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Arbitration
Overview
Including: Arbitration Agreement; Scope of Application; Seat of the Arbitral Tribunal; Arbitrability; Arbitration Agreement; Arbitral Tribunal; Pending Arbitration; Procedure; Jurisdiction; Decision; Setting an Award Aside; Exclusion Agreements; Deposit and Certificate of Enforceability; Foreign Arbitral Awards
The Swiss Supreme Court recently confirmed that an ad hoc arbitral tribunal seated in Geneva was regularly constituted within the meaning of the Private International Law Act where French courts had appointed the co-arbitrator of the Israeli respondent in the arbitration proceeding. The domestic court seized to appoint the co-arbitrator was located in France and not Switzerland, which the parties had then chosen as the seat of arbitration.
The Supreme Court recently rendered decisions in four arbitration-related cases. The issues under discussion included settlement and the pacta sunt servanda principle, whether an international arbitral award must be reasoned, legal capacity and waiver of a reasoned award.
The Supreme Court recently revisited the question of the impact of the party's bankruptcy on the continuation of arbitration. Restrictions to arbitration contained in foreign law provisions which do not affect the parties' legal capacity are irrelevant to an arbitration in Switzerland.
The Supreme Court recently opted for a flexible and pragmatic interpretation of the New York Convention, confirming Switzerland's reputation as an arbitration-friendly forum. It admitted that in certain circumstances, a party seeking enforcement in Switzerland of an award issued in English may be exempt from producing a certified comprehensive translation of the entire arbitral award into one of the Swiss national languages.
The Supreme Court declined to hear, in a challenge against the final award, arguments related to the constitution of an ad hoc arbitral tribunal that had already been heard by the lower cantonal court in an ancillary proceeding. The Supreme Court considered that the lower cantonal court had already issued a final and binding determination on the constitution of the tribunal and had thus satisfied the judicial review requirement.
For the first time since the Private International Law Act was enacted in 1987, the Supreme Court has vacated an international arbitration award on material public policy grounds. The violation was obvious and thus the annulment of the award is no indication that the Supreme Court intends to be more intrusive into arbitrators' decisions and reasoning, as an appeal court would be.
Banking
Overview
Including: Sources of Law; Regulation and Supervision of Financial Markets; Swiss Bankers Association; Banking Secrecy; Due Diligence Convention
The Federal Supreme Court recently rendered two landmark decisions regarding the extension of banking clients' options to obtain information, including internal documents, from banks. The court specified and expanded the information that must be passed onto banking clients. It also showed that the Federal Act on Data Protection could help clients looking for information held by a bank upstream of judicial proceedings.
The Federal Supreme Court recently rendered a landmark decision regarding the restitution to banking clients of commission received from funds or producers of financial products by banks acting as asset managers for their distribution services. In reaction, the Swiss Financial Market Supervisory Authority issued a newsletter on supervisory measures addressed to banks.
The Federal Supreme Court recently rendered two decisions regarding banks' duties of care and fidelity in the distribution of financial products. The court confirmed its established case law, but provided interesting insights into particular issues linked to the distribution of capital-protected structured products within the framework of an advisory relationship.
The Swiss Financial Market Supervisory Authority recently circulated a complete draft revision of the Ordinance on the Bankruptcy of Banks and Securities Dealers. The review was deemed necessary as a result of a series of amendments to the Federal Banking Act regarding the protection of depositors. However, the amendments to the act do not completely achieve the government's objective of full protection for depositors.
Switzerland and the United Kingdom have signed a cooperation agreement on taxation and financial markets. The agreement aims to regularise untaxed assets while preserving Swiss banking secrecy, and to curb the extent to which information is exchanged in relation to tax matters.
Switzerland and Germany have signed a cooperation agreement regarding the area of taxation and financial markets. The agreement aims to regularise untaxed assets while preserving Swiss banking secrecy, and to curb the extent to which information is exchanged in relation to tax matters. The agreement covers assets held by the clients at banks, brokers, PostFinance and asset managers in Switzerland. However, the agreement will mainly concern banks.
Capital Markets
Stock market offences and market abuse
Parliament recently adopted amendments to the Stock Exchange Act and the Stock Exchange Ordinance, encompassing a comprehensive reform of the regime on stock market offences and market abuse regulation. The reform seeks to strengthen the integrity and competitiveness of Switzerland's financial industry. The revisions also align the Swiss regime with international rules and proposals of the European Commission.
Parliament has recently passed a revised version of the Collective Investment Schemes Act. The new act contains the principal rules and the details are regulated by the new Collective Investment Schemes Ordinance. The revision process of the Swiss collective investment schemes regime has been welcomed by domestic financial market participants.
Ad hoc publicity
The obligation to disclose potentially price-sensitive facts – so-called ad hoc publicity – is one of the most important ongoing securities law obligations of issuers. Ad hoc publicity ensures market transparency and equal treatment of all investors, indirectly decreases insider trading and safeguards the proper functioning of the securities market.
Access to TARGET2-Securities platform
It is welcome news that SIX Swiss Exchange AG (SIX) has decided to become the first non-EU central securities depository to offer access to the TARGET2-Securities (T2S) platform. At present, SIX Securities Services, SIX's post-trade services department, settles over 50% of cross-border transactions in T2S markets. This highlights the importance of direct access to the new trading platform for SIX and its clients.
The Federal Council has adopted an amendment to the Ordinance on Collective Investment Schemes in order to introduce the key investor information document (KIID). The amendment establishes the regulatory basis for the introduction of the KIID applying to foreign undertakings for collective investment in transferable securities (UCITS), non-UCITS and most Swiss retail funds, thereby replacing the previous simplified prospectus.
In January 2010 the Federal Council issued a preliminary draft of its proposal to reform the system of stock market offences and market abuse regulation. Taking into consideration the comments filed by interested parties thereupon, the Federal Council recently submitted the dispatch on amending the Federal Act on Stock Exchanges and Securities Trading to Parliament. The amendments are expected to enter into force in 2013, at the earliest.
Company & Commercial
Overview
Including: Legislative Framework; Contract Law; Forms of Business Association.
Voters say yes to 'fat cat' initiative
Switzerland recently voted in favour of an initiative against excessive salaries for board members and executives. New transparency rules and a rigid regime on a binding say on the pay of board members and executives must be enacted. Once enacted, shareholders must vote annually on the aggregate compensation for the board, advisory board and executive management.
The Federal Court recently considered whether non-incorporated law firms are permitted to adopt the legal form of a company limited by shares. The court held that it is the organisational structure of a law firm which is decisive, not its legal form. A law firm constituted as a company limited by shares is admissible, provided that it is fully controlled by its attorneys, thereby granting it institutional independence.
Preparing for the new accounting law
On January 1 2013 a new accounting and auditing law will enter into force in Switzerland. The new law establishes uniform requirements for all kinds of business, irrespective of their form of incorporation, by introducing the 'same size, same rules' principle. Unlike under certain international reporting standards, consolidated financial statements will usually be required only if the size of a business exceeds certain thresholds.
The Supreme Court recently commented for the first time on the prerequisites under which a board of directors is obliged to place an item requested by a shareholder on the agenda for a general meeting. The court further dealt with the question of whether a company's articles of association may impose certain restrictions on a board's competence to delegate the management of the company's affairs to third parties.
The partial revision of the Federal Act Against Unfair Competition attempts to revive Article 8, particularly by removing the element of deception. Article 8 will clearly influence the drafting and use of general conditions of contract in future, although only to the extent that consumer contracts in the mass-market sector are concerned. Sellers and suppliers should consider reviewing any general contractual conditions in use in this sector.
A creditor which requires access to the annual accounts and auditor's report of a stock corporation must prove both its position as a creditor and a legitimate interest. Recently, the Supreme Court reconfirmed the existing practice in both doctrine and jurisdiction, and took the opportunity to specify in more detail the criteria to find an interest warranting protection pursuant to the Code of Obligations.
Competition
Overview
Including: Unlawful Agreements; Abuse of Dominant Position; Procedure; Sanctions; Swiss Law and EU Law; Merger Control; Merger Appraisal
The Competition Commission recently launched an investigation into whether the Federal Act on the Internal Market represents sufficient legal basis for notaries public to benefit from free movement between Swiss cantons. The introduction of free movement within the European Union may lead to unequal treatment of Swiss notaries public compared with their counterparts in the European Union.
The Competition Commission recently launched an investigation into the subscription television live sports broadcasting sector. The preliminary investigation found indications that Swisscom and Cinetrade, together with their subscription television provider, Teleclub, may have violated certain clauses of the Competition Act related to abuse of dominant position.
The Supreme Court recently confirmed a fine of Sfr2.5 million imposed on PubliGroupe SA by the Competition Commission for abuse of a dominant position. The court found the conditions of unlawful practice by a dominant undertaking pursuant to the Competition Act to have been fulfilled. The court's approach may prove useful in better equipping the competition authorities to address anti-competitive behaviour.
The Federal Competition Commission (FCC) recently imposed a fine of Sfr6.2 million on four international freight forwarders for agreeing on user fees and surcharges in air freight services. The investigation, opened by the FCC in 2007, established that the freight companies had agreed to fix fees and surcharges in the field of international freight services between 2003 and 2007.
The Swiss section of the International Federation of the Phonographic Industry and Phononet AG recently reached an amicable settlement with the Competition Commission over an investigation into alleged restrictions of parallel imports. The commission has announced that it will fight any contractual provisions aimed at foreclosing the Swiss market.
The Competition Commission recently fined German company BMW Ltd for preventing direct and parallel imports into Switzerland. BMW was held to have foreclosed the Swiss market by prohibiting its dealers in the European Economic Area from selling new BMW and MINI cars to Swiss customers. BMW has announced that it will appeal the commission's decision.
Construction
The statutory time limit for warranty claims has been extended from one to two years. The two-year time limit is mandatory only for consumer contracts. Contracts between businesses may still provide for shorter limitation periods for warranty claims. In addition, a recent revision of the Unfair Competition Act allows tribunals to invalidate general terms and conditions that are unfair towards consumers.
The Federal Supreme Court recently confirmed that a main contractor can align the contractual time bars for warranty claims against its subcontractors with the time limits applying to warranty claims that the owner has against the main contractor. This decision is relevant for both main contractors and subcontractors involved in large construction projects.
The controversial issue in a recent court of appeal case was whether the contractor still had a claim for compensation, despite its failure to submit progress reports and have them signed by the owner. The court ruled that in the absence of the contractually agreed progress reports, the contractor was still entitled to compensation but should establish (the amount of) its claim by other means of evidence.
The Supreme Court recently confirmed that an owner may rescind a contract for works if the contractor is in default. Before doing so, the owner must put the contractor on notice and grant it a reasonable grace period. In the present case, the contractor failed to reach agreed-upon output requirements and its delivery of the works was late. The court held that no prior notice or grace period was required in these circumstances.
It is expected that the upper house of the Swiss Parliament, the Council of States, will approve an amendment to the Code of Obligations which will align Swiss law on warranties with the UN Convention on Contracts for the International Sale of Goods and the EU Sale of Consumer Goods Directive. Since the rules on warranties applicable to the sale of goods under Swiss law also apply to contracts for works, the extension of the time limit will also impact on Swiss construction law.
The scope of liability between owner and contractor with regard to subsoil conditions that affect the location where works are performed is often a source of dispute. The Supreme Court recently applied the duty of care in a case where a contractor's equipment was damaged by obstacles on the ground. The court's findings may be applied to construction contracts in general.
Corporate Finance/M&A
Overview
Including: Significant M&A transactions over the past year; Public takeovers; Recent legislative changes; Impact on transaction planning; Opting out; Further proposed changes.
Takeover Board confirms opt-out practice
The Takeover Board previously expanded its practice with regard to the evaluation of the validity of opt-out clauses. In two recent cases, the board had to decide whether opt-out clauses introduced after listing were valid. The board also took this opportunity to reflect on its own practice. These decisions show that board practice is still variable and can be expected to undergo further changes and/or clarifications.
Control premium
The Swiss legislature has recently passed an amendment to the rules of the Stock Exchange Act. The new rules will, among other things, abolish the possibility for an offerer to pay a control premium to the controlling shareholders of a target company shortly before the launch of a public tender offer.
A new majority shareholder must take minority shareholders' interests into account. An offeror has two legal options to exclude or 'squeeze out' minority shareholders under the Stock Exchanges and Securities Trading Act and the Merger Act. The Supreme Court recently clarified certain questions relating to a squeeze-out merger following a successful public takeover bid, which was challenged under the Merger Act.
It appears that the Takeover Board will no longer review opt-out clauses in instances where the shareholders have been fully informed and made aware of the consequences and implications of the introduction of such clauses. This is rather astonishing, especially since in the last reform of the Securities and Stock Exchange Act, the legislature intended to substantially strengthen the position of minority shareholders.
In the first case in which it has acted as the court of final instance in relation to a public takeover, the Federal Administrative Court recently oversaw a case regarding a high-profile public takeover. In light of the case, offerors would be well advised to use the most simple transaction structures possible in future public takeovers in order to avoid the increasingly costly and time-consuming processes involved with legal challenges from shareholders.
In 2009 the Swiss legislature enacted the Financial Market Supervision Act and made several changes to the Act on Stock Exchanges and Securities Trading relating to public offers. In view of these changes in the legislation, FINMA and the Takeover Board undertook a general overhaul of the FINMA Stock Exchange Ordinance and the Ordinance on Public Takeovers. This update analyses the impact of these changes.
Corporate Immigration
Act amendments prioritise integration
Planned revisions to the Federal Act on Foreign Nationals will affect integration, among other things. Under the proposed amendments, foreign nationals will be granted a settlement permit only if they are integrated in Switzerland. An essential requirement for integration is a strong knowledge of a national language and, therefore, a concept for language advancement has been developed.
The Federal Council has announced that the total number of work permits for 2013 will remain at 12,000 – the same number as in 2012. Within the overall quota, B-permits for long-term assignments will be capped at 4,000 and L-permits for initial stays of up to one year at 8,000. The council has also stated that it will place more emphasis on training and qualifications in upcoming years.
Switzerland's admission system for foreign workers is complicated. Non-EU and non-European Free Trade Association nationals are often confronted with the problem of whether an existing work permit can be extended or converted to a different permit category, or what kind of cooling-off period between the two work permits must be observed.
Corporate Tax
To ensure that interest payments of a Swiss group company to related companies remain free of withholding tax , in principle the company should pay only interest that does not exceed the safe harbour interest rate. The Swiss group company should ensure that it does not grant any guarantees for foreign group companies.
A fundamental principle of Swiss tax law is the exemption of Swiss resident individuals from income tax on capital gains resulting from the disposal of movable property, such as securities. The tax authorities consider capital gains resulting from the disposal of securities to be income tax free, provided that a safe haven test is met.
A federal act which will enter into force in 2013 promises to harmonise the tax treatment of employee participation schemes. New obligations for employers call for a centralised administration of information related to employee stock option and share plans within group companies; a requirement to monitor the tax residence and tax status of employees may conflict with data protection obligations.
This update presents a case study of a hypothetical, non-Swiss resident parent company which wholly owns a loss-making Swiss subsidiary. It considers the tax consequences of the use of debt forgiveness, cash contributions into reserves and reductions and subsequent increases of the nominal share capital as financial restructuring measures.
Due to increased international competition, especially from EU countries, Parliament has revised the provisions of the Income Tax Act regarding the participation relief rules in order to ensure that Switzerland remains attractive in this field. Under the revised provisions the minimal investment threshold to qualify for the participation relief was lowered from 20% to 10%.
Capital contribution principle introduced
The adoption of the 'capital contribution' principle will be a substantial change in Swiss tax law. This update outlines the way in which the principle works and considers the legal basis and the general requirements for a tax-free repayment of reserves from capital contributions. It also discusses the transitional rules, certain special cases and the potential implications for the stock corporation law.
Derivatives
Except for some regulated entities, market participants are in general free to assume unlimited counterparty risk at their discretion, whether under over-the-counter derivative transactions or otherwise. Collateralisation is a useful means of significantly reducing counterparty risk, although it cannot fully eliminate any remaining credit risks relating to the counterparty.
E-commerce
Legislative Update
The Federal Council has rejected plans to amend the Code of Obligations and introduce specific e-commerce provisions. The rejected proposals included a right to withdraw within seven days of entering into contracts online, aggravated provisions regarding warranty and further provisions to enhance consumer protection.
The new Code on Electronic Signatures, which will become effective on January 1 2005, is open for public consultation. The new rules are expected to provide a framework which will increase the use of electronic signatures and ensure the installation of practical electronic certification systems.
The Swiss Academic and Research Network, Switzerland's registrar of internet country-code domain names, has issued new procedural rules for dispute resolution proceedings for '.ch' and '.li' domain names. On the basis of these rules, bad-faith domain name applications and registrations may be challenged through fair, fast and inexpensive proceedings.
Companies wishing to enhance productivity and efficiency often utilize business-to-business (B2B) websites, which serve as a platform for information exchange. However, this may violate the Swiss Cartels Act if the companies compete with each other in a specific market. B2B website providers should be aware that in certain cases they can be penalized as well as the competing companies.
Digital Signatures Accepted for VAT Purposes
The Swiss Federal Tax Administration recently approved a public key infrastructure solution which satisfies the formal documentation requirements of Swiss value added tax (VAT) law. Electronic invoices may now be used as evidence for the deduction of input tax if their transmission and recording is secured by means of approved electronic signatures.
The question of whether the creation of hyperlinks to hate sites constitutes a crime depends on the context in which the links were created. A professor was recently acquitted of criminal charges because, while his home page included links to sites from which racist websites could be accessed, it was clear that the professor did not endorse the prohibited content.
Employment & Labour
The Supreme Court recently confirmed earlier decisions refusing a Swiss banker's claim resulting from for a share-based bonus plan. The court refused the banker's argument that his vested/forfeited share bonus claim was a non-ancillary part of his overall compensation which could not be made subject to a vesting or forfeiture regime. The court held that the forfeiture of non-vested share bonus claims was valid.
Parliament recently passed an amendment to the Employment Law Act extending opening hours for convenience shops in petrol stations located on highways or main roads with high-volume traffic. The mandatory work-time regime is set to be liberalised so that convenience shop staff at petrol stations can work throughout the night and on Sundays, thereby offering for sale the full range of convenience store products.
A new treaty was recently signed by Switzerland, France and the European Union that will unify employment laws at the European Nuclear Research Council (CERN). The treaty provides that CERN's public procurement offers for new service contracts must state a final choice in favour of either Swiss or French employment law.
The State Secretariat for Economic Affairs recently opened hearings on mandatory time recording by Swiss employers. At present, employers must record the actual time that employees spend working under their individual employment contracts. The secretariat proposed that high-ranking management members be given the right to opt out, in writing, from record keeping.
The Supreme Court recently extended the consideration period for an employer terminating an employee for an important reason. According to the court, the termination was in line with Article 337 of the Code of Obligations, which provides as a general (but rather strict) rule that termination with immediate effect must be handed down within a few working days.
The Swiss and French governments have signed into law a treaty that secures the continuing application of Swiss employment, social security and income tax laws to the binational EuroAirport Basel-Mulhouse in Basel. This has given around 75 Swiss-sector businesses, which employ approximately 6,500 workers, the benefits of a flexible and reliable legal framework.
Energy & Natural Resources
In the aftermath of the Japanese earthquake and the accidents that ensued at the Fukushima nuclear power plants, the Swiss Federal Department of Environment, Transport, Energy and Communications has suspended the authorisation process for the construction of new nuclear power plants in Switzerland. The suspension will be in effect "until safety standards have been carefully reviewed and if necessary adapted".
Environment
Overview
Including: New efficiency requirements for electric devices; New energy labelling for electronic devices; Extension of prepaid recycling fee to all types of battery; List of clean construction machine engines; Reduced fees for certain heavy vehicles; New energy labelling for passenger vehicles; Incentives to lower CO2 emissions of passenger vehicles; Amendments to Ordinance on Biocidal Products.
The Federal Supreme Court recently confirmed the scope of the 'polluter pays' principle. The possessor of a contaminated site at the time of its clean-up is always a polluter for environmental law purposes and the persons that caused the pollution must bear the costs of the clean-up. The court specified that a cost share of between 10% and 30% might be inappropriate if the persons concerned are not responsible for the pollution.
Overview (January 2013)
Including: Brownfield sites; Chemicals; VOC emissions; Carbon emissions; Vehicles; Pipelines; Air pollution; Noise protection; Electronic waste.
The Supreme Court has ruled that litter falls into the category of domestic waste and the 'polluter pays' principle applies to litter disposal costs. Each waste holder is not required to cover the exact disposal costs for its own waste; rather, it is sufficient that all waste producers cover the full disposal costs. This decision follows a complaint by retailers charged a fee to cover the costs of removing litter from public areas.
The 'polluter pays' principle states that anyone who causes measures to be taken under the Environmental Protection Law must bear the related costs. However, with regard to sites that were polluted a long time ago, the issue arises of how long the polluter is exposed to potential liability for clean-up costs.
Federal court decisions on traffic noise
Two key principles apply when the courts are asked to consider noise from traffic sources such as roads, railways and aircraft. The precautionary principle provides that noise emissions should primarily be reduced at source, while the principle of proportionality states that remediation is required only if it is technically and operationally feasible and economically acceptable.
Improving the sustainability of real estate
A broad range of federal, cantonal and voluntary private measures are promoting enhanced real estate sustainability in Switzerland. The involvement of private enterprises, foundations and associations leads to a well-balanced and flexible system. The carbon dioxide tax, in particular, makes fossil fuels more expensive and provides a direct incentive to reduce carbon dioxide emissions.
Franchising
Overview
Including: Legal Environment; Franchise Agreement; Trademarks and Intangible Property Rights; Unfair Competition; Taxes; Cartel Law.
The Federal Competition Commission has issued a new draft notice on the competition law treatment of vertical agreements which takes into account the latest amendments to the Competition Act. While this attempt at clarification is welcome, it is hoped that further changes to the draft will be made to take account of the impact on franchise relationships.
Pre-contractual Disclosure Obligations
No specific franchising law or government agency regulates the offer or sale of franchises in Switzerland. However, parties are bound by the general principles of Swiss law, particularly the concept of a pre-contractual relationship of trust that commits a party to act with care and provide pre-contractual disclosure.
Effects on Franchising of Revised Cartel Law
The revised Cartel Law contains a number of novelties directly affecting franchising. Article 5 of the law states that the elimination of effective competition is also presumed in the case of agreements in distribution contracts with regard to the allocation of territories, insofar as passive sales are excluded, and minimum and fixed resale prices.
Healthcare & Life Sciences
Ownership of university inventions
In a recent decision on the ownership of inventions created with the involvement of universities, the new Federal Patent Court held that the university was not the (joint) owner of the patent, despite the fact that the professor participating in the invention had used the university's facilities for his contributions to the invention. The court held that there was no cantonal law conferring the rights of the professor to the university.
The Swiss Federal Council recently adopted a revision of health claims legislation in order to harmonise it with EU law. The revision is intended to prevent the creation of new barriers to trade and to provide consumers with the same information that is available in the European Union. The ban on health claims for slimming products has also been revoked.
In a series of recent cases the Opposition Board found a likelihood of confusion between trademarks for pharmaceutical products with phonetic similarities. In its decisions it took into account the fact that consumers usually purchase pharmaceutical products with a higher degree of attention.
Information Technology
The Federal Supreme Court recently held that an agent is obliged to verify whether its emails were in fact received. It ruled, among other things, that it is well known that email communication is reliable only to a limited extent, and that evidence of receipt of electronic communication is difficult to establish. The risk that a message is lost or delayed before it is received lies with the message sender.
New rules in the Code of Obligations on time limits for warranty breaches in sales contracts and contracts for work and services recently came into force. The new warranty period for sales contracts is two years and the extended warranty period is five years. It remains possible to agree contractually on shorter or longer warranty periods. ICT providers and users should carefully analyse their existing agreements.
The Federal Supreme Court recently considered whether the conclusion of contracts on the delivery of standard software and the development of client-specific applications and maintenance allow for unilateral source code modification by the licensee. It also considered how a licensee should compensate the software provider if it unilaterally modifies the source code.
In several European countries, Google has faced legal action by aggrieved parties over its Google Suggest search tool, with the decisions apparently revealing significant differences in outcome and reasoning. In a case in which a college argued that a suggested term implied that it was involved in fraudulent activity, two Swiss courts shed further light on the key issues for Google and the nature of the tool that it provides.
The Federal Supreme Court has overruled the judgment of an upper cantonal court finding a seller guilty of fraud after he sold several products that he did not possess, and subsequently did not deliver, through online auction platforms eBay.ch and ricardo.ch. The Supreme Court held that the cantonal court had not sufficiently established that the seller had misled his customers about his intention and ability to fulfil their orders.
In the course of the revision of the Federal Act Against Unfair Competition, the new Article 3, Paragraph 1 will introduce various transparency requirements. In particular, the new provision specifies that company information must be included on websites by every e-commerce provider that is active in Switzerland. Non-compliance may not only damage a provider's reputation, but can also trigger civil and criminal law penalties.
Insurance & Reinsurance
The Federal Supreme Court recently ruled on the applicable prescription period for loss-of-income insurance. The decision clarifies the prescription period regarding the underlying right for this type of insurance with periodic payments. The draft of the revised Insurance Contracts Act suggests that the prescription period should be amended from two years to five years.
The Federal Court recently rendered two decisions in favour of state insurers which hold a monopoly. In its leading case, the court ruled that when insuring buildings under state monopoly, state insurer Glarnersach of Glarus Canton may also compete with private insurance companies. In its second decision, the court dismissed a licence challenge by the Swiss Insurance Association and two private insurers.
The Swiss Financial Market Supervisory Authority (FINMA) recently published for consultation a draft of its new circular that aims to illustrate in detail the provisions of supervisory law regarding risk management by defining principles for reporting on liquidity. FINMA requires that insurers file a liquidity report covering the points raised and the criteria outlined in the circular at least once a year.
The Financial Market Supervisory Authority has proposed a new Insurance Bankruptcy Ordinance and recently commenced the consultation procedure. The purpose of the draft ordinance is to strengthen the rudimentary framework for bankruptcy proceedings. The common legislative intent behind the new legal provisions is the protection of insureds in the case of an insurer's bankruptcy.
Due to a lack of legislation which would effectively protect insureds against unfair terms in general insurance conditions, the Federal Supreme Court has traditionally looked for other means to correct undesired results. The revised Article 8 of the Federal Act Against Unfair Competition, which will soon enter into force, is likely to offer insureds better protection.
The existing Insurance Contract has been in force for over a century, although it has been partially revised several times in that period. A bill to reform the act completely has now been finalised and is awaiting consideration by the the National Council and the Council of States. This update considers the impact that the proposed new act will have on insurance brokers and agents.
Intellectual Property
The Federal Supreme Court recently published three decisions related to making available encrypted pay television broadcasts. The court held that the merchants did not violate the Copyright Act regarding transmission and retransmission of broadcasts. However, to fight unauthorised commercialisation of protected content by third parties successfully, the owners or licensees should develop strategies to defend IP rights.
The Federal Supreme Court has found that VOGUE is a famous mark under the Trademark Act. The holder of such a mark is entitled to prohibit others from using the mark for any type of goods or services, provided that such use threatens the distinctiveness of the mark or exploits or impairs its reputation.
After a 12-year battle before various Swiss courts, it is now final: the shape of Lego bricks does not enjoy trademark protection in Switzerland. The Federal Supreme Court has ruled that the shape of Lego bricks is technically necessary and therefore is excluded from trademark protection, regardless of whether the shape has acquired distinctiveness.
A recent decision of the Federal Supreme Court has given welcome guidance on the requirements of proof in a trademark matter where one party claimed the other party's lack of intention to use its registered trademarks in Switzerland. The court's decision clarified the requirement for establishing lack of intention to use a trademark and how to claim nullity of a defensive trademark registration successfully.
In a recent case the Federal Supreme Court ruled on a company name dispute. The dispute concerned the potential for a likelihood of confusion between the company name Mediconsult AG and the company name Medical Consult AG. While the court of first instance answered this question in the negative, the Federal Supreme Court found that there was a likelihood of confusion.
The Bern Commercial Court recently had to decide whether use of the sign 'Mega' on watches resulted in a likelihood of confusion with respect to trademarks owned by watch manufacturer Omega. In dismissing Omega's action, the court concluded that neither party could have registered the sign 'Mega' for watches, as it lacked distinctiveness and belonged to the public domain.
Litigation
Overview
Including: Judicial Structure; Commercial Courts; Court Procedure; Appeals to Swiss Federal Court.
The Debt Enforcement and Bankruptcy Law enables a creditor to apply for an order to freeze a debtor's assets on the basis of a final enforceable title. The Supreme Court recently ruled that a foreign award without prior exequatur proceedings can constitute a final enforceable judgment, and thus under certain conditions justify a freezing order. This decision extends creditors' access to freezing orders, but does not give them free rein.
Design infringement proceedings always carry the risk of losing the rights in a design because of a successful nullity counterclaim by the counterparty. A recent decision shows that also prior design applications by third parties, which had not been made available to the public when the party's own design was filed for application, must be considered in this regard.
The Federal Supreme Court has ruled on the appeal of Swatch Ltd, a leading Swiss watch and jewellery manufacturer, against a decision of the Berne Commercial Court to hold valid a trademark co-existence agreement between Swatch and TKS Ltd. The Supreme Court partially approved Swatch's appeal, revoked the commercial court's decision and remanded the matter to the commercial court for reappraisal.
The Federal Administrative Court recently ruled on an appeal by the Munich Breweries Association against a decision of the Federal Institute of Intellectual Property (FIIP) refusing to grant trademark protection for the term 'Oktoberfest-Bier' with respect to beer in Class 32. The FIIP had held that the sign was not distinctive and needed to be kept freely available under Article 2(a) of the Trademark Act.
The Supreme Court recently issued an interesting decision, in which it dismissed a motion to set aside an award rendered by the Court of Arbitration for Sport (CAS). This decision highlights the rule pursuant to which the CAS has "full power to review the facts and the law [and] may issue a new decision which replaces the decision challenged or annul the decision and refer the case back to the previous instance".
Supreme Court rules on the right to be heard
The Swiss Supreme Court has overturned a Court of Arbitration for Sport (CAS) award regarding the contribution for legal costs due to a breach of X's right to be heard. This was because the CAS had requested the parties to file written comments on legal costs but failed to set a precise deadline for the parties to file such observations, and then issued its award without giving them the opportunity to be heard in this respect.
Media & Entertainment
The Federal Supreme Court recently published three decisions on the making available of encrypted pay television broadcasts. The court held that the sale of devices facilitating this did not constitute retransmission under Swiss law, since the protected content was streamed directly between the broadcasters and end users, and the merchants' involvement consisted merely of making available the decryption codes.
The Supreme Court recently dealt with the civil liability for blog posts on a newspaper's website whose content infringed the personality rights of a third party. The infringed party initiated proceedings against the blog author and the newspaper. The newspaper appealed, arguing that it should not be held liable for the infringing acts of the blog's author. The court rejected the argument.
The Prosecutor's Office of the Canton of Zug recently discontinued the criminal investigation against the International Federation of Association Football and two of its employees concerning accusations of corruption. Requests from journalists to access the decision were approved, but addresses belonging to the affected individuals will remain anonymous.
Any person whose personality rights have been directly affected by a statement of fact made by the media is entitled to a right of reply. In practice, requests to publish a reply are often not expressly rejected, but the replies are published as letters to the editor or as corrections instead of formal replies. The Supreme Court recently rejected the view that the right of reply is lost whenever the content of the reply is published in a different form.
In a landmark ruling based on breach of substantive public policy, the Supreme Court has overruled a Court of Arbitration for Sport award which confirmed a decision of the International Federation of Association Football Disciplinary Committee. The decision had found a Brazilian football player and a Spanish football club guilty of breaching their obligations towards Ukrainian football club Shakhtar Donetsk.
With the 2012 Olympic Games just months away, it is worth examining the issue of ambush marketing and athletes' rights. Under Swiss law, the main instrument against ambush marketing is the Unfair Competition Act. In addition to the act and IP rights, basic legal instruments (eg, public concessions, property rights and contracts) have become important in the fight against ambush marketing.
Offshore Services
The Hague Convention on the Law Applicable to Trusts and on their Recognition was concluded at The Hague, Netherlands on July 1 1985. Switzerland signed the convention on April 3 2007, and ratified and acceded to it on April 26 2007. The convention entered into force in Switzerland on July 1 2007.
Swiss-EU Taxation of Savings Agreement
Switzerland and the European Union recently initialled an agreement in the form of an exchange of letters on the date of application of the Swiss-EU Taxation of Savings Agreement. Switzerland confirmed its agreement to a new date of application of July 1 2005, on condition that Swiss constitutional requirements will be met by that date.
The Swiss Supreme Court has clarified the rules governing international mutual legal assistance in criminal matters, and in particular the principle of proportionality which constitutes a limit to the transmission of evidence taken in Switzerland to a requesting state. The judgment ends the authorities' practice of transmitting documents to the requesting state without a prior detailed screening.
The US and Swiss authorities recently concluded a mutual agreement on the interpretation of the US/Switzerland tax treaty. The agreement is a product of what appears to be a US attempt to expand the scope of the exchange of information clause. Two changes have given rise to several interesting arguments based on conflict of law and the application of domestic legal principles.
Swiss charitable foundations and other foreign charitable entities with accounts in Switzerland can receive a preferential withholding tax rate under the US qualified intermediary programme, in respect of US securities holdings, should they qualify for this preference based upon an equivalency determination by a US counsel.
Under Swiss private international law, foreign executors can operate directly in Switzerland to gain control of the assets of a deceased person and transfer them to the heirs in accordance with the will. Swiss assets should thus be included in the will of a client domiciled outside Switzerland. However, special legal advice should be sought where these assets include property.
Product Liability
The Swiss Supreme Court recently considered whether the producer of a defective product was liable for an injury to someone involved in a rescue operation - in other words, whether this injury had a causal connection to the defective product. It held that occurrences which do not result directly from a product defect, but are merely linked thereto, generally may not be attributed to the defective product.
In Swiss tort litigation, including product liability cases, it is becoming increasingly popular to introduce only a partial action - for example, on a part of the total damages or for a specific category of damages (eg, compensation for loss in income). These tactics call for procedural counter-measures such as the counter-claim on a negative fact.
In a landmark case the Supreme Court considered the question of how far the diligence of a service provider extends in case of defective products or machinery. It also considered the hotly debated concept of the protective effect of a contract for third (ie, non-contractual) parties.
In a recent landmark case the Swiss Supreme Court considered for the first time claims based on the perte d’une chance (loss of a chance) theory. In a well-founded decision, it rejected the claims by interpreting the foundations of Swiss tort law in a classic manner.
Supreme Court Clarifies Standard of Proof
In a recent decision the Supreme Court had the opportunity to discuss some basic issues of product liability law, such as an importer's capacity to be sued as a party, the notion of a defective product and the standard of proof. The ruling is all the more significant because Swiss decisions in product liability cases are rare.
A key innovation of the new Swiss auditing and company laws requires the board of directors to set up an adequate risk management system and internal control system. Manufacturers should therefore review their pre and post-loss management; as for board members and directors, product liability events may trigger personal liability with respect to not only damaged persons, but also shareholders and even creditors.
Professional Negligence
Liability for Breach of Trust
The Supreme Court recently had to decide whether an architect who provided a valuation of a property to a homeowner for mortgage purposes was to be held liable for misrepresentations in the valuation to a third party who bought the property two years later.
Projects & Procurement
The Gotthard Base Tunnel is part of the Sfr20 billion AlpTransit project to build a new rail link through the Alps, with the objective of creating a direct and level route for high-speed passenger and freight trains. The Gotthard tunnel project was one of the first in Switzerland where foreign contractors were admitted to bid, and they were actually awarded many of the lots.
Securitisation & Structured Finance
Overview
Including: Assignment of Accounts Receivable and Other Payment Claims; Security in Real Estate Lending; Synthetic Securitization; Alternative Risk Transfer; Merger Law Benefits for Real Estate Portfolio Transactions; Opco/Propco Transactions; Taxation of ABS Transactions; Other Issues.
The ongoing disruption of credit and capital markets is urging banks to pursue refinancing solutions that have rarely been used in the past or that have previously been used in a different context. A recent transaction shows that the mortgage bond system might become an efficient refinancing tool in situations where a secured refinancing transaction is difficult to structure or an off-balance sheet securitization is not possible.
Opco/Propco Structures under Swiss Law
The use of operating company ('opco') and property company ('propco') structures has recently become increasingly common in the Swiss lending and securitization market. Using these structures often leads to more efficient and less expensive financing. This update outlines some of the most significant features and issues related to setting up an opco/propco structure.
A provision of the Swiss Merger Act facilitates a transfer of assets from the originator to the securitization vehicle in a securitization transaction. Although some issues require clarification, the new transaction method will in most cases facilitate the transfer of a portfolio consisting of a large number of agreements, particularly with regard to the third-party consent required for such a transfer.
CMBS Wave Finally Hits Switzerland
Switzerland has recently seen a major increase in both origination and securitization activity in the commercial real estate market. It is expected that this year will see another increase in commercial mortgage-backed securitization (CMBS) transactions, and that future multi-jurisdictional and pan-European deals including Swiss assets will be conducted.
The Swiss Federal Banking Commission is consulting on its Position Paper on the Applicability of the Investment Fund Law to Structured Products and Other Finance Vehicles. The paper asserts that structured finance products have evolved to the point that they have become publicly offered substitutes for regulated investment funds; therefore, they should be regulated as investment funds.
Shipping & Transport
Recourse Action for Subrogated Underwriters
A recent Supreme Court decision has opened the door for subrogated underwriters to take recourse action in international transport relationships. The decision is significant since it limits the longstanding practice established in the Gini/Durlemann Case in cases where the transport is governed by the Convention on the Contract for the International Carriage of Goods by Road.
Limitation of Liability in Sea Carriage Case
In a recent case a pleasure yacht transported to Gabon by sea suffered major damage during unloading in the port. As the damaged yacht was transported on deck, the Supreme Court held that an exclusion of liability was in line with the Federal Act on Carriage by Sea.
Telecommunications
A recent decision confirms that historic ancillary communications data must be made accessible for the investigation of suspected crimes. However, since internet service providers (ISPs) are legally obliged to store historical data for a period of six months only, this decision is not overly burdensome. If an ISP stores data stored beyond this six-month period, it may be required to make this available in case of an investigation.
Two guidelines regarding lawful interception were recently revised and have subsequently entered into force, while a third guideline has been published for the first time. The main amendments include the delivery method for circuit-switched services and defining which information must be provided to the interception service for each addressing resource.
Sunrise Communications AG requested a review of prices for the resale of telephone access. The Federal Communication Commission concluded that Swisscom (Schweiz) AG should reduce the price that it charges for the resale of telephone numbers. Swisscom appealed and the Federal Administrative Court largely upheld the appeal.
In a recent decision, the Federal Supreme Court laid down principles that can be applied to state-owned enterprises in competition with privately owned telecommunications enterprises. It is not uncommon for public entities to extend their activity beyond their monopoly; however, they must adhere to strict principles to prevent the public enterprise from cross-subsidising private sector telecommunications activity.
The Federal Council recently issued a new report on the telecommunications market. This follows a similar report published in 2010, which identified several shortcomings in the regulatory system, but found no urgent need for the legal framework to be revised. The 2012 report concludes that the existing legal framework could be improved, as its deficiencies have become more evident over time.
The Federal Administrative Court has largely rejected an appeal filed by Swisscom against a Federal Communication Commission (ComCom) decision that Swisscom be required to offer leased lines at cost-oriented prices. The court remanded the case to ComCom for a technical correction to the cost allocation for the splicing costs.
Trade & Customs
Switzerland's latest initiative to inspire progress in the Doha Development Round negotiations received tepid support from trade ministers at meetings held at the World Economic Forum in Davos on January 30 2009. Unless a major breakthrough is achieved by the end of March, the round is likely to be delayed until at least 2011.
White Collar Crime
New amendments to the Stock Exchange and Securities Trading Act redefine the offences of insider trading and market manipulation, and introduce a new administrative enforcement regime to combat such conduct more effectively. This marks a significant change to Swiss financial markets law and increases the exposure of financial services providers to regulatory and criminal liability risks.
The government recently passed two draft bills proposing new legislation to combat money laundering and prevent tax evasion. The proposed legislation contains certain groundbreaking novelties, including making tax fraud (in its aggravated form) a predicate offence to money laundering. However, it remains to be seen which proposals will be contained in the definitive bills submitted to Parliament for approval.
