An Arbitration Court in Inheritance Disputes?

Inheritance disputes can sometimes require a great deal of patience. Proceedings before ordinary Swiss courts often last several years, especially if the Federal Supreme Court is involved after the two cantonal instances (in the canton of Lucerne, the District Court and the Cantonal Court). This raises the question: Is there an alternative?

First of all, it should be noted that the executor cannot make decisions unilaterally in the case of disagreements among the heirs; rather, he can only mediate or propose amicable solutions. To the extent that the testator has allocated estate components to specific individuals or has provided for division rules in the will or inheritance agreement, the executor is both entitled and obligated to carry out those directives. However, disputes over the (valuation) worth of, for example, an artwork or a property, the need for interpretation of a will or inheritance agreement, or competing claims by multiple parties to the same assets can still lead to a deadlock. In such cases, the executor (not least for his own protection) must wait to proceed with further distribution and settlement until the heirs reach an agreement or a court has rendered a decision.

An arbitration procedure can, ideally, lead to a resolution more quickly and discreetly than an ordinary court proceeding, as an arbitration court typically issues a final decision without subsequent appeal options. While there is the option of appealing to the Federal Supreme Court (at least according to the provisions of the Swiss Civil Procedure Code), the grounds for appeal are quite limited, meaning there is likely to be only one substantive assessment of the matter, namely that by the arbitration court. One advantage of arbitration is that, due to the specialization of the arbitrators in their respective fields, their expertise may lead to a more appropriate ruling or settlement. Depending on the value of the dispute and the number of instances in the ordinary process, the costs of arbitration may be lower than those of a corresponding ordinary procedure. However, the right to free legal aid (provisional litigation at the state’s expense for those without means) is excluded in arbitration.

The establishment of an arbitration court can fundamentally be provided for by the testator in the will, by several parties within the framework of an inheritance agreement, or by the heirs during the division of the estate. If a ruling is made within the framework of an arbitration proceeding, the executor is also bound by it. While the executor can generally be appointed as an arbitrator, this situation can often be precarious due to a conflict of interest regarding the executor.

In Switzerland, arbitration received its first "anchor" with the federal Civil Procedure Code (ZPO) in 2011. Articles 353 and following of the ZPO generally regulate the organization of the arbitration court and the arbitration procedure for arbitrable matters – including those outside inheritance law. The parties have considerable leeway to agree on a procedure that suits them. The choice of arbitrators is of great importance: they should be free from specific conflicts of interest and dependencies with the parties. One option is the Swiss Association for Arbitration in Inheritance Matters (SVSiE), established in 2012 to provide services in the area of arbitration in inheritance matters. It offers national and international arbitration services in inheritance matters in Switzerland, irrespective of the applicable law (www.schiedsgericht-erbsachen.ch). With its arbitration rules, the SVSiE largely refers to an existing regulatory framework, namely Articles 1-45 of the Swiss Arbitration Rules. Members of the association’s board or individuals appointed by them usually serve as arbitrators.

Similar to initiating an ordinary civil process, you should also carefully consider entering into arbitration:

• What legal questions are at stake, and can they even be adjudicated by an arbitration court?
• Which individuals possess the necessary expertise and independence?
• What deviations (particularly simplifications) from the ordinary civil process are desired and/or sensible?
• What costs and time duration can be expected?

Are you considering including an arbitration clause in your estate planning or hoping to resolve an inheritance dispute through arbitration? We would be happy to advise you!

Lucerne, August 21, 2020

Reto Marbacher