Decision of the Swiss Supreme Court on the arbitrability of claims arising from employment contracts

In its decision 4A_7/2018, the Federal Supreme Court (again) had to deal with the question to what extent claims from employment contracts are accessible to (domestic) arbitration.

Referring to the lead decision FSC 136 III 467, the Federal Supreme Court concludes, with regard to procedural terms, that the provisions governing the arbitrability of labour law claims in the area of Swiss domestic arbitration have not changed with the introduction of the Swiss Code of Civil Procedure (CPC) and that the case-law established by the Federal Supreme Court must in principle continue to be observed. Consequently, claims arising from mandatory provisions of the law or from mandatory provisions of a collective employment agreement may not be submitted to an arbitral tribunal by agreement of the parties before one month after termination of the employment relationship has expired. In the present case, the matter concerned claims by a football coach from unjustified termination without notice. Claims resulting from unjustified termination without notice are subject to the prohibition of waiver under Swiss labour law and, as a result, are not arbitrable.

Another subject was the differences of arbitrability in internal/international arbitration for pecuniary claims. The Federal Supreme Court pointed out that in the field of domestic arbitration only those claims which the parties may freely dispose of may be the subject of arbitration proceedings, unlike international arbitration, where any pecuniary claim is declared accessible to arbitration.

In an obiter dictum, the Federal Supreme Court stated that, in Swiss domestic arbitration, the denied arbitrability of claims that are not under the parties’ free disposal may not be circumvented by a so-called opting-out by the parties in accordance with the Swiss CPC (opting-out: the parties may exclude the application of the third part of the CPC on [domestic] arbitration by making an express declaration to this effect in the arbitration agreement or a subsequent agreement, and instead agree that the provisions of the Twelfth Chapter of the Swiss Private International Law Act apply).

In view of this case law, caution is required when including arbitration clauses in employment contracts.

Philipp Haymann or your personal contact at our law firm are happy to answer any questions you may have.

Decision 4A_7/2018 of the Swiss Federal Supreme Court of 18th April 2018 (published on 4th May 2018).