Vol 16 (2019) - Issue 6

Article preview

The New Swiss International Insolvency Law

Synopsis

On 1 January 2019, the revised chapter of the Swiss Private International Law Act (hereinafter 'PILA') regarding cross-border insolvencies entered into force. The revision became necessary as the previous regulation was criticised in particular for its protectionist elements, which also were a recurring topic in discussions with foreign colleagues and insolvency practitioners. The major points for discussion in recent years were: – How can insolvency practitioners of foreign main proceedings access the debtor’s assets in Switzerland and transfer them to the estate of foreign main proceedings? – How can they pursue claims against third party debtors in Switzerland?

Both was difficult and costly until end of 2018, namely for the following reasons: Contrary to the rules of the European Insolvency Regulation, Swiss law did not provide that foreign insolvency proceedings and the powers of foreign insolvency practitioners are automatically recognised in Switzerland. Foreign insolvency practitioners could therefore not access assets in Switzerland and enforce claims against Swiss third party debtors without recognition of the foreign insolvency opening order. Even after such recognition, the insolvency practitioner could not access the assets in Switzerland or pursue claims against Swiss debtors on its own. Instead, an ancillary insolvency proceeding was opened and conducted by a Swiss bankruptcy office (a state authority). Only a potential surplus of the ancillary insolvency proceeding could be transferred to the foreign estate. This cumbersome process led to criticism – in Switzerland as well as abroad. A further point of discussion was that foreign decisions on claw back claims and other creditor-damaging acts could not be recognised in Switzerland. Instead, such claims had to be pursued in Switzerland in the course of the ancillary insolvency proceedings and the claims were governed by Swiss law.

With the revised PILA, the Swiss legislator has responded to these criticisms. This article outlines the fundamentals of the new Swiss cross border insolvency law and analyses to which extent above issues have been addressed. As a preliminary, the innovations of the revised act are limited in scope. It is still necessary to have the foreign insolvency decision recognised in Switzerland in a first step, although the recognition requirements have been slightly loosened (see section I below). In principle, an ancillary insolvency procedure remains necessary (see section II below). Consequently, accessing assets located in Switzerland and transferring them to a foreign estate will continue to be difficult and costly for foreign insolvency practitioners. Besides, a provision was introduced as part of the revision which, in principle, allows the recognition of foreign decisions on claw back claims and other insolvency related claims (see section III below). However, this only applies if the respondent was not domiciled in Switzerland at the time of the judgment. As a result of this restriction, foreign decisions on such insolvency related claims will often still not be recognisable in Switzerland in the future.