidence itselfv .

Provisional and conservatory measures

(7) The French text refers to the -competent" court, i.e., one having proper jurisdiction.

(8) In German, "... nimmt die Beweise selber ab."; in

French, "... proc?de lui-m?me ? l'administration des

preuves."

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2. Where the assistance of a court

is necessary to gather evidence, the

arbitral tribunal, or the parties

with the agreement of the

arbitrators, may seek the assistance

of the court of the canton in which

the arbitral tribunal has its seat;

that court shall apply its own law.

Artt 185

4. Other court Where the assistance of a court assistance

is otherwise necessary, the court of

the canton in which the arbitral

tribunal has its seat shall have

(Q) jurisdiction* '.

Art, 186

vii. Jurisdiction 1. The arbitral tribunal shall rule

on its own jurisdiction.

2. The claim of lack of

jurisdiction must be raised prior to

any defense on the merits.

(9) The German text "... so ist der Richter am Sitz des Schiedsgerichts zust?ndig" is more precise than the French H... on requerra le concours du juge du si?ge ....H

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3. As a general rule* ', the

arbitral tribunal shall rule on its

jurisdiction by means of an

interlocutory decision^11^.

Art. 187

VIII. Award on the merits

1. Applicable law 1. The arbitral tribunal shall

apply the rules of law chosen by the

parties, or failing such choice,

the rules of law most closely

connected to the dispute.

2. The parties may authorize the

arbitral tribunal to decide ex aequo

et bono(12).

2. Partial award Unless the parties have agreed

otherwise, the arbitral tribunal may

(13) issue partial awards* .

(10) "En g?n?ral"; ".?? in der Regel".

(11) "... durch Vorentscheid"; "... par une d?cision incidente", as opposed to an award on the merits.

(12) In French, "statuer en ?quit?"; in German, "nach

Billigkeit".

(13) "Teilentscheide", or "sentences partielles", as opposed to "Schiedsentscheid" or "sentence arbitrale" at 189.

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Arti 189

3. Arbitral award 1. The award shall be issued

according to the procedure and in

the form agreed upon by the

parties*14^.

2. Failing such agreement, the

award shall be made by a majority of

the arbitrators, or, in the absence

of a majority, by the chairman

alone. It shall be in writing,

stating the reasons on which it is

based, dated and signed. The

chairman's signature shall suffice.

Art. 190

1. An award is final as of its

communication.

2. An award may be attacked on the

following grounds only:

a. when the sole arbitrator or the

arbitral tribunal was appointed

IX. Finality, action to set aside'15'

1. Principle

(14) This means that the parties may, among other things, waive the requirement at 189(2) that reasons must be given.

(15) In French, "recours"; in German, "Beschwerde".

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in violation of the applicable

rules<16);

b. when the arbitral tribunal

erroneously held that it had or

did not have jurisdiction;

c. when the arbitral tribunal ruled

on issues beyond the scope

of the claims or failed to

rule on one of the claims

submitted^17*;

d. when the arbitral tribunal

failed to grant the parties

equal treatment or the right

to be heard in adversary

proceedings ;

e. when the award is contrary to

public policy.

3. An interim award may only be

attacked on the grounds set forth

above at (2) (a) and (b) . The time

limit to file an action to set aside

commences with the communication of

the award.

Art. 191

2. Jurisdiction 1. An action to set aside may only

be brought before the Federal

(16) In German, -vorschriftswidrig-; in French, -irr?guli?rement-.

(17) The German -Rechtsbegehren- suggests legal issues, whereas the French un des chefs de la demande is somewhat broader.

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55

( 18 ) Tribunal* ? The proceedings

shall be governed by the provisions (19)

concerning public law appeals* 7

of the Federal statute organizing

federal courts*20^.

2. However, the parties may agree

that such recourse be brought before

the court of the canton in which the

( 21) arbitral tribunal had its seat* 7

in lieu of the Federal Tribunal and

the aforesaid court shall

conclusively rule on the

(22) matter* 7 ; the cantons shall

designate a sole cantonal court

having jurisdiction for this purpose.

Artt 192

X. Waiver 1. If neither party is domiciled,

nor has its habitual residence or

place of business in Switzerland,

the parties may expressly agree in

(18) The Federal Tribunal is the highest court in Switzerland,

(19) One possible recourse to the Federal Tribunal which excludes oral arguments and, generally, disposes of cases reasonably efficiently.

(20) Loi f?d?rale d'organisation judiciaire; Bundesgesetz ?ber die Organisation der Bundesrechtspflege.

(21) See supra, note 4.

(22) Meaning no subsequent appeal to the Supreme Court under any circumstances.

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the arbitration agreement or in a

subsequent written agreement, to

waive their right to challenge an

arbitral award before the Swiss

courts; they may also waive their

right only with respect to one or

some of the grounds set forth at

article 190(2).

2.

When the parties have waived all

recourse against the award and when

its enforcement is sought in

Switzerland, the New York Convention

on the Recognition and Enforcement

of Foreign Arbitral Awards of

June 10, 1958, shall apply by -, (23)

analogy* ' .

Art, 193

Deposit and issuance 1. Each party may file, at its own of certificate of enforceability expense, a copy of the award with

the Swiss court at the place where

the arbitral tribunal has its seat.

(23) See suora, note 5.

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Page 22: SWITZERLAND: STATUTE ON INTERNATIONAL ARBITRATION

2, The Swiss court shall certify,

upon the request of one of the

parties, that the award is

enforceable.

3, Upon the request of one of the

parties, the arbitral tribunal shall

certify that the award was made in

conformity to the provisions of the

present law; such a certificate is

equivalent to a filing before a

Swiss court.

Art, 194

XII. Foreign arbitral Recognition and enforcement of awards

foreign arbitral awards is governed

by the New York Convention on the

Recognition and Enforcement of

Foreign Arbitral Awards of June 10,

1958.

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