In May 2008, the Swiss Federal Government commenced a consultation process with a view to the full revision of the Federal Law on Public Procurement. During the process, however, it became clear that a full revision was not advisable due to delays of the WTO Government Procurement Agreement of 15 April 1994 to which the Federal Law has to conform. The Federal Government therefore decided to put the full revision on hold and to focus on certain elements of the Law that required urgent attention.

In May 2010, the Government submitted to the Parliament a proposal for an amendment of the Federal Law on Public Procurement (Message to the Parliament of 19 May 2010, 10.051, http://www.admin.ch/ch/d/ff/2010/4051.pdf). The amendment would, in respect of Federal procurement processes for certain types of projects, preclude unsuccessful bidders from seeking a stay of the entire process when challenging a decision of the adjudicatory authority. According to the Government, the current public procurement regulations do not achieve one of their stated main goals, namely the efficient use of public funds.

Pursuant to the legislation in force, challenges of a tender process by unsuccessful bidders, as a rule, do not automatically stay the process. However, courts may grant a stay of the tender process. Bidders bringing a challenge often file a request for such a stay, and these requests are often granted by the courts. This is the opposite of other areas of Swiss public and administrative law, in which challenges, as a rule, automatically have the effect of a stay, and in which the relevant agency or the courts may lift the stay if warranted by the circumstances.

The Government’s experiences in two highly publicized procurement processes in particular are at the origin of its amendment proposal. Both processes came to a grinding halt when certain decisions of the adjudicating authority were challenged:

• The dispute arising out of the procurement for the construction project of the Erstfeld tunnel, which is part of the NEAT project (the world’s longest railway tunnel; see our blog of 6 July 2010), delayed the commencement of the works for 18 months and caused an approximately 50 million Swiss Franc increase of the costs of the project.

• Also in the framework of the NEAT project, the award of the 1.7 billion Swiss Franc contract for the installation of technical railway equipment in the Saint-Gotthard base tunnel was challenged by an unsuccessful bidder. The court in charge of handling the challenge took six months to decide on the request for a stay of the works, which resulted in a de facto stay of the same length. It ultimately rejected the request, but estimates are that every month of stay entailed additional project costs of approximately 10 million francs. Fortunately, the adjudicator and the bidder subsequently reached a settlement.

The Federal Government’s proposed amendment to the Federal Law on Public Procurement would first provide for an automatic stay of a procurement process where a decision of the adjudicatory authority is challenged. Most importantly, however, the amendment provides that if important supra-regional procurement projects are urgent or if their postponement would cause disproportionate delays or damage, a challenge would not prevent the procuring entity from entering into a contract with the successful bidder.

Critics of the proposal consider that it is difficult to reconcile with Switzerland’s treaty obligations and with the fundamental right to court review of adjudicators’ procurement decisions (Peter Galli, Kein Verzicht auf aufschiebende Wirkung, Neue Zürcher Zeitung, 6 August 2010, p. 10; Marc Steiner, Der Rechtsschutz im öffentlichen Beschaffungswesen – ein Baustellenbericht kurz vor dem Durchbruch am falschen Ort, http://www.sgvw.ch/d/fokus/Seiten/100727_lexleuenberger_steiner.aspx).

In this regard, the recent adoption on July 27, 2010 of Federal Laws 193-FZ and 194-FZ improving the legal regime of Mediation (the Mediation Laws) can be seen as a bold and satisfying legislative move to complete the legal framework of ADR in Russia and stimulate the use of these methods (the arbitration legal regime has indeed been settled for long already by Federal Laws of July 7, 1993 and July 24, 2002). These Mediation Laws will come into force on January 1, 2011.

Initiated several years ago by the Chamber of Commerce and Industry of the Russian Federation (CCIRF – http://www.tpprf-arb.ru/en/2010-01-13-20-37-26en/centerabouten) on the basis of the United Nations Commission on International Trade Law (UNCITRAL) 2002 model, the original mediation bill has been revamped earlier this year under the authority of the Russian President Dmitri Medvedev himself, bringing further enhancements (http://kluwerarbitrationblog.com/blog/2010/03/19/russian-president%E2%80%99s-bill-draft-law-on-mediation-%E2%80%93-is-a-new-epoch-of-adr-beginning-in-russia/comment-page-1/).

The most critical improvements of the Mediation Laws to the existing state of legislation are the following:

- anything said by a party during the mediation process cannot be used in litigation or arbitration at a later stage. This fundamental principle of mediation is now clearly provided for by the Mediation Laws;

- a framework for mediation proceedings is defined, with inter alia a tight maximum timeframe of 60 days for such proceedings (with certain exceptions);

- in order to insure their independence, neutrality and competence, the Mediation Laws provide for specific qualification requirements for mediators (whilst that kind of formal requirements does not exist yet in jurisdictions such as France). There are no provisions for licensing of mediators but they will have to get affiliated to self-regulated organizations (SROs) to be created.

In addition, the Mediation Laws consolidate the current state of legislation on a number of issues. Mediation can thus be initiated before or after a dispute has been submitted to a court or arbitral tribunal. Further, the settlement agreement reached as a result of the mediation can be confirmed by a court or arbitral tribunal, allowing compulsory execution orders. Failing such confirmation, the settlement agreement is considered as a simple civil contract.

Interestingly, ADR methods were imported to Russia earlier in the construction sector than in most other industries. Indeed, the growing involvement of international lenders in large construction projects has triggered the increasing use of international models of contracts such as FIDIC. Such models being structured to avoid disputes to a maximum largely rely on a panel of ADR methods encompassing mediation, dispute boards and arbitration. While dispute boards have rarely been set up in practice to date, independent experts have occasionally been called as mediators on specific construction projects, fulfilling to a certain extent the role of the Engineer under the FIDIC Books prior to 1995.

Although a clear legal framework is now set for mediation in Russia, there is still a strong need for additional factors and catalysers to make mediation become a common practice in Russian business culture, such as:

- a strong network of qualified mediators to allow successful mediation to take place. It is worth noting that many experienced professionals are already present in the Russian construction sector;

- a lobbying from institutions such as the CCIRF to promote mediation in Russia through a proven track record of successful precedents and statistics demonstrating that mediation brings tremendous added value to dispute resolution, such as rapidity, cost effectiveness, and last but not least a chance to pursue business relations – an attractive point for contractors when employers constitute a scarce commodity as in the current context.

It will be therefore interesting to follow the development of mediation in Russia in the next few years. And as the saying goes, an ideal situation in the field of dispute resolution will be achieved only when litigation itself will be considered as an alternative to mediation. Not necessarily a happy perspective for litigation lawyers – but this is still far from sight in Russia!

With the return of more difficult times, ADR has again come under the spotlight. It seems widely accepted that arbitration in the domestic arena in Australia has become largely undistinguishable, in terms of time and money spent resolving disputes, from litigation.

Meanwhile, international arbitration has also been under scrutiny across the globe. In 2006, UNCITRAL revisited its Model Law for arbitration and agreed revisions to the Model Law. These revisions have been accepted by the Australian federal government (as discussed below).

Although difficulties with domestic arbitration in Australia are arguably due to the way in which parties, lawyers and courts have interpreted that legislation, Australia has taken the opportunity to overhaul its domestic arbitration regime, and make it consistent with the approach taken in international arbitration.

The International approach

On the international stage, Australia is intent on becoming a hub for international arbitration. To this end, a dedicated Australian Disputes Centre opened in Sydney this year, and the Australian Government last month updated the International Arbitration Act (Cth) 1974 (IAA), to adopt the 2006 revisions to the Model Law. Australia is the fifth country to do so – following in the footsteps of Peru, Mauritius, New Zealand and Slovenia.

In the context of announcing the amendments to the IAA the Attorney-General, the Hon. Robert McClelland MP, highlighted the aim of the amendments is to

‘emphasise the importance of speed, fairness and cost-effectiveness in international arbitration, while clearly defining and limiting the role of the courts in international arbitration without compromising the important protective function they exercise’.

To achieve these aims, the amendments to the IAA focus on clarifying matters of application and judicial interpretation and incorporating the greatest possible choices for parties to resolve their dispute. In summary, the amendments to the IAA:

1. provide increased protection for foreign awards by providing that a court may only refuse to recognise and enforce an arbitral award if one or more of the specific grounds listed in the IAA is satisfied;

2. provide clarification to the courts by inserting a new objects clause (which emphasises the important role arbitration plays in facilitating international trade and commerce) and a new interpretation clause (which requires a court to consider the objects of the Act, including that awards are intended to provide certainty and finality);

3. remove the parties’ previous ability to opt out from using the Model Law;

4. include a regime for interim binding orders to protect the rights of a party and maintain the status quo, preserve assets or preserve evidence (although Australia has not adopted the Model Law to the extent it allows for applications for interim order to be brought ex parte);

5. provide the parties with more flexibility by showcasing a range of optional provisions to govern their dispute (such as seeking assistance from a court in the form of a subpoena);

6. include a framework/regime for protecting confidential information; and

7. give the arbitral tribunal greater scope to limit the costs of an arbitration.

The Domestic approach

Each Australian state and territory has legislation allowing for commercial arbitration. In tandem with updating the IAA, the Standing Committee of Attorneys General have developed a ‘Model Commercial Arbitration Bill’, to bring Australia’s domestic arbitration regime in line with international expectations and law, and to achieve greater consistency between the commonwealth and state laws.

The Model Commercial Arbitration Bill largely adopts the Model Law. This acknowledges the greater success of international arbitration legislation.

If the Model Commercial Arbitration Bill is adopted throughout Australia, the business community and practitioners alike will no longer be required to have knowledge of two arbitral systems (one for domestic disputes and another for international disputes). This will assist in increasing both Australian and overseas businesses’ familiarity and confidence of Australian arbitral processes within Australia.

New South Wales has been the first to adopt the Model Commercial Arbitration Bill, by replacing its Commercial Arbitration Act (NSW) 1984 with the Commercial Arbitration Act 2010, which was passed in late June 2010. The NSW Act largely accepts the Model Bill but there are some notable differences, for example the NSW Act does not include a power to stay court proceedings. These differences make the NSW Act more consistent with international arbitration law and advance the object of arbitration.

The future

It remains to be seen whether the other states and territories will adopt the Model Commercial Arbitration Bill (and hence the Model Law), and whether or not they will make any amendments to it in doing so. Assuming the laws are adopted throughout Australia, it will be a matter of time to see whether the parties to disputes have confidence that arbitration has again been put in the position of being a viable alternative to litigation.