Arbitration Of Foundation Disputes In Switzerland
I. Legal Framework Governing Swiss Foundations
1. Foundations under Swiss Law
Swiss foundations are governed by Articles 80–89bis of the Swiss Civil Code (CC). Key characteristics include:
a dedicated purpose fixed by the founder,
absence of members,
governance by a foundation board,
mandatory supervisory authority (state oversight).
Common foundation disputes include:
board appointment and removal,
interpretation of the foundation purpose,
use and allocation of assets,
beneficiary rights,
conflicts between founders’ intent and evolving circumstances.
II. Arbitrability of Foundation Disputes
2. Economic-Interest Test and Structural Limits
Under Article 177(1) PILA, disputes involving an economic interest are arbitrable. Swiss tribunals apply this test to foundation disputes with caution due to:
the lack of members,
mandatory public supervision.
Case Law 1: ATF 118 II 353
Holding: Arbitrability depends on economic interest, not institutional form.
Foundation Relevance: Disputes over asset allocation, remuneration, or beneficiary entitlements are arbitrable.
Limit: Issues of public supervision remain non-arbitrable.
III. Validity of Arbitration Clauses in Foundation Instruments
3. Arbitration Clauses in Foundation Charters and Regulations
Swiss foundations may include arbitration clauses in:
the foundation deed,
bylaws or regulations.
However, such clauses cannot exclude mandatory supervisory jurisdiction.
Case Law 2: ATF 119 II 271
Holding: Private-law entities may validly include arbitration clauses in their constitutive documents.
Application: Foundations may refer internal disputes to arbitration.
Restriction: Arbitration cannot displace supervisory authority powers.
IV. Binding Effect on Boards and Beneficiaries
4. Who Is Bound by Arbitration Clauses?
Swiss tribunals analyze binding effect functionally:
foundation board members are bound by virtue of office,
beneficiaries may be bound if the clause governs benefit-related claims.
Case Law 3: ATF 129 III 445
Holding: Arbitration clauses bind persons integrated into the legal structure of an entity.
Foundation Context: Board members and officers fall within the clause’s scope.
Caveat: Beneficiaries require a sufficient nexus to the foundation deed.
V. Role of the Supervisory Authority and Non-Arbitrable Matters
5. Mandatory Oversight and Public Interest
Foundations are subject to continuous state supervision (Art. 84 CC). Certain matters are reserved to authorities.
Case Law 4: ATF 136 III 345
Holding: Arbitration cannot override mandatory public-law safeguards.
Non-Arbitrable Areas:
approval of amendments to purpose,
dissolution orders,
replacement of supervisory authority.
Consequence: Arbitrators may decide private claims but not exercise supervisory powers.
VI. Beneficiary and Asset Allocation Disputes
6. Arbitration of Beneficiary Rights
Swiss tribunals permit arbitration of:
entitlement to distributions,
interpretation of benefit criteria,
disputes over discretionary grants.
Case Law 5: ATF 132 III 389
Holding: Disputes affecting legally protected economic interests are arbitrable.
Foundation Application: Beneficiary claims to payments or services fall within arbitral jurisdiction.
Limit: Arbitrators must respect the foundation’s fixed purpose.
VII. Judicial Review of Arbitral Awards in Foundation Disputes
7. Public Policy and Supervisory Compatibility
Swiss Federal Supreme Court applies a restrictive review of arbitral awards under Article 190(2) PILA.
Case Law 6: ATF 140 III 477
Holding: Courts will not annul awards merely because they touch upon foundation governance.
Annulment Standard: Only if the award manifestly violates public policy or mandatory foundation law.
Importance: Preserves finality while safeguarding public oversight.
VIII. Procedural Techniques in Foundation Arbitration
Swiss arbitral tribunals frequently:
join supervisory authorities as interested parties (without decision-making power),
appoint neutral experts on foundation purpose or accounting,
issue declaratory relief clarifying governance obligations.
Arbitration is especially attractive for:
international family or charitable foundations,
confidentiality-sensitive disputes,
technically complex asset-management conflicts.
IX. Tension Between Founder’s Intent and Changed Circumstances
Arbitrators may interpret founder’s intent but cannot modify the foundation purpose, which remains the exclusive domain of supervisory authorities or courts.
X. Synthesis: Swiss Approach to Foundation Arbitration
Swiss handling of foundation disputes reflects six guiding principles:
Arbitrability of economic and private-law claims
Validity of arbitration clauses in foundation instruments
Binding effect on board members and integrated actors
Strict respect for mandatory supervisory jurisdiction
Careful treatment of beneficiary rights
Minimal judicial intervention post-award
Concluding Observation
Switzerland offers a nuanced and balanced framework for arbitrating foundation disputes. While firmly supporting arbitration for private-law conflicts, Swiss tribunals carefully preserve public supervision and founder intent, ensuring that arbitration complements rather than undermines the foundation system
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