Article 186 of the Swiss Private International Law Act (the PIL Act) reads as follows:
1. The Arbitral Tribunal shall itself decide on its jurisdiction.
1bis. It shall decide on its jurisdiction notwithstanding an action on the same matter between the same parties already pending before a State Court or another Arbitral Tribunal, unless there are serious reasons to stay the proceedings.
2. A plea of lack of jurisdiction must be raised prior to any defence on the merits.
3. The Arbitral Tribunal shall, as a rule, decide on its jurisdiction by preliminary award.
Paragraph 1bis was added effective March 1, 2007. Its rationale is to clear up any uncertainty arising out of the Swiss Supreme Court’s decision in the Fomento case (ATF 127 III 279: http://relevancy.bger.ch/cgi-bin/JumpCGI?id=BGE-127-III-279&lang=fr&zoom=OUT).
In that case, the defendant in a court case in Panama subsequently initiated a Swiss arbitration. Jurisdiction of both the court and the arbitrators turned, inter alia, on whether such defendant had waived the arbitration agreement by not asserting it timely in the Panama case. The arbitrators decided the issue while it was pending before the Panamanian Supreme Court. The Swiss Supreme Court held that the arbitrators should have stayed their decision pending the final Panamanian judgment on jurisdiction. It did so on the basis of Article 9 of the PIL Act, which prescribes that a Swiss judge must stay the case if a prior action is pending abroad, "if it is to be expected that the foreign court will, within a reasonable time, render a decision capable of being recognized in Switzerland" (translation from A. Bucher/P.-Y. Tschanz, Private International Law and Arbitration – Basic Documents, 1995).
Extending Article 9 to arbitration proceedings when jurisdiction is disputed raises complex issues. It is not even clear that the question is one of lis pendens in the traditional sense.
The Swiss Court relied on the public policy of avoiding conflicting decisions and on the fact that the Panamanian courts were better placed to decide whether as a matter of Panamanian procedure the arbitration agreement was raised in a timely fashion.
Some commentators were concerned, however, that the efficacy of arbitral proceedings could be imperilled by abusive proceedings and acceptance of jurisdiction elsewhere. Hence, the need for Article 186(1bis).
Others argued that the amendment was superfluous, since an arbitral tribunal applying Article 9 would still have to decide in effect on its own jurisdiction when evaluating whether the foreign court decision will be capable of being recognized in Switzerland (as it would not be recognized if there is a valid arbitration agreement). True, the Fomento decision does not leave much room for the arbitrators to review whether the arbitration agreement is valid before staying their proceedings on jurisdiction. However, the arbitrators could still make this review as part of their subsequent evaluation as to whether the Panama Supreme Court’s decision on jurisdiction is capable of being recognized.
In any event, Article 186(1bis) improves legal predictability as to what Swiss arbitrators should do when faced with a jurisdictional objection which is already pending before a foreign court. This rule, pertaining to the arbitrators’ behaviour, complements harmoniously the rule pertaining to the corresponding behaviour on the part of courts which is often referred to (using a phrase coined by Prof. Emmanuel Gaillard) as the "negative effect" of the arbitrators’ power to decide on their own jurisdiction.
Source: Swiss Federal Parliament:
http://www.parlament.ch/ab/frameset/d/s/4714/231679/d_s_4714_231679_231680.htm
The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.
