Switzerland: New Rules Relating To The Recognition In Switzerland Of A Foreign Bankruptcy Or Restructuring Order

Insolvency and international cooperation in insolvency matters have been subject to recent developments, particularly in the European Union but also internationally, as mandated by the UNCITRAL. Switzerland however, did not participate in these modernization processes, except in the banking field. Switzerland has now adopted modern and competitive regulations, thereby unifying the entire applicable legislative system.


European law (Regulation 1346/2000 and, subsequently 2015/848) has long provided for the principle of automatic recognition of decisions initiating insolvency proceedings against a debtor and other related decisions, "without further formality'.

This is not the case in Switzerland, whose private international law has always strictly enshrined the principle of "flexible" territoriality. Pursuant to law prior the legislative amendment, any foreign bankruptcy order, or any other related decision, was subject to formal judicial recognition proceedings before the decision in question could be applied in Switzerland, and access to the debtor's assets located in Switzerland could be authorized. Further, recognition was not automatic, as certain conditions had to be met. 

The Swiss Parliament has recently adopted new rules aiming at facilitating the recognition of bankruptcy and related decisions, to simplify the recognition proceedings and to improve coordination with foreign proceedings.



The recognition and enforcement of foreign insolvency decisions in Switzerland is governed by Articles 166 et seq. of the Federal Act on Private International Law of 18 December 1987 (PILA). Bankruptcy judgments rendered by foreign Courts fall within the material scope of application of the aforementioned provisions. Other judgments similar to bankruptcy judgments, rendered in the event of insolvency, or any provisional measures applicable in the event of insolvency, shall also be recognized and enforced in accordance with these provisions.

Articles 166 et seq. PILA constitutes a specific corpus of laws, which applies exclusively to insolvency decisions. Foreign decisions related to insolvency proceedings are outside the material scope of application of the Lugano Convention. Decisions issued due to the insolvency of the debtor, having the effect of limiting the debtor's capacity to dispose of its assets, for the purpose of instigating liquidation or forced restructuring of its debt, typically consist of bankruptcy judgments or similar decisions.

Foreign judgments against a debtor who is active in the financial markets sector, an activity subject to authorisation, are recognized under the Federal Act on banks and saving banks, and according to the FINMA's ordinance on bank insolvency. Those decisions remain outside of the material scope of application of the Articles 166 et seq. PILA.


The amended provisions essentially provide currently the following:

  • Recognition is required either by the foreign bankruptcy administration or its equivalent in a restructuring procedure, or by a creditor;
  • The recognition request shall be filed within the Court where the assets are located;
  • The decision rendered is enforceable;
  • The decision has been rendered in the State of the registered office, or domicile of the debtor;
  • Reciprocity is granted; only foreign insolvency decisions rendered in States which recognize decisions issued by Swiss authorities are recognized in Switzerland.
  • There is no reason for refusal (such as a violation of the public order, irregular summons, violation of fundamental procedural rights, res judicata).


According to the current regulation, the recognition of a foreign insolvency decision has the effect of initiating ancillary bankruptcy proceedings in Switzerland limited to the debtor's assets located in Switzerland. In these proceedings, only secured creditors and privileged creditors domiciled in Switzerland (such as workers, social insurances) are paid off. Any positive balance is then transferred to the foreign bankruptcy estate after recognition in Switzerland of the foreign colocation status. If the repayment schedule cannot be recognised, the balance is distributed among the Swiss ancillary bankruptcy non-preferred creditors.

A claw-back action can be opened in Switzerland by a foreign bankruptcy administration only after recognition in Switzerland of the foreign bankruptcy decision, and only if the administration of the ancillary bankruptcy as well as the Swiss privileged creditors have renounced such action (cascade system).


In Switzerland, the branch of a foreign legal person registered in the commercial register, may be sued and declared bankrupt for debts arising from its operations. If there is a branch of a foreign legal entity in Switzerland, this also means that the legal entity owns assets in Switzerland. The consequences of the above, is that currently two competing proceedings are likely to be initiated in Switzerland. An ancillary bankruptcy covering all the assets in Switzerland of the foreign legal person, as well as an ordinary bankruptcy limited to the assets of the branch. In the former proceeding, only secured and privileged creditors domiciled in Switzerland are paid off, whereas in the latter, all creditors may be paid.

"Herein, Swiss law notably aligns itself with European law and its concept of COMI."



Hence, both a decision rendered by the authority of the State in which the debtor holds its registered office or domicile, and a decision rendered in the State in which the debtor has its centre of main interests (COMI) may be recognised in Switzerland. Herein, Swiss law notably aligns itself with European law and its concept of COMI.

Recognition will be rejected if the debtor had its domicile or registered office in Switzerland at the time the proceedings were initiated abroad, even if the debtor's centre of main interests is situated abroad.


Under current law, the authority to request recognition of a foreign insolvency decision was solely attributed to the bankruptcy administration and creditors, to the exclusion of the debtor itself.

If this rule is understandable in the context of a bankruptcy, whereby the debtor loses in principle all capacity to dispose, and all capacity to act, it became problematic within the context of recognition of decisions in relation to the restructuring of the debtor (concordat, or similar proceedings). Indeed, in such circumstances, it is generally the debtor who is the first, or even the only party, to be aware of the situation. Moreover, in restructuring proceedings, it is common that the debtor's capacities are not restricted.

Hence, the debtor whose capacities are not limited by the decision to be recognised will also be granted the authority to proceed in Switzerland in view of said recognition. In any case, no automatic recognition is expected.


The reciprocity requirement was introduced in 1983 to "contribute to strengthen the mutual desire for cooperation" (FF 1983 I 438). This condition had to be verified ex officio by the judge. In practice, the reciprocity requirement leads to:

  • An increase in the costs of the proceedings by forcing the applicant to have one or more expert reports prepared almost systematically, at its own expense, in order to demonstrate that the reciprocity requirement is met;
  • Lengthening of the proceedings' recognition period because of the need for evidence of reciprocity;
  • Unequal treatment between creditors when reciprocity is not recognized because, in such a case, recognition is refused and each creditor may individually attack the debtor's assets.

Parliament has therefore decided to strike the reciprocity requirement from law. In the future, it will be sufficient and required to have a foreign decision enforceable in the State where it was rendered, with no reason for refusal, and to evidence that it was rendered by the competent authority pertaining to said State.

"Parliament has therefore decided to strike the reciprocity requirement from law."


The initiation of ancillary bankruptcy proceedings is solely justified when Swiss creditors' interests have to be protected (privileged creditors who have their domicile in Switzerland, to whom non-privileged creditors can be added when the debtor owns a branch registered in the Swiss Commercial Register in Switzerland). In the absence of Swiss creditors, the initiation and the execution of ancillary proceedings at the expense of the Swiss entity's enforcement proceedings, loses its relevance.

The legislator has chosen to conditionally authorize the transfer of assets located in Switzerland without initiating ancillary bankruptcy proceedings. In actuality, the new system will be as follows:

  • A request for recognition (which can be qualified as "simplified") will have to be filed, which must expressly conclude that the conduct of ancillary bankruptcy proceedings should be waived.
  • The creditors will be advised by public notice, published by the Swiss enforcement proceedings administration, in order to ensure that no Swiss creditors rights must be protected.
  • In the absence of any reaction from Swiss creditors, the Swiss enforcement proceedings entity will inform the enforcement court accordingly; the court will thereby be able to authorise the direct transfer of assets to the competent foreign authorities, attaching conditions or obligations.


The initiating of claw-back actions in Switzerland by a foreign bankruptcy administration appeared to be problematic.

The rendered foreign judgments in revocatory matters could not be recognised, in order to prevent bypassing of the obligation to act within an ancillary bankruptcy, by the foreign bankruptcy's administration.

Furthermore, the initiating of revocatory actions was not possible unless an ancillary bankruptcy was initiated, and only if the Swiss enforcement proceedings entity, and the Swiss creditors, waived their right to proceed.

Henceforth, the foreign bankruptcy administration will be entitled to get a foreign decision ruling on a duly recognised revocatory action. This will however, be limited to the scope of ancillary bankruptcy proceedings.


The relation between a branch bankruptcy and the recognition of a foreign bankruptcy decision, resulting in the initiation of ancillary bankruptcy proceedings regarding the debtor's sole assets located in Switzerland, is hence settled differently in order to prevent the initiating of parallel proceedings.

Assuming that at the moment the foreign bankruptcy order is recognized, a bankruptcy proceedings is already pending as regard the branch, the branch proceedings will be stayed and all creditors will be repaid in the framework of the ancillary proceedings, except if the branch proceedings can no more be stayed (because repayment of the creditors started); in such a case, the two proceedings shall still coexist.


Among the adopted amendments, the relinquishment of the reciprocity criteria and the transfer of assets without any ancillary bankruptcy proceedings must be particularly emphasized.

"The transfer of assets without any mini bankruptcy proceedings is a major innovation resulting from banking regulations."

With the relinquishment of the reciprocity requirement, quite unjustifiable and misunderstood from a creditors' point of view, and unique to the Swiss law now being abandoned, Switzerland has joined the long list of notably European States for which a recognition decision is a mere formality.

Unequal treatment caused by the absence of reciprocity has also been remediated: indeed, in the absence of recognition, each creditor, individually, could sue the debtor in Switzerland, favouring the fastest creditors and those having the necessary funds to finance the recovery proceedings.

The transfer of assets without any mini bankruptcy proceedings is a major innovation resulting from banking regulations. It puts an end to an expensive anomaly. Indeed, prior to the current act, in the absence of any creditor in Switzerland, the Swiss authorities had to liquidate the Swiss mini bankruptcy.

The other amendments are also a welcome change, since they also bring greater simplification and harmonisation. The only regret that can be expressed is the absence of a comprehensive new regulation regarding the coordination and information exchange with the foreign entities, which is the subject of only one, broadly expressed, law provision. The date on which the new bill shall come into force is not yet known.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Schellenberg Wittmer Ltd
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Schellenberg Wittmer Ltd
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions