Switzerland
1. Are freezing orders (or their equivalent referred to below) available in civil legal proceedings in this jurisdiction and what is their effect?
Yes. The respondent is prohibited from disposing of the assets referred to in the freezing order (located within the jurisdiction) until a specified time (for example, a further hearing, judgment or payment) or further Court order.
2. Are other interim orders commonly made in conjunction with a freezing (or equivalent) order?
No. There is no need to take any other provisional measures in conjunction with a freezing order. However, once the freezing order has been obtained, proceedings in the underlying substantive claim must be issued (if not already done so).
3. Briefly what is the relevant legal test?
An applicant seeking to obtain a freezing order must demonstrate to the competent Court on a prima facie basis that:
(i) it has a claim against the respondent;
(ii) there is sufficient legal ground for an attachment; and
(iii) the defendant owns attachable assets located in Switzerland.
Assets of the respondent can only be attached if:
(i) the defendant is concealing its assets, absconding or making preparations to abscond so as to evade the fulfilment of its obligations;
(ii) the respondent is passing through Switzerland or is a person engaged in attending business fairs or markets, for claims which by their nature must be fulfilled at once;
(iii) the respondent has no domicile in Switzerland (and none of the other grounds for a freezing order are fulfilled), provided the claim for which the attachment is sought for has a sufficient connection with Switzerland or is based on a written recognition of debt by the debtor;
(iv) the applicant holds a certificate of shortfall against the respondent from previous bankruptcy or seizure proceedings; or
(v) the applicant holds an enforceable judgment or an arbitral award against the respondent.
4. Briefly what is the process for obtaining a freezing (or equivalent) order?
The application is made without notice before the cantonal Court of first instance, either where the targeted assets are located or at the respondent’s regular place of domicile. The respondent is informed (by the Court) if the freezing order is granted, and it may then file an appeal. If the freezing order is granted, the applicant must within ten days issue proceedings.
5. Does the applicant have to provide any form of security or commit to compensation if its claim is ultimately unsuccessful and any freezing (or equivalent) order granted causes loss and damage to the respondent?
The applicant may become liable for damages incurred by the respondent (or a third party holding the respondent’s assets). The Court has discretion to instruct the applicant to pay a deposit as security to secure such potential damages of the respondent.
6. Can it be sought against third parties?
The attachment is, in principle, limited to assets that legally belong to the respondent. This includes assets that purport to be held by third parties, from which the respondent derives economic benefit (for example, a shell company) but there are evidential hurdles in ascertain ownership. Third parties which are not parties to the freezing order cannot be bound by the order if notified (except for third parties that hold the attached assets such as banks or the debtor of attached receivables).
7. What assets are covered by a freezing (or equivalent) order?
In principle, almost all types of assets can be subject to an attachment order, including (but not limited to) bank accounts, shares, receivables, amounts payable under documentary credit, chattels (such as works of art) and real estate. This may include blocking real estate in the land register, etc. The attachment is limited to assets located in Switzerland, as Swiss law applies to the principle of territoriality and Swiss Courts do not issue worldwide freezing orders.
8. Can a freezing (or equivalent) order be made in support of substantive proceedings abroad?
Yes.
9. Can a freezing (or equivalent) order be made in support of arbitration proceedings or awards?
Yes.
10. At what stage of proceedings can a freezing (or equivalent) order be sought?
At any stage, including prior to commencing the claim (although the Court will expect the applicant to issue its claim promptly) or following judgment to assist with enforcement.
11. Are there typically any exceptions to the general prohibition on the respondent’s use of assets subject to a freezing (or equivalent) order?
No.
12. What happens after a freezing (or equivalent) order is granted?
The Court will issue an order and notify the local debt enforcement office who are responsible for implementing the order. After the Court has issued the freezing order, the respondent or a third party affected by the order, may file an objection or appeal with the Court that issued the order, within ten days after becoming aware of the order. The resulting judgment can be further appealed to the respective cantonal High Court and, as a last instance, to the Federal Supreme Court. The freezing order will lose its effect unless the applicant instigates enforcement proceedings in Switzerland or starts litigation in relation to the underlying claim, if it has not already done so. If the applicant is successful in the underlying claim, the freezing order is converted into a seizure and the applicant can collect the attached assets to meet the judgment debt.
13. Who pays the costs of the application for a freezing (or equivalent) order?
The applicant must pay the costs up front. If the freezing order is granted, these costs can later be recovered against the attached assets.
14. What protections are there typically in a freezing (or equivalent) order for third parties to such orders?
(i) A third party holding the attached assets (for example, a bank) is not prevented from exercising any rights of set-off arising prior to its notification of the freezing order. Equally, a pre-existing security right takes precedence over the attachment.
(ii) A third party does not need to enquire as to the use of any money withdrawn by the respondent if the withdrawal appears to be permitted by the freezing order.
15. What are the consequences of breach of a freezing (or equivalent) order?
A respondent who disposes assets in breach of the freezing order risks criminal prosecution and civil liability under Article 169 Swiss Criminal Code. This also applies to a third party holding the attached assets, such as a bank, that releases monies on an attached account
16. Does a third party notified of (but not a party to) a freezing (or equivalent) order owe a duty of care to the applicant (meaning it can be liable to the applicant for non-compliance)?
Yes. Third parties that hold attached assets and that were properly notified (such as banks) must comply with the order and are directly liable to the applicant if, for example, they fail to block the account attached.
17. Can a freezing (or equivalent) order be enforced abroad?
No.
18. Can freezing (or equivalent) orders from overseas jurisdictions be enforced in this jurisdiction?
Swiss Courts will recognize a freezing order (in the form of an interim measure) made in a Lugano Convention signatory state if the decision was not made ex parte (for lack of due process). There is legal debate about the enforcement of ad personam freezing orders as this instrument is not known under Swiss law and Swiss attachment orders are always directed against defined assets. A freezing order (in the form of an interim measure) rendered in a state which is not a signatory of the Lugano Convention will not be recognized in Switzerland.
Contacts
Patrick Eberhardt Partner Eversheds Sutherland Ltd Geneva, Switzerland patrick.eberhardt@eversheds-sutherland.ch www.eversheds-sutherland.com Carol Tissot Partner Eversheds Sutherland Ltd Geneva, Switzerland carol.tissot@eversheds-sutherland.ch www.eversheds-sutherland.com
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