Switzerland
In Switzerland, we currently see that the hurdles for a party pursuing a claim, to establish that they have suffered damage and/or loss have become high. In other words, the requirements for producing evidence of a loss are very high according to the case law of the Swiss Federal Supreme Court. For example the evidence required to establish damage suffered from a business interruption incident (such as a cyber-attack) are complex. The alleged loss and/or damages have to be calculated as accurately as possible. This required detailed knowledge in accounting and very often financial experts are required to assist.
It is anticipated that the next few years will see an increase in litigation related to blockchain/distributed ledger technology. As these technologies evolve, legal disputes around smart contracts, token offerings, and data privacy are likely to increase.
Alongside this, there are proposals for amendments to the Swiss Code of Civil Procedure (CPC) which are expected to come into force from early 2025.
Whilst many proposed amendments relate to simple codification of the Swiss Federal Supreme Court’s jurisprudence, a number of amendments are of wider importance, in particular the impact these may have on international commercial litigation. It is anticipated that the amended code will provide the Cantons authority to expand the jurisdiction of their (already established) commercial courts (for example in Cantons such as Zurich, Berne and St Gall) over international disputes meeting certain criteria.
This, alongside the proposed reduction of cost barriers (such as the party bringing a claim no longer being required to pay 100% of the costs into court in advance) is likely to generate a buoyant market and enhance accessibility to the Swiss courts and legal system; making it a go-to hub for the resolution of international commercial disputes.
1. Is third party funding permissible for disputes?
Yes, third-party funding is permissible for disputes in Switzerland. This practice has been gaining attention over the last decade. The Swiss Federal Tribunal made a landmark decision in 2004, stating that third-party funding is permissible under Swiss law and is protected by the fundamental right of economic freedom. This allows a party lacking necessary funds to commence arbitration proceedings or desiring to outsource the costs of the arbitration and any associated financial risks.
Several third party funding companies have entered the Swiss market since then, including FORIS AG, Allianz ProzessFinanz GmbH, Profina Prozessfinanzierung GmbH, JuraPlus AG, Nivalion AG, Swiss Legal Finance SA, and Liti Capital SA. Larger international participants like Omni Bridgeway and Burford Capital Limited are also said to be taking on Swiss cases.
However, it’s important to note that while third-party funding is allowed, there are ethical standards applying to lawyers practicing in Switzerland. The Professional Rules of the Swiss Bar Association prohibit “no win, no fee” arrangements. Yet, a modified version of such agreements to “no win, less fee” (that is, charging a fixed legal fee with the promise of an additional fee should the claim succeed) is authorized under those professional rules.
2. Are lawyers able to work on a contingent basis in the jurisdiction and are there any restrictions?
No, lawyers in Switzerland are not allowed to work on a pure contingency basis. This means that lawyers need to agree a fixed fee or an hourly fee charge with their clients. The fees agreed have to allow the lawyer to cover more than the pure costs. The contingency fee must be less than half of the fees agreed and can only be agreed at the very beginning of an instruction.
It’s always recommended to have a written agreement between the client and attorney outlining the fee structure and other details.
3. Can the court or tribunal order one party to pay the other’s legal costs?
Yes, in Switzerland, based on the civil procedure (federal law), the court or tribunal will order the unsuccessful party to pay the successful party’s legal costs. However, in practice these indemnities do not cover the full costs that are readily incurred.
The legislation regarding court fees and party indemnifications are governed by cantonal law. Therefore, the fees for hearing a case in Switzerland vary based on the canton where the case is heard, but also on the nature of the case.
In general, the legal interest of 5% p.a. is applied under Swiss law. No punitive damages exist under Swiss law and damages awarded are purely compensatory and correspond to the actual loss suffered. However, the concept of liquidated damages is known and used. As far as procedural costs are concerned, court fees are paid upfront by the party bringing the claim but are eventually borne by the unsuccessful party.
4. Is insurance available to protect against adverse outcomes for funded litigation?
Yes, insurance is available in Switzerland to protect against adverse outcomes for funded litigation. This is often referred to as Third-Party Litigation Funding (TPLF)The Swiss Federal Court has clarified that third-party litigation funding does not qualify as an insurance that would fall under the Insurance Supervision Act because there is no payment of a premium in exchange for insurance against a future risk. Furthermore, the core offering of litigation funders does not fall within the scope of other Swiss financial market laws.
Contact
© Eversheds Sutherland. All rights reserved. Eversheds Sutherland is a global provider of legal and other services operating through various separate and distinct legal entities. Eversheds Sutherland is the name and brand under which the members of Eversheds Sutherland Limited (Eversheds Sutherland (International) LLP and Eversheds Sutherland (US) LLP) and their respective controlled, managed and affiliated firms and the members of Eversheds Sutherland (Europe) Limited (each an "Eversheds Sutherland Entity" and together the "Eversheds Sutherland Entities") provide legal or other services to clients around the world. Eversheds Sutherland Entities are constituted and regulated in accordance with relevant local regulatory and legal requirements and operate in accordance with their locally registered names. The use of the name Eversheds Sutherland, is for description purposes only and does not imply that the Eversheds Sutherland Entities are in a partnership or are part of a global LLP. The responsibility for the provision of services to the client is defined in the terms of engagement between the instructed firm and the client.
Share this page