On March 16, the Swiss Parliament approved a revision of the Federal Act on Private International Law, modifying the rules on international insolvency.
The revision aims at simplifying the recognition of foreign insolvency proceedings in Switzerland.
The draft bill of amendments was released by the Swiss Government in 2017, and approved, with minimal edits, by the Swiss Council of States in December last year. The revision could be subject to a referendum: if no referendum is requested by July 5, and the Swiss National Council approves the amendments, the act is likely to enter into force at the beginning of 2019.
Under the current law, a foreign bankruptcy judgment rendered abroad has no immediate effect in Switzerland unless it has been recognized in this country. To have it recognized, it is necessary that the judgment is rendered in the state of the debtor’s seat or domicile, that the judgment is enforceable in the state where it was rendered and, importantly, that the state in which the judgment was rendered grants reciprocity.
The amended act establishes that a foreign judgment would be recognized even if the judgment was rendered in the state where the debtor’s centre of main interests (COMI) is situated.
Another important amendment concerns secondary proceedings. Under the current version, if there is a foreign insolvency decree, it is necessary to open secondary insolvency proceedings in Switzerland – so-called “mini-bankruptcy – and instruct a local insolvency practitioner to reach assets in Switzerland. The practitioner does not have the priority on the assets located in Switzerland, as these are primarily used to satisfy the claims secured by a pledge and the claims of privileged Swiss creditors.
The amended act provides that there is no need to instruct secondary proceedings when there are no privileged Swiss creditors. This means that the foreign insolvency practitioner has the right to exercise his powers in Switzerland and in particular, to bring an action in court and move assets out of the country without the need of instructing ancillary proceedings.
Under the current act, before recognizing a foreign judgment, Swiss courts have to evaluate if the foreign jurisdiction would also recognize, under similar circumstances, a Swiss judgment. This may be extremely time-consuming to prove. The new revisions put an end to this reciprocity requirement.
The amended act contains other provisions that aim at facilitating the cross-border insolvency proceedings and enhancing the collaboration with foreign insolvency authorities.