SWITZERLAND Law and Practice Contributed by: Simon Gabriel, Axel Buhr, Roxane Schmidgall and Audrey Duffner, GABRIEL Arbitration
Finally, Article 178.4 of the PILA clarifies that the rules of the Swiss lex arbitri also apply, by analogy, to arbi - tration agreements in unilateral transactions (such as last wills) or in articles of association. 3.2 Arbitrability Article 177.1 of the PILA provides that every claim “involving an economic interest” ( vermögensrechtlich ) may be referred to international arbitration. Claims that concern family status issues (eg, separation, divorce or children-related claims) are thus not arbitrable in Switzerland, and neither are insolvency matters arbi - trable that have the aim of dissolving a company for lack of assets. At the same time, a company in insol - vency proceedings is still bound by pre-existing arbi - tration agreements (unless the insolvency negatively affects the general legal capacity of an entity accord - ing to the decisions of the Swiss Federal Tribunal Nos 4A_118/2014, 138 III 714, and 4A_428/2008 – the so- called Vivendi decision). One important point for proceedings with state involvement is that Article 177.2 of the PILA provides that a state or state-owned entity is not entitled to rely on its own law in order to argue that certain issues in dispute are not arbitrable or that it is not capable of being a party in arbitration proceedings. This provi - sion of the PILA can be very useful for any party that The Swiss Federal Tribunal considers that (at least) the core of the arbitration agreement (ie, the exclu - sion of the state courts in favour of arbitration) is of a procedural nature. If a party starts legal proceedings before state courts in a dispute that is subject to an arbitration agree - ment, the state court will – first of all – wait and see whether the counterparty objects to state court juris - diction based on the arbitration agreement. If there is an objection, it will decline its jurisdiction and the claimant will need to start arbitration proceedings. However, the state court will consider the absence of any objection as tacit agreement to proceed before state courts (Article 7 of the PILA). contracts with state-owned entities. 3.3 National Courts’ Approach
In respect of the law applicable to the arbitration agreement, the state court will apply the principle of favor validitatis in international arbitration proceedings seated in Switzerland (see 3.1 Enforceability ). On the other hand, the state court is obliged to apply Article II.3 of the New York Convention, of which Swit - zerland is a contracting state, if the arbitration agree - ment at issue would (hypothetically) lead to the forma - tion of an arbitral tribunal seated outside Switzerland. In this regard, the prevailing view suggests that the state court should apply the conflict of laws rule of Article V.1.a of the New York Convention by analogy. Accordingly, the law applicable to the substantive validity of an arbitration agreement is primarily the law chosen by the parties to govern their agreement (lex causae), or subsidiarily, the law of the foreign seat of the arbitral tribunal (foreign lex arbitri). In a recent decision, the Swiss Federal Tribunal found in this regard that an arbitration agreement, provid - ing for a (Russian) arbitration institution that no long - er existed, was to be interpreted exclusively on the basis of the applicable foreign law, in this case Rus - sian law (decision of the Swiss Federal Tribunal No 4A_19/2023, paragraph 2.3). Against this background, the (procedural) Swiss approach is slightly different from the (substantive) US approach, where courts positively order parties to attend arbitration proceedings, but the result remains the same: if a valid arbitration agreement exists and one of the parties insists on arbitration, Swiss courts will respect the arbitration agreement by declining their jurisdiction and the parties must proceed with arbitration in order to obtain a decision on the merits. This approach is in line with Article II.3 of the New York Convention. 3.4 Validity Article 178.3 of the PILA expressly provides that an arbitration agreement may be considered valid even if the main contract is invalid (the so-called doctrine of separability). At the same time, there may be situations in which a defect of the main contract also affects the arbitration agreement. This can be the case, for example, if an
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