Recognition proceedings

Swiss law does not foresee a standalone exequatur procedure for foreign arbitral awards. Foreign monetary awards are usually recognized in the course of ordinary domestic debt enforcement proceedings governed by the Debt Enforcement and Bankruptcy Act (DEBA). Non-monetary awards are enforced in enforcement proceedings under the Swiss civil procedure code. Since the latter is very rare in practice, this article focuses on the enforcement of monetary awards.

To establish jurisdiction, the debtor must either have a seat or domicile in Switzerland or must own assets located in Switzerland. The course of action may slightly differ depending on whether the debtor is seated in Switzerland or not.

a) Enforcing an award against a debtor with assets in Switzerland

If the debtor is seated abroad but has assets in Switzerland (bank accounts, subsidiaries, real estate, claims, movable property, etc), a freezing order can be obtained based on the award. A freezing order is issued in ex parte proceedings and requires a credible showing that the debtor indeed owns (specified) assets located in Switzerland and that the award is likely to be recognizable and enforceable. The court will not examine the enforceability of the award in detail at this stage but limit itself to a prima facie assessment and, if positive, grants a freezing order to preserve the status quo for the duration of the enforcement proceedings. Once the freezing order has been executed by the local enforcement office and a report has been issued, the award creditor has 10 days to commence ordinary debt enforcement proceedings by applying for the delivery of a payment order according to Art. 67 DEBA. If the debtor challenges the payment order by raising an objection, the creditor needs to have the objection set aside so that the enforcement proceedings can be continued and the frozen assets be realized.

To have the objection against the payment order set aside, the creditor must present an enforceable title, such as an arbitral award. It is only in these (adversarial) proceedings that the court examines in detail whether the award can be recognized and enforced.

b) Enforcing an award against a debtor with seat or domicile in Switzerland

If the debtor is seated or domiciled in Switzerland, jurisdiction is given and it is not necessary to identify assets and apply for a freezing order before enforcement proceedings can be commenced. Ordinary debt enforcement proceedings are initiated by applying for the delivery of a payment order according to Art. 67 DEBA. If the debtor challenges the payment order by raising an objection, also here the creditor needs to have the objection set aside and may rely on an award to do so. If the creditor fears that the debtor hides assets during the enforcement proceedings (and/or wants to put pressure on the debtor), it may apply for a freezing order based on the award also if the debtor is seated or domiciled in Switzerland.

Recognition and enforcement requirements and Swiss court practice

The recognition and enforcement requirements are the ones set forth in the Convention, whereas Swiss courts tend to be less formalistic than courts in other jurisdictions.

a) Formal requirements

First of all, according to Art. IV(1) of the Convention, the applicant must show that all formal requirements are met. The party that seeks recognition and enforcement of a foreign arbitral award hence is required to submit (i) the duly authenticated original award or a certified copy of the award and (ii) the original or a certified copy of the arbitration agreement. If these two documents are not in an official language, the applicant must produce a certified translation.
According to case law of the Swiss Federal Supreme Court, these formal requirements are not to be applied strictly. If there are no doubts as to the authenticity of the documents, the submission of simple copies instead of certified copies or originals is sufficient. The same holds true for the translation requirement. If the award is in an official language (German, French, Italian), no translation is required. Further, the Swiss Federal Supreme Court held that if an award is in English, a translation is usually not required and only needs to be provided in exceptional circumstances.
If the formal requirements are met, a foreign award is recognized unless the debtor proves that a ground for refusal enumerated in the Convention exists.

b) Grounds for refusal of recognition

The Convention provides for a limited number of objections which the debtor may raise. Pursuant to Art. V of the Convention, the burden of proof for the existence of grounds for refusal of recognition lies with the debtor. According to the long-standing practice of the Swiss Federal Supreme Court, grounds for refusal of recognition under the Convention are only accepted reluctantly. The award debtor may invoke the following grounds based on which recognition may be refused:

  • V(1)(a): Invalidity of the arbitration agreement. Recognition of an arbitral award can be refused at the request of the party against which the award is invoked if such party proves that the underlying arbitral agreement is not valid. This is, e.g., the case if one of the parties was under some incapacity to conclude the arbitration agreement. Other reasons are invalidity in terms of form and substance, including lack of consent to the agreement. However, it is important that the party against which the award is invoked has not participated in the arbitration proceedings without raising an objection and thereby waived the right to challenge the jurisdiction of the arbitral tribunal.
  • V(1)(b): Violation of due process. This ground for refusal of recognition presupposes that the party against which the award is invoked has not been duly informed of the appointment of the arbitrator(s) or of the arbitral proceedings, or that it for other reason has not been able to plead its case during the proceedings. To prevail with its objection and to meet the required burden of substantiation and proof, a party typically would have to show that all major notifications were invalid under the applicable law and/or that none of the notifications reached it at all or timely enough that it could participate in the proceedings. Art. V(1)(b) does not lay down any specific rules regarding the service of court documents. The Swiss Federal Supreme Court held that service is to be considered valid in any case if it is considered valid under the law of the addressee's domicile, meaning that the conformity of the method of service with the law at the addressee's domicile is always sufficient, but not mandatory, to comply with the requirements of the Convention. The laws and rules applicable to the arbitral proceedings are decisive for the question whether documents have been validly served. If service was effected in compliance with these rules, service is also valid from an enforcement law perspective, even if the methods and modalities deviated from Swiss procedural law. The Swiss Federal Supreme Court acknowledges that in arbitration many different methods of service are used, such as service by ordinary mail, registered mail, fax or telex as well as modern methods of communication such as e-mail. As regards e-mails, the Court held that even if there was no electronic acknowledgement of receipt, this would not mean that the recipient had not received the e-mails. If the e-mail address was valid and the e-mail does not bounce back, it can be assumed that it had been delivered.
  • V(1)(c): Arbitral award out of scope. Art. V(1)(c) allows to deny recognition and enforcement at the request of the party against which the award is invoked if the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration. However, according to the Convention, the court of enforcement may declare the award at least partially enforceable if different decisions can be distinguished within the award.
  • V(1)(d): Failure to respect the applicable arbitral procedure. Recognition and enforcement of the arbitral award can further be refused, if the party against which the award is invoked proves that the composition of the arbitral tribunal or the arbitral procedure itself was not in accordance with the agreement concluded between the parties or, in the lack thereof, in accordance with the lex arbitri. However, according to the Swiss Federal Supreme Court, only violations of fundamental rules of procedure are sufficient to refuse enforcement based on Art. V(1)(d) of the Convention.
  • V(1)(e): Award not yet binding or set aside. If the opposing party can prove that the award has not become binding, a ground for refusal of recognition pursuant to Art. V(1)(e) may be invoked. The same holds true if the award has been set aside or suspended by a competent authority of the country in which or under whose law it was made. According to the Swiss Federal Supreme Court, the notion of binding force and enforceability of the arbitral award is firstly governed by the parties’ agreement. In the absence of an agreement, it is determined by the lex arbitri. If the award has become binding but was subsequently annulled or suspended by a competent authority, it is no longer enforceable in Switzerland regardless of whether the reason for setting it aside is valid from a Swiss perspective.
c) Grounds to be examined ex officio

In contrast to the ground set forth above which must be proven by the party against which the award is invoked, the court deciding about the enforcement may, according to Art. V(2) of the Convention, review two grounds for refusal on its own initiative: It can on the one hand refuse recognition if the subject matter of the arbitration procedure is not capable of settlement by arbitration under Swiss law. However, since all claims with a monetary value are deemed capable of settlement by arbitration under Swiss law (art. 177 PILA), this is rarely the case. On the other hand, the court can refuse enforcement if the recognition or enforcement of the award contradicts the ordre public, meaning that it violates fundamental principles of the Swiss legal system and conflicts in an intolerable way with its sense of justice. It should be noted that the Swiss Federal Supreme Court only assumes a violation of the Swiss order public reluctantly and only in the case of gross violations.

Enforcement of awards against sovereign states

When an award is enforced against a sovereign state the requirements explained above apply as well. In addition, some particularities need to be considered.
States enjoy immunity under international law. This includes both immunity from jurisdiction and immunity from enforcement. Immunity from enforcement only applies to assets of a state that serve sovereign purposes ("acta iure imperii"), but not to assets of the state which the state owns as a holder of private rights ("acta iure gestionis"). Only in the latter case enforcement proceedings against a foreign state are even a possibility.
If the creditor wishes to seize assets of a foreign state that are located in Switzerland, the Swiss Federal Supreme Court has held that in addition to the general requirements for a freezing order pursuant to Art. 271 DEBA, there must be a sufficient nexus of the matter to Switzerland. In other words, circumstances must be given that connect the legal relationship to Switzerland to such an extent that it justifies holding the foreign state accountable before Swiss authorities. This is inter alia the case if the underlying relationship was established in Switzerland, if obligations are to be performed in Switzerland or if the state took certain actions in Switzerland. It is not sufficient that assets of the foreign state are located in Switzerland or that the claim was awarded by an arbitral tribunal with its seat in Switzerland. In the absence of a sufficient nexus, the Swiss courts do not assume jurisdiction over enforcement proceedings against a foreign state.

Get in touch

The Swiss Litigation & Risk Management practice group regularly handles cases involving the recognition and enforcement of foreign judgements and arbitral awards and will be pleased to answer any queries you may have.