Litigation 2021

Last Updated December 04, 2020

Switzerland

Law and Practice

Authors



Walder Wyss Ltd boasts some 240 legal experts and is one of the biggest commercial law firms in Switzerland, with offices in Zurich, Geneva, Basle, Berne, Lausanne and Lugano, covering all three Swiss language regions. Walder Wyss is a full legal services firm, covering all areas of commercial law. The firm features a dedicated dispute resolution team with more than 55 members which is one of the most powerful teams in the country. The litigation practice's main focuses are commercial litigation, in particular before the commercial courts in Zurich, Berne, Aargau and St. Gall and before the civil courts in Geneva and Basle, with a particular focus also on injunctive relief matters, and work on recognition and enforcement of foreign judgment and arbitral awards, including freezing orders.

Switzerland is a civil law jurisdiction. The method of adjudication in civil matters before state courts in Switzerland is adversarial. There are some minor exceptions to this, where there are also inquisitorial elements (generally speaking, these are not relevant in commercial matters).

Swiss civil procedure is mainly governed by the Swiss Federal Civil Procedure Code (CPC), which came into force in 2011 and replaced the 26 Cantonal Civil Procedure Codes that were in force previously.

Main features of the Swiss civil litigation system include:

  • in most cases, reconciliation before a “reconciliation authority” (also known as “justice of peace”) is mandatory before the plaintiff may file suit with the court;
  • the plaintiff is to advance the court costs;
  • pleadings are largely done by way of written briefs;
  • with regard to evidence, the focus primarily is on documentary evidence, less on witness testimony;
  • there is no “discovery” or “disclosure” in the style of the USA or UK; 
  • there are no jury trials;
  • the “loser pays” principle applies with regard to both court costs and compensation for legal fees;
  • “no win, no fee” arrangements are prohibited, whilst certain success fee elements may be possible; and
  • third-party litigation funding is possible.

In essence, there is a two-layer civil court system in the cantons (states), and the Federal Supreme Court on the federal level as the highest court in Switzerland: with the notable exemption of the Swiss Federal Patent Court that has jurisdiction for all patent cases in Switzerland, civil litigation generally starts at the courts of first instance whose decision may be appealed with the cantonal court of appeal (superior court). The superior court’s decisions are then subject to appeal with the Swiss Federal Supreme Court.

There are specialised courts of first instance in the fields of labour and tenancy, and certain cantons have established specialised commercial courts that basically handle all disputes between commercial entities and whose decisions may only be appealed with the Swiss Federal Supreme Court.

The organisation of the courts of first and second instance in civil matters is governed by the law of the cantons. The organisation and number of professional judges sitting on a case therefore differs to some extent from canton to canton.

Depending on the official language at the place of the court, the proceedings are conducted in German, French or Italian.

In general, civil court hearings are open to public, but it is quite rare that other people than the parties or other people involved would attend. Court documents (including the parties’ submissions) are not normally available to the public. It is possible to obtain a specific judgment, if certain requirements are met, and such judgment would then be anonymised. All judgments of the Federal Supreme Court are published (in anonymised form).

In general, the professional representation of parties in court is reserved to lawyers admitted to the bar. It is also necessary to be admitted to the bar to be allowed to represent a party before the Federal Supreme Court. Bar admission is administered by the cantons, but admission in one canton entitles to practice throughout Switzerland.

Qualified attorneys from European Union member states may practice in Switzerland if they only do so occasionally. If they wish to practice permanently in Switzerland, they must obtain a simplified admission.

Third-party litigation funding is permitted. As long as the party to the proceedings is directly funded by a third party, no limits apply. Third-party funding might however interfere with the independency rule for counsel mandated to represent their client’s interest. In this case, the rules of professional conduct might prohibit counsel from entering into a correspondingly funded client relationship.

There are, as a matter of principle, no restrictions for third-party funding with regard to specific types of lawsuits. Yet, most litigation funders would normally only finance commercial disputes (including inheritance disputes).

Third-party funding is available to both the plaintiff and the defendant. Yet, it is typically the plaintiff that would use litigation funding, whereas defendants may be able to rely on insurance coverage (provided their legal costs are covered).

There are no specific minimum and maximum amounts that a third-party funder would fund. The amounts will depend on a specific case and the specific funder. By and large, funders are only interested in funding cases of a certain size.

Third party-funder will normally finance all costs of a litigation, in particular court costs, lawyers’ fees, costs of experts, and a compensation to the winning party for its legal costs.

Contingency fee and “no win, no fee” agreements are not allowed.

However, it is possible to agree on a success fee element in the sense that counsel will receive a top up on his fee in case of success, but it is required that the fee that is payable in any case (regardless of the outcome) must at least cover any and all costs of counsel and must also contain some profit element.

The Swiss Federal Supreme Court has in recent rulings tightened the applicable rules, imposing further restrictions on such agreements.

There are no time limits by which a party to the litigation should obtain third-party funding.

There are, in principle, no rules as to pre-action conduct in Swiss litigation. In particular, a plaintiff is not required to advise the defendant that he wishes to initiate legal proceedings. Similarly, a defendant is not required to respond to a pre-action letter. Whilst not formally required, it is quite normal for a counsel to send a “letter before action” to the counter-party and its counsel respectively, before initiating formal proceedings.

In this context, it should be noted that in most cases, before a matter may be brought to court, the plaintiff has to file a formal conciliation request with the conciliation authority. The conciliation authority will attempt to facilitate a settlement between the parties. If the parties cannot reach an agreement, the conciliation authority will issue the permit to file suit with the court.

If the parties agree, the standard conciliation proceedings may be replaced by mediation. The parties may also choose to waive the conciliation proceedings if the value at stake amounts to at least CHF100,000. Moreover, in cases where a commercial court (in the cantons that have provided for a commercial court) is competent, there is no formal conciliation proceeding.

The general rule is that civil claims are time barred ten years after they became due unless the law provides otherwise.

There is a number of shorter time bar periods for various types of claims specifically provided in the law. To name just a few: recurring claims such as rent claims become time barred after five years. Tort claims become time barred three years after the injured person learned of the damage and of the tortfeasor's identity (but in any case ten years - and in personal injury cases, 20 years - after the date on which the damage was caused).

In contrast, certain inheritance claims are time barred only after 30 years.

The statute of limitation period generally starts to run from the point in time the claim becomes due.

In international cases, Swiss jurisdiction is given if an international treaty, in particular the Lugano Convention (the equivalent to the Brussels I Regulation), between Switzerland and the member states of the European Union or the Swiss Private International Law Act (PILA) provide for jurisdiction. Jurisdiction for domestic cases is governed by the CPC. The two main grounds for jurisdiction are the existence of a jurisdiction agreement between the parties (normally a jurisdiction clause in a contract) or jurisdiction of the court at the place of the defendant. Depending on the matter and the applicable international treaty or procedural law, other grounds for jurisdictions may apply, for example at the place of performance etc. If jurisdiction based on the above mentioned rules is given, there is no room for a defendant to claim that there would be a more convenient forum somewhere else.

Normally, the plaintiff will file its action by filing a written brief, setting out in detail its prayers for relief, the claim(s) and the facts, along with documents that support its case (statement of claim along with exhibits). In its statement of claim, the claimant is to indicate any and all means of evidence (in particular, witnesses) that support its case. It is common to plead the law as well, but not formally required (the iura novit curia principle applies).

As mentioned, in most cases, the plaintiff must first file a reconciliation request with the reconciliation authority. This request can be kept brief but must describe the basic set of facts and state the prayers for relief. If no settlement can be achieved, the reconciliation authority will issue a permit to sue to the plaintiff, based on which the plaintiff may file suit with the court within a deadline of three months.

A party may, if certain requirements are met, amend its claim prayers (its prayers for relief) after having filed its statement of claim. Moreover, in ordinary proceedings, each party is entitled to file two written submission or to present its case at a hearing after a first exchange of written briefs.

It is the court that serves the written submissions and exhibits filed by one party directly on the other party.

Judicial documents are usually served by registered mail.

A party outside of Switzerland can be sued in Switzerland, and service will then be effected via international legal assistance pursuant to the applicable rules and treaties (eg, the relevant Hague conventions).

If the defendant does not file a response to a lawsuit within the time limit set for them by the court for such response, the court grants them a short extension. If the defendant also fails to respond within this extended time limit, the court renders a default judgment. The court will in essence assume that the plaintiff's factual assertions were not contested and apply the law accordingly, ie, usually grant the claim.

To date, the Swiss legal system does not provide for class actions or collective redress. The recent move to include elements of collective redress through an amendment of the CPC has been pushed back. Multi-party actions, however, are allowed (ie, several plaintiffs with identical or similar claims may join and file one action) and an intervention of a third party is possible.

There is case law holding that counsel is to advise the client of the cost implications of litigation. Moreover, the court is to inform the parties of the likely costs. In most cases, the court will in any case request an advance on court costs in the amount of the full expected court costs from the plaintiff before taking up the case.

Case management falls within the competence of the court. The parties may however file procedural requests, most commonly for extensions of deadlines, etc. It is also possible to request interim relief be it via separate proceedings or from the court dealing with the main claim. There are no “strike out” applications. However, a defendant may request that the proceedings be limited in its scope to a potentially decisive issue, eg, lack of jurisdiction, lack of standing to sue, or that the claim is time-barred.

There is no early judgement or strike out applications (see 4.1 Interim Applications/Motions regarding the possibility to limit the scope of pending proceedings through a procedural request). In addition, there is the possibility to request a judgement in fast track proceedings if the conditions for a so-called “clear case” are met, but this does not normally work in commercial disputes and in general is very rarely successful (with the exemption of eviction of tenants which is regularly sought through fast track decision).

In Swiss civil litigation, dispositive motions primarily relate to the issues of whether the court has jurisdiction, whether the plaintiff has standing to sue, or whether the claim has become time barred. In these cases, the defendant may request that the proceedings be limited to the dispositive issue in question (see 4.1 Interim Applications/Motions and 4.2 Early Judgment Applications).

It is possible for third parties to join the proceedings. A third party needs to establish, on a prima facie evidence basis, that it has a legal interest that a pending case is decided in favour of one of the parties and file a corresponding application with the court. The court will, having heard the parties to the case on the application, decide upon the application. If a third-party notice was issued by a party of a pending proceeding, the third party has a right but no obligation to join the proceedings and to support the notifying party.

A defendant may apply for security for their legal costs to be posted by the plaintiff, if certain requirements are met, eg, if the plaintiff seems to be insolvent or if there are other grounds based on the which a subsequent compensation for legal costs seems to be jeopardised. Such a request is granted in particular if plaintiff is not domiciled in Switzerland, but only if its country of domicile has not entered into a treaty with Switzerland exempting its citizens/incorporated legal entities from such payment.

In general, the court will decide on the costs of interim applications and procedural motions in its final decision at the end of the proceedings. In case of separate interim relief proceedings, the court would normally decide on the costs with its decision on the interim relief.

In general, a court will rule swiftly on applications and motions. The timeframe will depend on the case, the urgency of the issue and the court’s workload. Ex parte court orders are available if requesting party can show that there is urgency.

There is no pre-hearing fact discovery in the sense of discovery as it happens in the United States.

However, in the proceedings, the parties (and third parties) have a duty to cooperate in the taking of evidence. In particular, they may be ordered to produce certain specifically identified documents (no fishing expeditions), subject to the attorney-client privilege or other secrets to be protected. The court may take into account an unjustified refusal to cooperate by a party when weighing the evidence.

Moreover, if a party can establish, on a prima facie basis, that a future taking of evidence is in jeopardy, it may request the precautionary taking of evidence even before filing suit on the merits. Precautionary taking of evidence is (theoretically) also available if a party can credibly show that if a certain fact can be ascertained – for which the precautionary taking of evidence is requested – it would have a claim. Due to the strict handling of such cases by the courts, such requests are usually not granted.

See 5.1 Discovery and Civil Cases. There is no pre-trial discovery. However, in pending proceedings, a party to the proceedings or a third party may be ordered by the court (upon request) to produce documents or, in case of third parties, to appear as witnesses.

There is no discovery in Switzerland.

Swiss civil proceedings essentially consist of two phases: first, the allegation phase (oral or written pleadings, and filing of documentary evidence by each party), and second, the taking of evidence phase.

Swiss courts heavily rely on documentary evidence. Such evidence is submitted by the parties together with their briefs: the plaintiff files their action and all documentary evidence that they believe supports their case. Likewise, the respondent, together with their answer to the statement of claim, files those documents that they believe supports their case. Additional documentary evidence can be provided in further pleadings (ie, both parties are entitled to plead twice).

It is possible for a party to apply within its briefs to the court to order the counterparty (or a third party) to disclose and file certain specific documents, if they are relevant and necessary for the outcome of the case. However, such documents must be clearly specified (no fishing expeditions, no request for broad categories of documents but rather, for example, disclosure of the letter sent by person X to person Y on or around 11 May 2020. with regard to the issue of malperformance of a certain machine).

The parties may also indicate in their briefs witnesses that may then be called by the court to give evidence in a hearing. Moreover, the court may appoint experts or inspect eg, a site or a building. Finally, the court also questions the parties to establish the facts, ie, the parties’ testimony qualifies as evidence (although usually cautiously weighted by the courts).

Privilege is essentially protected (“attorney secrecy”). As there is no discovery in Switzerland, privilege generally triggers fewer issues. In-house counsel currently may not invoke the privilege related to the attorney secrecy. Settlement discussions between counsel are to be kept confidential.

Parties as well as third parties are generally under an obligation to cooperate with the court and to follow its orders, eg, also to produce documents. However, the CPC provides for quite complex and nuanced rules that allow a party or a third-party to refuse to co-operate. Co-operation may be refused in particular, if producing certain documents would violate a protected secret or to prevent self-incrimination or incrimination of a close person.

In general, interim relief is granted if a party can establish, on a prima facie evidence basis, that it has a claim or right that has been infringed or is in danger of being infringed and that there is the threat that it would suffer a harm that cannot easily be cured. The party requesting interim relief must further also establish urgency or even extreme urgency in case of an ex parte request.

Injunctive relief can take various shapes and forms, in particular freezing or conservatory orders, aiming at maintaining a current situation. To a limited extent courts also grant interim relief aiming at performance. “Anti-suit” injunctions are not granted. The interim relief sought must be proportionate.

Protection of monetary claims is exclusively dealt within attachment proceedings, codified in the Swiss Debt Enforcement and Bankruptcy Act (DEBA). The prerequisites for such an attachment vary considerably from the general rules applicable pursuant to CPC, eg, they are always and only granted on an ex parte basis. In particular, an attachment is only granted if the requesting party can make credible both the place of as well as the general existence of assets that ought to be frozen (eg, that the defendant has a bank account, and that, thus, assets of the defendant are with said bank). The corresponding freezing order, although usually directed at third parties (such as banks or other financial intermediaries), operates in rem.

In very urgent matters, an ex parte order (including an attachment, see 6.1 Circumstances of Injunctive Relief) may be obtained within hours or a few days. There are no “out of hours” judges, but in case of urgency, some judges may be prepared to sit longer if they are advised that an urgent request will be filed shortly.

Ex parte relief may be granted, if the matter is so urgent that there is no time to hear the defendant and/or there is a risk that otherwise the purpose of the order would be missed. The courts tend to apply a very strict standard before granting ex parte relief.

In principle, if an injunction later on turns out to have been unjustified and if it has caused damage to the respondent, the respondent may claim damages from the plaintiff. The plaintiff may be required to post security, both at the ex parte stage or later in the proceedings and courts can make the issuance of a court order conditional of the deposit of such a security.

Interim relief granted by Swiss courts normally is limited in its effects to Switzerland. In particular, there are no Swiss “worldwide freezing orders” to protect monetary claims, ie, only assets in Switzerland can be frozen (see 6.1 Circumstances of Injunctive Relief).

Provided the general prerequisites for injunctive relief are met, injunctive relief may also be obtained against third parties, taking into account that such an order must be proportionate given its effect on a third party. The most common injunctive relief directed at a third party is an attachment order vis-à-vis a bank ordering it to freeze assets of a certain individual (see 6.1 Circumstances of Injunctive Relief).

Depending on what the injunctive relief order provides, non-compliance with such order may constitute a criminal offence or the obligation to pay a certain amount of money per day of infringement.

In Swiss civil proceedings, there is not really a “trial” as in common law jurisdictions. In particular, in more complex commercial cases, pleadings are done by way of written brief, and documentary evidence is filed along with such briefs. However, hearings with oral pleadings are possible, and in smaller cases the second round of briefs is sometimes skipped and oral pleadings take place.

The parties and the courts primarily, however not exclusively, rely on documentary evidence. Provided a court wants to hear testimony from a witness (or a party) such witness testimony is taken during a hearing, specifically set for that purpose or at the end of the proceedings during the final hearing. Although holding at least one hearing (the so called final hearing) is a prerequisite for a court to decide on the merits, the CPC allows that the parties renounce to hold such a hearing.

The courts can summon the parties to hearings throughout the proceedings and at any stage. Usually, however, the only hearing that takes place before the final hearing (if the parties have not renounced to it) is a so called instructional hearing during which the court can inter alia question witnesses and the parties as well as give the parties room to negotiate a settlement.

Given that there are no “trials” as in common law jurisdictions and hearings are rather short and limited, and as the conduct of the proceedings is in the hands of the court, there are no case management hearings in civil disputes. Instructional hearings may, however, take place at any time during the proceedings (see 7.1 Trial Proceedings).

There are no jury trials in Switzerland.

Evidence is admitted to the extent it relates to facts alleged by one party and disputed by the other party, provided the fact itself is relevant to decide the case. Non-objection to an allegation is qualified as acknowledgment and no further evidence needs to be admitted or taken by the court to base its decision on such a fact.

Evidence needs to be linked to a specific allegation, ie, the written or oral pleadings need to link the request that a certain piece of evidence is taken to an allegation made.

As the allegations also the evidence must be submitted by the parties on or before the end of the pleading phase (which usually ends with the second round of written pleadings). Evidence submitted at a later stage is only accepted if it came into existence after the record was closed or if the party submitting has a valid excuse for only submitting it late.

In order to be admitted evidence must fall within the categories of admissible evidence set out by the CPC:

  • oral witness testimony (written testimony is generally not allowed);
  • documents or other records such as photographs, videos, etc;
  • inspection of objects and places by the courts;
  • expert opinion by court appointed experts (private expert opinions do not qualify as evidence);
  • written statements from authorities (or in exceptional cases from individuals); and
  • oral statements of the parties (party interrogation by the court).

Parties may file written expert reports, but legally they do not qualify as means of evidence (see 7.4 Rules That Govern Admission of Evidence) and (only) have the same legal standing as the parties’ allegations. In order to qualify as proper evidence, the expert must be appointed and instructed by the court. A party may request in its briefs that such expert be appointed by the court. It remains for the court to decide whether it considers an appointment of an expert as appropriate.

The parties are usually granted the right to submit specific questions to the court appointed expert which, however, must pass the court’s muster. The expert instruction is done by the court. The court appointed expert presents its conclusions in a report and in addition the court appointed expert is usually also questioned by the court and the parties. However, no cross-examination takes place (ie, the parties are limited to ask clarifying questions and are not allowed to extend their questions beyond what they pleaded/alleged in their briefs/pleadings).

In general, civil court hearings are open to public, but it is quite rare that other people than the parties or other people involved would attend. Settlement negotiations during hearings are not open to the public. Court documents, including transcripts of hearings, are not normally available to the public. It is possible to obtain a specific judgment, if certain requirements are met, and such judgment would then be anonymised before it is released. All judgments of the Federal Supreme Court are published (in anonymised form).

It is the court that conducts the proceedings in all aspects. In particular, it is the court that examines the witnesses and questions the parties. Counsel may be given the opportunity to ask additional questions, but always under the control of the court. The court will normally render decisions with regard to the procedure during the hearing on the spot. In commercial matters, judgements will normally be rendered at a later date, apart from small cases.

The length of the proceedings normally depends on the complexity of a case, if witnesses and/or experts are to be heard or not, if the case requires service of court orders, etc, outside of Switzerland, if taking of evidence outside of Switzerland via international legal assistance (Hague Convention on the Taking of Evidence Abroad) is necessary and also on the workload of the judge in charge of the file. As a rule of thumb, in commercial matters, the whole first instance procedure (from filing the action up to service of a judgment), normally takes one to two years. However, commercial disputes are often settled during an instructional court hearing after the parties have exchanged one set of briefs, thus, effectively many matters are resolved within a year or less.

In commercial matters, the parties may settle their dispute in or out of court. No court approval is necessary. Whereas an out of court settlement is a mere contract/agreement, settling the dispute in court gives the settlement the same effect as a court decision, eg, the settlement agreement is a title for enforcement equivalent to a court decision. If the parties settle (in or out of court) the proceedings are terminated without a formal decision on the merits being issued by the court.

Provided the parties agree to confidentiality, settlements are confidential.

If the settlement is made in court, it is enforceable in the same way as a court judgement. Out of court settlements are enforced like contractual claims.

A settlement made in court could be set aside through a very limited appeal mainly and only if a party can establish that it suffered from an error or was deceived, and the settlement, thus, is invalid. However, it is difficult to set a settlement aside, as the general assumption is that by settling their dispute by way of settlement, the parties accepted that there may be uncertainties etc.

An award can take many forms. The operative part of an award is the mirror image of the prayers for relief, which it cannot exceed. Most commonly an award orders a party to do, not to do or to tolerate something. The most common award is certainly that payment of money is ordered, as this is the most common relief sought. An award can also alter the legal situation (eg, cancelling a resolution passed by a shareholders’ meeting) or ascertain that a specific right exists or not.

In civil matters in Switzerland, only compensatory damage may be recovered. Interest may be recovered based on the specifics of the case (for example interest for delayed payment at a rate of 5% is almost always available). There are in general no punitive damages in Switzerland.

Interest may be recovered based on the specifics of the case (for example interest for delayed payment). In case of a money claim, interest may be granted from the date of default in paying, at a standard interest rate of 5% per year or at a higher rate as agreed by the parties (as long as the rate is not usurious). The relevant trigger is the time the debtor was in default with paying, not the moment the judgement is made. For claims for damages the trigger is the moment at which the damage occurred.

Enforcement of a money judgment is governed by the DEBA, enforcement of non-money judgements are governed by the CPC.

Monetary Claims

An enforceable judgment allows to request an attachment provided the creditor can credibly show that there are assets of the debtor located in Switzerland that can be frozen.

Monetary claims are enforced by debt enforcement proceedings administered by the local debt enforcement office (usually each municipality has such an office). The creditor must request that a summons to pay is issued by the competent debt enforcement authority. The debtor may object to a served summons to pay and can bring the proceedings to a halt. However, if the creditor holds an enforceable judgment in his hands, he will be able to set aside the objection in fast track court proceedings.

If there is no objection or if the objection is set aside, the creditor can request that the enforcement proceedings continue. The debt enforcement office then may seize assets located in Switzerland of the debtor in order to liquidate these assets and distribute the proceeds to the debtor. If the debtor is a corporation the creditor must request from the bankruptcy court to declare the debtor bankrupt. Bankruptcy proceedings will then be initiated provided there are sufficient funds to cover the costs.

Non-monetary Claims

Non-monetary claims are enforced by the courts in summary proceedings. Where necessary and possible, enforcement is done by force ordering compulsory measures (eg, by taking away an asset from debtors control, etc). If debtor is under an obligation to act, refrain or tolerate something, the enforcement court may impose fines, in particular a fine of CHF1,000 for each day of non-performance. The enforcement courts decision may further substitute for any legal action necessary for performance (such as declarations to assign a claim, etc) that the debtor refuses to carry out.

In order to be enforced, a foreign judgement must be recognized and declared enforceable by a Swiss court upon application of the judgement creditor. Provided that none of the many treaties Switzerland has entered into governs the recognition and enforcement of the relevant judgment, the issue is governed by the rules set out in the PILA.

International Treaties, in Particular, the Lugano Convention

In practice, the most relevant multilateral treaty is the Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the Lugano Convention), entered into by Switzerland and the European Union as well as Denmark, Iceland and Norway. The Lugano Convention is, in essence, the equivalent of Regulation (EC) No 44/2001 (Brussels I) on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters. It should be noted, in this context, that the Lugano Convention has not been amended to mirror the changes made to the Brussels I Regulation by the Recast Brussels I Regulation, which took effect in January 2015, and there are no plans to amend the Lugano Convention.

The Lugano Convention applies in civil and commercial matters, excluding inheritance matters, bankruptcy, social security, and arbitration).

The Lugano Convention provides for broad recognition and enforcement of judgments rendered in a member state of the European Union (including Denmark), Iceland or Norway in Switzerland.

Recognition is denied if the provisions of the Lugano Convention are not met. In particular, a judgment that manifestly runs contrary to public order, or that is the result of proceedings in which the document initiating the proceedings was not properly served on defendant culminating in a default judgment, are not recognised and enforced. Further, recognition is also denied if the foreign judgment stands in irreconcilable conflict with a judgment between the same parties be it a Swiss judgment or an earlier foreign judgment, provided that the latter can be recognised in Switzerland.

Moreover, Switzerland is party to a number of bilateral treaties on recognition and enforcement in civil and commercial matters, eg, Liechtenstein.

Recognition and Enforcement under the PILA

Where there are no applicable treaties, the recognition and enforcement of foreign judgments is governed by the Swiss Private International Law Act (the PILA).

In general, the PILA provides for recognition of foreign judgments, provided the foreign court:

  • had jurisdiction pursuant to the jurisdiction provisions of the PILA (including also judgements rendered at the place of domicile of defendant or judgments based on a an agreed jurisdiction clause or judgement or judgments in which defendant accepted the jurisdiction of the foreign court by pleading to the merits);
  • if it is final and binding; and
  • no other specific ground to deny recognition such as violation of the public order would apply.

The actual enforcement of foreign judgment then follows the same rules that apply for Swiss judgments, ie, monetary claims are enforced according to the rules set out in the DEBA whereas enforcement of all other claims is done pursuant the enforcement rules stipulated in the CPC.

Switzerland has not yet signed the Hague Convention on Enforcement.

In general, there are two appeal instances: from the district court (court of first instance) to the cantonal superior court, and from there to the Swiss Federal Supreme Court. The appeal to the superior court in general (exceptions are made for certain summary judgments, in particular in the field of enforcement) provides for full scrutiny both as to facts and as to law, whilst the appeal to the Federal Supreme Court essentially only allows for a scrutiny of law; the Federal Supreme Court is basically bound to the facts as established by the superior court and the fact established by the cantonal superior court can only be challenged on extremely limited grounds.

In cases where there is only one cantonal court deciding on the merits, as is the case if a canton has established a commercial court (as is the case in the cantons of Zurich, Berne, Argovia and St. Gall) or if the CPC provides for direct adjudication by the cantonal superior court (such as is the case in IP-matters), the relevant decision may only be appealed against before Federal Supreme Court (with limited scope as set out above).

Appeals against procedural/interlocutory orders are possible to a limited extent.

See 10.1 Levels of Appeal or Review to a Litigation. If the conditions set out by the CPC are met, an appeal is possible, there is no “leave” or similar necessary, and it is the appellate court (cantonal superior court or Swiss Federal Supreme Court) that will decide if the conditions for admission of an appeal are met.

An appeal must be lodged with the appellate court within 30 days in ordinary proceedings and within 10 days in summary proceedings (such as proceedings for interim relief). The deadline is triggered by service of the decision to be appealed.

In general, an appeal has suspensive effect, ie, the appealed decision cannot be enforced during the deadline to file an appeal and once an appeal has been served. Most notable exceptions are appeals against decision regarding interim relief or appeals in enforcement matters.

Generally, the appeal provides for full scrutiny, ie, appellants may challenge both the fact finding by the court of first instance as well as the application of the law. Exceptions are made for certain summary judgments, in particular in the field of enforcement, for which there is not a full but only limited appeal, allowing only to challenge the application of the law, whereas the facts established by court of first instance can only be challenged on limited grounds. An appeal to the Swiss Federal Supreme Court only provides for limited scrutiny, ie, the Swiss Federal Supreme Court is in essence bound by the facts established by the cantonal superior court.

In essence, the parties are bound by what they have pleaded with the court of first instance. New facts can only be submitted if it was not possible to submit them in the previous court before the pleading phase ended. In cases where there is only a limited appeal, no new facts are admissible.

The court of appeal usually orders appellant to pay an advance on court costs and may not take up the case if the advance is not paid. Other than that, there are no conditions imposed by the court before granting an appeal, apart from the appeal being admissible, ie, meeting the requirements provided by the CPC.

An appellate court may confirm or squash the attacked decision. It the appealed decision is lifted, the appellate court may either itself issue a new decision or send the case back to the court of first instance to decide anew.

Whereas cantonal court of appeals usually issue a new decision if they come to the conclusion that the decision appealed is deficient, the Swiss Federal Supreme Court in such cases only rarely decides on the merits but instead usually remits the case to the cantonal court of appeal to decide anew in line with the Supreme Court’s findings.

In Switzerland, the “loser pays” principle applies. The losing party has to bear the court costs and to pay a compensation for legal fees to the winning party. Both the court costs as well as the compensation of legal fees are determined by the court, usually in accordance with a tariff that varies from canton to canton but normally depends on the amount at stake.

The decisive factor is what party prevails, and to what extent, eg, if only 50% of the amount claimed is awarded, the costs are usually split and the concurring compensation claims for legal fees are set off. The actual amount of the court costs as well as the claim for compensation for legal fees depends on the amount at stake, the importance of the matter and the complexity of the proceedings. Both are determined according to the applicable tariffs.

In general, there is no interest awarded on costs. However, if the costs are not reimbursed in time, the costs creditor may request statutory interest for delayed payments at 5% per year pursuant to the general rules applicable based on Swiss substantive law.

In Switzerland, commercial disputes are often solved by way of settlement. The courts facilitate settlement. In order to file an action with the court, the plaintiff generally first needs to file a request for reconciliation with a so called justice of peace (who is often a lay person). The justice of peace attempts to facilitate a settlement between the parties. There are certain cases where no reconciliation proceeding is required, in particular in cases where a commercial court has jurisdiction. The parties may use mediation in place of a reconciliation request.

It is fair to say that in commercial matters, mediation in Switzerland is not often used, which may be a consequence of the above mentioned reconciliation procedure before the justice of peace and the fact that courts in Switzerland generally attempt to facilitate a settlement between the parties which is, of course, not mediation proper.

In particular, cases that go to a commercial court as established in the cantons of Zurich, Berne, Aargau and St. Gall, are very often settled amicably. These courts have a long tradition of facilitating such settlements.

See 12.1 Views of Alternative Dispute Resolution within the Country.

As set out above, mediation in commercial matters is less important than in other jurisdictions. Still, there are a number of institutions that offer and promote ADR, most notably the Swiss Chambers’ Arbitration Institution.

Switzerland is an arbitration friendly country and is actually one of the top venues for international arbitration worldwide. In international arbitrations with venue in Switzerland, most often the Rules of Arbitration of the International Chamber of Commerce (ICC Rules) and Rules of the Swiss Chambers’ Arbitration Institution (“Swiss Rules”) are used. In domestic matters, arbitration certainly is an option to many parties, but it seems fair to say that most domestics disputes are still dealt with before state courts.

International arbitration in Switzerland is governed by Chapter 12 of the PILA, domestic arbitration by the CPC. International arbitral awards are recognised and enforced in Switzerland in accordance with the New York Convention.

In essence the rule is that arbitration is admissible if the parties can freely dispose of the issue at stake. Therefore, almost all commercial disputes may be subject to arbitration; the notion of arbitrability in Switzerland is exceptionally wide.

An arbitral award rendered in Switzerland may only be challenged based on very limited grounds, in particular an infringement of the right to be heard. In any case, there is no scrutiny on the merits. Arbitral awards are only very rarely set aside.

Arbitral awards are enforced essentially in the same manner as court judgments (see 9.4 Enforcement Mechanisms of a Domestic Judgment). Recognition and enforcement is governed by the New York Convention.

There is currently a proposal for certain specific amendments to the CPC pending; it is not yet clear to what extent and when they will enter into force. For details, see the separate Switzerland Trends & Developments chapter in this guide

In light of the COVID-19 crisis, the government has passed certain legislation. For details, see the separate Switzerland Trends & Developments chapter in this guide.

Walder Wyss Ltd

Seefeldstrasse 123
8034 Zurich

+41 58 658 58 58

+41 58 658 59 59

dieter.hofmann@walderwyss.com www.walderwyss.com
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Trends and Developments


Authors



Walder Wyss Ltd boasts some 240 legal experts and is one of the biggest commercial law firms in Switzerland, with offices in Zurich, Geneva, Basle, Berne, Lausanne and Lugano, covering all three Swiss language regions. Walder Wyss is a full legal services firm, covering all areas of commercial law. The firm features a dedicated dispute resolution team with more than 55 members which is one of the most powerful teams in the country. The litigation practice's main focuses are commercial litigation, in particular before the commercial courts in Zurich, Berne, Aargau and St. Gall and before the civil courts in Geneva and Basle, with a particular focus also on injunctive relief matters, and work on recognition and enforcement of foreign judgment and arbitral awards, including freezing orders.

Introduction

As elsewhere, the COVID-19 pandemic has been a relevant driver for change in the realm of litigation also in Switzerland and will continue to play an important role, due to the uncertain progress of the pandemic. Further, in early 2020 a bill was submitted to parliament for the revision of the Code of Civil Procedure (CPC). The CPC came into force in 2011 and harmonised the law of civil procedure throughout Switzerland, replacing the previous 26 cantonal procedural laws.

An earlier pre-draft of the revision had contained a proposal to introduce instruments of collective legal redress. This was quite remarkable, as when the CPC was introduced in 2011, the government had taken the position that there was no need for collective redress, and that collective redress was a concept “alien to Swiss law”. However, the current draft CPC does not contain provisions with regard to collective redress, and this issue has been separated from the revision project and postponed to a later stage. This is against the background that the pre-draft proposal for collective redress had met a lot of criticism. 

Yet, the revision project still contains interesting and significant proposals for changes, in alia with regard to reducing cost barriers in civil proceedings. Moreover, as of 1 January 2021, the simplified procedure for blocking the commercial register will be abolished and a court decision will have to be obtained from the outset. This will make the first step to obtain interim relief with regard to entries in the commercial register, such as changes in the board of directors, capital increases, amendments to the articles of association, etc, more difficult for a claimant.

Impact of the COVID-19 Pandemic on the Judicial System in Switzerland

The COVID-19 pandemic had and continues to have quite an impact on the legal framework and the litigation landscape in Switzerland. The situation is in a state of flux, and it is difficult to predict whether and to what extent further interventions with an impact on court proceedings will be taken by the government. However, it should be noted that even though at the peak of the first wave in Switzerland in early spring of 2020, considerable general restrictions were in place, these restrictions did not have a paralysing effect on court operations. After a short period of adaptation, the courts and the enforcement authorities were able to maintain their operations even under difficult conditions. Accordingly, one should assume that future restrictions, which may go beyond those currently in force and that will affect life in general, will have an impact on the operation of the courts, but that the system will remain effective so that efficient legal protection in Switzerland will remain guaranteed.

Emergency measures

At the beginning of the first wave of the pandemic, the Swiss Federal Council (Swiss federal government) issued an order, inter alia, to suspend procedural deadlines by emergency law. The Swiss Federal Council also ordered a halt to enforcement proceedings aimed at monetary claims for a certain period of time. To the exception of urgent matters, de facto, court proceedings came to a standstill for a very short time in certain places, however, were quickly resumed. In any case, the duration of already pending proceedings was not noticeably extended as a result, although some authorities experienced a certain backlog, which should have been smoothed out by now.

As part of its emergency measures, the Swiss Federal Council has, by means of ordinances, granted the courts the possibility of conducting court hearings virtually, ie, via video conference. Such virtual court hearings are not provided for in the Code of Civil Procedure. According to the authors' experience, however, the courts have made relatively little use of this possibility or there is no known widespread implementation. Instead, the court authorities have continued to conduct hearings physically, albeit with considerable sanitary precautions in place.

Lifting of emergency measures

Both the suspension of proceedings and the halt to debt collection proceedings were subsequently lifted. The lifting of the latter measure was justified, in particular by the fear of a collapse in payment morale, as was the case with the last stop imposed during the First World War. The other substantive changes introduced as an emergency measure to support the economy and to prevent bankruptcies had no noticeable procedural effects.

The measures mentioned above (procedural suspension of deadlines and suspension of debt enforcement proceedings) were of brief duration and are no longer in place. The regular court proceedings and the general enforcement proceedings, thus, were quickly resumed. At present, stricter hygiene regulations are in force (including compulsory wearing of masks indoors), which presents organisational difficulties for the regular court business, but has not led to any noticeable restrictions or delays so far. However, the situation is in flux.

In the meantime, the Federal Council has decided to prolong the measures in place until 31 December 2021. In addition to the general sanitary regulations, also the regulations regarding the use of videoconferencing for court hearings remain in force. However, these regulations have been both clarified and modified and the use of videoconferencing is now subject to stricter requirements. Since little use has been made of such video conferences in the past, it is unlikely that video conferences will be used frequently in the future, subject of course to further tightening of the restrictions imposed on everyday life which may well impose the adaption of videoconferencing by the courts. 

Going forward

The experience had during the ongoing COVID-19 regime helped to push for further digitisation of court operations. An initiative (“Justitia 4.0”) for the digitisation of court operations had been launched already before COVID-19. It is supported by the COVID-19 experience.

Moreover, certain specific simplifications in enforcement law introduced by the Swiss Federal Council will remain in force. For example, less strict requirements apply for formal service of enforcement documents by the relevant authorities. The use of online platforms for the auctioning of movable assets will also remain possible.

Overall, the Swiss judicial system has coped well with the difficulties and challenges arising from the COVID-19 pandemic. Efficient legal protection has remained available and the experience gained so far nourishes the hope that despite the uncertainty associated with the COVID-19 pandemic, this will continue to be the case also in the further course of the pandemic.

Revision of the Swiss Code of Civil Procedure

The current draft bill proposes a number of amendments to the current CPC, but drops the proposed introduction of the collective redress mechanisms that were part of the pre-draft bill. Overall, the revision in its current form will bring a number of specific adjustments and will incorporate certain case law on the Code of Civil Procedure in the text of the code (codification of court practice).

Collective Redress Postponed to a Later Stage

The revision of the Code of Civil Procedure, which was initiated some years ago and was submitted for consultation in 2018, has also progressed further. Based on the preliminary work, the Swiss Federal Council has proposed a bill containing the revision project to parliament at the end of February 2020 for further consideration and potential enactment. While the introduction of means of collective legal redress was a central component of the initiated revision efforts, the revision project now referred to Parliament for further consideration no longer provides for any such measures.

Collective legal redress has been separated from the revision project. It may therefore be assumed that collective legal redress will become the subject of parliamentary discussions at a later stage. In any case, any change of the law in this regard has been postponed. Accordingly, no change of system or the introduction of legal institutions hitherto unknown in Switzerland is currently under discussion.

Reducing Cost Barriers

The 2011 CPC provides for the possibility for the courts to request an advance on court costs from the plaintiff. Previously, these issues had been regulated differently from canton to canton, some cantons requiring an advance, some not. Whilst the current provision states that the courts may request an advance (but are not obliged), the practice has become for most courts to request an advance, as a matter of principle, and to request an advance in the amount of the full likely costs.

Depending on the amount at stake, these costs can be quite considerable, and, depending on the financial situation of the plaintiff, may constitute a serious hindrance to bring a suit. Moreover, under the current rules, the plaintiff that has eventually won the case and wishes to recover the advance on court costs from the defendant bears the risk that the defendant is unable to pay, in other words, the winning plaintiff is not paid back their advance from the court, but rather given a claim against the losing defendant. There is legal aid, but the requirements for it, as well as the handling of legal aid by the courts, are quite strict and cumbersome, so that most plaintiffs (in commercial disputes almost always) do not qualify. There has therefore been widespread criticism that the current regime can make it difficult for a plaintiff to get access to justice.

The revision aims at reducing some cost barriers. The revision project proposes that the advance requested from the plaintiff to cover court costs should in general only amount to half of the presumed court fees, whereas currently courts request an advance for the full court costs at the beginning of the proceedings. In addition, a party obliged to make an advance payment for court costs, that is subsequently exempted from costs because it has won the case, should no longer have to bear the risk of the other party defaulting on the court costs.

The current regulation provides that the advance payment for court costs made by one party is at the end collected by the court to cover the court fees. A party winning the proceedings and therefore actually exempt from costs that had to make such an advance payment, is only awarded a claim for compensation against the losing party. The proposal is to shift the risk of a defaulting debtor to the state.

However, the cantonal procedural tariffs are to remain in place also in the future and, therefore, no uniform cost framework is to be set, despite uniform civil procedural law in force throughout Switzerland. The considerable cantonal differences regarding court costs will, therefore, remain.

Legal Privilege Also for In-house Counsel

The revision project also proposes that lawyers who are employed by a company may, under certain conditions, also invoke a special right to refuse to co-operate in civil proceedings. The corresponding regulation is welcomed by in-house counsel, as it tries to establish a level playing field also with regard to the regulations applicable outside of Switzerland.

Introduction of Special “International Commercial Courts”

The draft law will also allow the cantons to give their commercial courts more extensive jurisdiction over international disputes. It is also planned that the cantons shall have the authority to designate English as the language of such proceedings. As a result, the already existing high attractiveness of Swiss commercial courts to handle major international disputes will be further increased.

Other Simplifications and Improvements

The revisions also proposed certain simplifications in the co-ordination of parallel proceedings/multi-party proceedings as well as the selective expansion of the applicability of the reconciliation proceeding. Reconciliation proceedings will now also be available on a voluntary basis in cases the code provides for the jurisdiction of a single cantonal court authority, such as is the case when a canton has established a commercial court. This creates an efficient way to interrupt the statute of limitations for non-monetary claims, since today in these cases an action must generally be brought before the appropriate court to have this effect.

Abolition of the Fast-Track Proceedings with the Commercial Register to Block Entries

As the law stands, Swiss law allows for a fast-track proceedings to block entries regarding a specific corporate entity (such as an LTD) in the Commercial Register by filing a simple objection (essentially a formal letter) with the relevant Commercial Register. The consequence of such an objection is that the Commercial Register in charge does not make the relevant entries for the time being and, for example, a capital increase resolved by a shareholders’ meeting can thereby be prevented from taking effect.

However, the objector has to submit an application to the court within ten days to validate the blocking block that has been put in place. This is done by starting proceedings for interim measures, ie, it is sufficient to initiate such proceedings in order to benefit from the protection of the blocking.

At the beginning of 2021, the corresponding procedure will be changed. The blocking of the commercial register will no longer be obtainable by simply filing an objection with the Commercial Register in charge. Rather, a court will have to issue a corresponding order in the first place.

Due to the urgency of these cases, as the registration is usually imminent, the blocking will therefore only be available if the court grants an ex parte measure. Thus, the change in law significantly raises the hurdles for obtaining a blocking of the commercial register. However, the possibility to block the commercial register will remain, but must now be ordered by a court from the outset.

Walder Wyss Ltd

Seefeldstrasse 123
8034 Zurich

+41 58 658 58 58

+41 58 658 59 59

dieter.hofmann@walderwyss.com www.walderwyss.com
Author Business Card

Law and Practice

Authors



Walder Wyss Ltd boasts some 240 legal experts and is one of the biggest commercial law firms in Switzerland, with offices in Zurich, Geneva, Basle, Berne, Lausanne and Lugano, covering all three Swiss language regions. Walder Wyss is a full legal services firm, covering all areas of commercial law. The firm features a dedicated dispute resolution team with more than 55 members which is one of the most powerful teams in the country. The litigation practice's main focuses are commercial litigation, in particular before the commercial courts in Zurich, Berne, Aargau and St. Gall and before the civil courts in Geneva and Basle, with a particular focus also on injunctive relief matters, and work on recognition and enforcement of foreign judgment and arbitral awards, including freezing orders.

Trends and Development

Authors



Walder Wyss Ltd boasts some 240 legal experts and is one of the biggest commercial law firms in Switzerland, with offices in Zurich, Geneva, Basle, Berne, Lausanne and Lugano, covering all three Swiss language regions. Walder Wyss is a full legal services firm, covering all areas of commercial law. The firm features a dedicated dispute resolution team with more than 55 members which is one of the most powerful teams in the country. The litigation practice's main focuses are commercial litigation, in particular before the commercial courts in Zurich, Berne, Aargau and St. Gall and before the civil courts in Geneva and Basle, with a particular focus also on injunctive relief matters, and work on recognition and enforcement of foreign judgment and arbitral awards, including freezing orders.

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