Like clockwork

 MARKET VIEW – ARBITRATION 

Why are so few awards rendered by the Swiss Chambers’ Arbitration Institution subject to challenge proceedings in the country’s courts? Rainer Füeg, the institution’s Executive Director, speaks to Lenz & Staehelin partner Martin Burkhardt

Martin Burkhardt, Lenz & Staehelin: With a growing number of arbitral institutions, why should a party use your institution?

Rainer Füeg, Swiss Chambers’ Arbitration Institution: Arbitration proceedings under the Swiss rules of international arbitration are efficient, reliable and cost-effective. They are administered in four languages: English, German, French and Italian. In arbitration proceedings where the amount in dispute does not exceed CHF1m, expedited procedures will apply; in such cases, the award shall be made within six months from the date on which the secretariat of the Institution submitted the file to the arbitral tribunal. More generally, the members of the institution and its arbitral tribunal are experienced international arbitration practitioners.

Martin Burkhardt: What have you done within the last 12 months to quicken arbitration – which parties complain has become increasingly drawn out – while maintaining quality?

Rainer Füeg: On 1 June 2012, the revised version of the Swiss rules entered into force. The goal of the revision was inter alia to further efficiency in order to speed proceedings. The revised Swiss rules contain amended provisions on conducting the arbitration in an expeditious manner – shorter time limits for paying deposits or for challenges, for example. Under the expedited procedures, an initial deposit has to be made when the notice of arbitration is submitted, so the tribunal may start its work the moment it receives the files. In addition, amended article 15(7) clarifies that contributions to efficient proceedings and avoidance of unnecessary delays are manifestations of the principle of good faith. Other provisions related to quickening the process are: settlement facilitation by the arbitral tribunal if the parties agree; new provisions on the preliminary order of interim relief (article 26(3) explicitly vests the arbitral tribunal with the competence to issue preliminary orders); and the introduction of emergency relief proceedings (new article 43 makes it possible to obtain interim measures even before the initiation of arbitral proceedings). After 2012 no additional changes were made.

‘Corruption is a deep-seated issue in international arbitration, which is rarely dealt with in arbitral awards.’ Martin Burkhardt, Lenz & Staehelin

Martin Burkhardt: What is the average administration time – from registration to the first hearing – on a case at your institution?

Rainer Füeg: In the period 2011 to 2013, the average duration of a case before the tribunal has been 6.5 months for expedited procedures and ten months under ordinary proceedings. There is no monitoring of the time of the individual steps of an arbitration.

Martin Burkhardt: Challenges of awards are on the rise. What have you done in the last 12 months to manage or restrict challenges?

Rainer Füeg: In 2007 (updated in 2010), the ASA Bulletin published an analysis of the cases in which arbitral awards issued in Switzerland had been appealed to the Swiss Federal Supreme Court. An important finding is that only 7% of all challenges have been upheld by the federal court. This shows that the federal court exercises restraint in its judicial oversight of Swiss arbitration tribunals. Another important finding is that it generally took the federal court four months to dispose of a challenge once and for all. Another conclusion of these analyses is that commercial cases seem to be challenged less and less. Both judicial restraint and swift adjudication by the federal court are important pillars of Switzerland’s reputation and success as an arbitration venue.

Martin Burkhardt: What does your board provide that others’ don’t, and what has it achieved over the last 12 months?

Rainer Füeg: As mentioned previously, the Swiss rules were revised in 2012 and the organisation adapted accordingly. Since then, no further changes have been made.

Martin Burkhardt: What factors does the Swiss Chambers’ Arbitration Institution take into account in appointing arbitrators?

Rainer Füeg: Arbitrators are appointed by the parties. The designation of an arbitrator made by the parties is subject to confirmation by the institution. To be confirmed, they need to be independent and impartial and have to show that they have the necessary time to conduct the arbitration as well as the qualifications required for the specific case: nationality, language skills and specific knowledge.

Martin Burkhardt: Have the emergency arbitrator procedures proved to be successful? What metrics do you use to measure this?

Rainer Füeg: Since 2012, when emergency relief was introduced into the Swiss rules, there has been one case that has been conducted within the timeframe set in the Swiss rules: 15 days from the date on which the secretariat of the institution transmitted the file to the emergency arbitrator.

Martin Burkhardt: International arbitration is sometimes perceived as being dominated by English and US law firms. Do you agree with that? Does it matter? What impact does this have on international arbitration?

Rainer Füeg: There is no domination of UK or US law firms in Swiss rules arbitration. However, on a worldwide basis – and specifically in big cases – the market share of big international law firms seems to be increasing. There is a risk that common law methods and techniques are being used more often in arbitration – or even being declared ‘standards’ which many practitioners believe is leading to more complicated and costly proceedings.

Martin Burkhardt: What can the Swiss Chambers’ Arbitration Institution do to promote international arbitration in developing countries? Do you have expansion plans?

‘Arbitration proceedings under the Swiss Rules of International Arbitration are efficient, reliable and cost-effective.’
Rainer Füeg, Swiss Chambers’ Arbitration Institution

Rainer Füeg: The Swiss Chambers’ Arbitration Institution is a sponsor of both the VIS moots in Vienna and Hong Kong. As Switzerland, as politically neutral territory, is particularly suited for arbitration, there are no expansion plans into developing countries at the moment.

Martin Burkhardt: What do you do to ensure quality of arbitral awards? How, if at all, could this improve?

Rainer Füeg: We confirm and/or select experienced and well-qualified arbitrators; monitor the proceedings based on the provisional timetable; and control costs.

Martin Burkhardt: Does the Swiss Chambers’ Arbitration Institution ever ‘black list’ arbitrators?

Rainer Füeg: There is no ‘black list’ for arbitrators but the designation of an arbitrator made by the parties is subject to confirmation by the institution.

Martin Burkhardt: Corruption is a deep-seated issue in international arbitration, which is rarely dealt with in arbitral awards. Does this need to change – and, if so, how and what should institutions be doing to ensure contracts and treaties with such clauses are handled effectively?

Rainer Füeg: There has been a profound discussion among arbitration professionals of these issues in the last few years. While the institution only takes a prima facie decision to administer a case based on the arbitration clause, and does not interfere with the deliberations of the arbitral tribunal, the institution and the arbitrators confirmed by it are well aware of those issues.

Martin Burkhardt: What is your fee structure? What changes have to be made to arbitrator and institution costs over the 12 months?

Rainer Füeg: The costs of an arbitration proceeding consist of the registration fee, the administrative costs of the institution and the arbitrators’ fees. These costs are calculated based on the amount in dispute. The arbitrators’ fees further depend on the complexity of the subject matter of the arbitration, the time spent and any other relevant circumstances of the case (including for example the discontinuation of the arbitral proceedings in case of settlement). In any case the fees, expenses and costs must be necessary and reasonable relative to the amount in dispute. The revised Swiss rules vest the institution with greater powers: If it considers that the determination of one or several cost items over with the parties have no control needs to be adjusted, it is no longer limited to expressing its view in consultation with the arbitrators; rather the institution may make the adjustments it deems fit (article 40).