On 4 May 2018 the Swiss Federal Supreme Court published leading case 4A_7/2018 dated 18 April 2018, which has been marked for inclusion in the official court reporter.
The case pertains to the dismissal with immediate effect of the former footballer and television sports expert Benjamin Huggel as coach of the football club Black Stars Basel. The civil court of Basel-City subsequently awarded Huggel damages and compensation due to wrongful dismissal based on article 337c of the Swiss Code of Obligations (CO). The football club filed an appeal with the Swiss Federal Supreme Court. The club referred to the arbitration clause contained in the employment contract providing for the jurisdiction of the Court of Arbitration for Sport (CAS), and submitted that the state court had lacked jurisdiction to render a decision on the matter.
The Federal Supreme Court affirmed the jurisdiction of the Basel civil court and dismissed the appeal. The Federal Supreme Court confirmed its landmark decision BGE 136 III 467 rendered under the former legislations on state court forums and domestic arbitration, which have since been superseded by the Swiss Code on Civil Procedure (CPC), whereby the validity of arbitration clauses in employment contracts is not all-encompassing. Contrary to international matters, where according to article 177(1) Swiss International Private Law Act (PILA) all disputes involving financial interests are arbitrable, domestic disputes can only be referred to arbitration where parties can freely dispose over the claims in question (article 354 CPC). The parties can precisely not freely dispose over mandatory employment law claims under article 341 CO, which include claims related to the mandatory protective provisions for wrongful dismissal. Such claims can only be referred to arbitration one month after the termination of the employment by way of a separate arbitration agreement. In the present case, the parties had not concluded such post hoc arbitration agreement. Hence, the claims based on article 337c CO for wrongful dismissal are not arbitrable.
In a noteworthy and important obiter dictum the Federal Supreme Court, in consideration of employee protection and in deviation from certain voices in legal doctrine, held that it is impermissible to bypass the limitation on arbitrability for domestic employment dispute by making use of article 353(2) CPC and opting for the rules on international arbitration to govern the arbitration agreement.
Swiss companies are therefore well-advised to review possible arbitration clauses in their employment contracts with employees residing in Switzerland with regard to such clauses' enforceability. In particular, for reasons of efficiency, companies should endeavor to prevent a split of the legal process depending on the nature of the employment claim underlying an individual dispute. The Swiss Federal Supreme Court's reasoning does not however apply to employment contracts with employees residing abroad, and all related financial disputes may still be comprehensively referred to arbitration.
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