On 16 March 2018, Swiss Parliament approved a revision of the Swiss rules on international bankruptcy law in the Private International Law Act. At its inception in 1989, the rules were considered an adequate and even modern tool to deal with the recognition of foreign bankruptcy and insolvency decrees, composition agreements etc. and their legal consequences in Switzerland. Over the years, however, also in view of international developments, the rules have proven to be too cumbersome in some respects. The current revision simplifies recognition and relevant local proceedings.
Easier recognition of foreign bankruptcy decrees
The revision abolishes two former recognition requirements, making it easier to obtain recognition of foreign bankruptcy decrees in Switzerland: 1) It is no longer necessary that the concerned foreign state grants reciprocity to Swiss bankruptcy decrees. 2) The foreign bankruptcy decree no longer needs to be issued at the domicile or seat of the debtor; it can now also be issued at the latter's center of main interest provided that the debtor's domicile or seat was not located in Switzerland at the time of the opening of the foreign proceedings.
No automatic opening of ancillary bankruptcy proceedings in Switzerland
Under the current law, the recognition of a foreign bankruptcy decree always triggers the opening of ancillary (or "mini-") bankruptcy proceedings in Switzerland over the local assets of the debtor. Such proceedings intend to ensure the preferential payment of secured creditors and of privileged Swiss creditors out of the assets located in Switzerland. However, in most foreign bankruptcies, there are no such secured or privileged creditors. Rather, recognition is only sought because assets of the debtor are located in Switzerland (mostly Swiss bank accounts).
Under the revised law, the opening of ancillary bankruptcy proceedings in Switzerland will not always be necessary. Upon request of the foreign bankruptcy trustee, no "mini-bankruptcy" shall be opened if no secured or privileged Swiss creditors have announced any claims and if the Swiss court is of the view that the claims of ordinary Swiss creditors have been adequately taken into account in the foreign proceedings. If no "mini-bankruptcy" is opened, the foreign bankruptcy trustee has the power to transfer assets out of Switzerland and to conduct legal proceedings in Switzerland, but he or she remains barred from exercising acts of public authority or from adjudicating claims.
Further, the revised law implements changes that should allow for a better coordination between bankruptcy proceedings opened over a Swiss branch office of the debtor and the ancillary bankruptcy proceedings in Switzerland following the recognition of the foreign bankruptcy decree over the debtor. The revision also makes it easier for the foreign trustee to introduce claw-back proceedings in Switzerland and the recognition of foreign claw-back decisions in Switzerland is now possible as well.
The revised law will enter into force at the earliest on 1 August 2018.
We will provide a more detailed overview of this revision in one of our next firm newsletters.
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