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Swiss substantive law: an excellent choice of the applicable law in cross-border contracts

In the parts 1 and 2 of this blog series, we have explained that Switzerland as the venue of commercial litigation or arbitration is an excellent, reliable, and predictable choice.

The same applies with regard to Swiss law as the chosen law. Swiss law is extremely stable. As an example, both the Civil Code and the Code of Obligations entered into force in 1912 and have essentially remained unauthored since then. Where they are modernised, this becomes known years in advance, and there is generally no retroactive effect of amendments. Other than statutes in some other countries, Swiss statutes are deliberately worded in plain language and thus easily accessible. Also, other than in European law, there exist fewer special laws, so the danger of getting lost in a maze of parallel statutory rules is much smaller. Finally, courts in all parts of the country are unbiased and professional, ensuring equal treatment and an application of the rule of law. The Federal Supreme Court, in turn, ensures a consistent application of statutes throughout the country and predictability of outcomes.

Another advantage of Swiss law is the fact that it is highly flexible. Freedom of contract is paramount, and there exist only few statutory provisions – e.g., in employment or lease law – that are of compulsory nature. This fact – in combination with the rock-solid general principles of Swiss private law – has allowed Swiss law to remain up to date and to react flexibly, and predictably, to new developments in the economy and in international trade.

Even more importantly, there is virtually no danger of contractual gaps resulting in invalidity of entire contracts under Swiss law. As long as the parties have agreed upon all essential aspects of their contract (in essence: performance and counterperformance), they have concluded a valid contract, and any gaps there may exist can, and will, be filled by recourse to general principals and non-compulsory statutory law. The advantage of this is obvious – even complex and high-volume contracts can, in principle, be limited to a few pages, which drastically reduces the time and costs of contractual negotiations.

As explained in part 3 of this blog series, Swiss law should – in spite of all these advantages – not come into play randomly in the framework of contractual negotiations. It is key to negotiate choice of law and forum clauses strategically and to ensure their predictability by involving Swiss counsel early on at the stage of contractual negotiations. This also enables seamless and consistent legal advice from a single source, including when things may become contentious.