In decision 5A_375/2017, which is slated for official publication in the court reporter, the Swiss Supreme Court ruled for the first time that the statute of limitation for a claim evidenced by a certificate of shortfall is governed by the Swiss Debt Enforcement and Bankruptcy Law (DEBA), irrespective of whether foreign or Swiss substantive law is applicable to the original claim (i.e. the claim resulting from two arbitral awards rendered in Singapore) . This may allow the award creditor enforcing an arbitral award in Switzerland to benefit from a much longer limitation period.
In a decision dated 13 June 2018, the Swiss Supreme Court reversed the decision of the lower courts and ruled for the first time that the limitation period for a claim evidenced by a certificate of shortfall must be assessed in accordance with the rules of the DEBA, irrespective of whether foreign or Swiss substantive law is applicable to the original claim (in casu a claim resulting from an arbitral award rendered in Singapore).
The Swiss Supreme Court concluded that Article 149a (1) DEBA, which provides that a claim evidenced by a certificate of shortfall becomes statute-barred 20 years after the certificate has been delivered, applies regardless of the reservation of the provisions of the Swiss Private International Law Act (PILA) expressed in Article 30a DEBA. The ordinary limitation period under the applicable substantive law for the claim to be enforced, which had lapsed in the meantime, had been replaced by the 20-year limitation period, which began with the delivery of the certificate of shortfall. (Decision 5A_375/2017.)
Article 30a of the Swiss Debt Enforcement and Bankruptcy Law (DEBA), states that the provisions of the Swiss Private International Law Act (PILA) are reserved. Article 148 (1) PILA provides that the statute of limitation is governed by the applicable substantive law.
Pursuant to Article 149a (1) DEBA, a claim evidenced by a certificate of shortfall becomes statutebarred 20 years after the certificate has been delivered. The certificate of shortfall serves as an official certificate for the creditor that the debtor's assets which were seized in Switzerland during the enforcement proceedings could not fully satisfy the creditor's claim and that the creditor consequently incurred a loss of a certain amount, which constitutes the creditor's shortfall.
The defendant was ordered, by two arbitral awards rendered by an arbitral tribunal acting under the rules of the Singapore International Arbitration Centre (SIAC) in May and July 2002, to pay damages to the claimant. In September 2002, the claimant commenced the enforcement proceedings on the basis of these arbitration awards at the defendant's domicile in Switzerland. The enforcement proceedings by way of seizure were not successful for the claimant and led to the issuance of a certificate of shortfall in December 2010 pursuant to Article 149 DEBA.
By a payment summons issued in May 2016, the claimant again commenced enforcement proceedings against the defendant for the amount pursuant to the certificate of shortfall, whereupon the defendant filed an objection. In July 2016, the claimant filed a request with the Cantonal Court of Zug to definitively set aside the objection that the defendant had raised against the payment summons. The petition for setting aside the objection was based on the certificate of shortfall of December 2010 and the two SIAC arbitration awards of 2002. Upon appeal, the Cantonal Supreme Court of Zug, in March 2017, confirmed the lower court's decision to dismiss the petition to set aside the objection. The claimant submitted an appeal in civil matters against this decision to the Swiss Supreme Court.
The Swiss Supreme Court granted the claimant's appeal and ruled that the limitation period of 20 years for a claim evidenced by a certificate of shortfall under Article 149a (1) DEBA prevails over limitation periods set by substantive law.
The Supreme Court considered that the question of the preference of the provisions of the PILA over those of the DEBA, based on the reservation made in Article 30a DEBA, must be examined in relation to the meaning of each individual provision and in relation to the specific situation as the international dimension of different issues varies greatly. Whether a relevant international dimension exists if the original claim becomes statute-barred under foreign substantive law, so that the provisions of the PILA should prevail, depends on the meaning and purpose of the certificate of shortfall, its effect and the link with the enforcement law.
Regarding the statute of limitation, it is generally acknowledged that the limitation period of 20 years provided by Article 149a (1) DEBA modifies the substantive content of the claim whose enforcement is sought and that this limitation period applies to the enforcement of claims under the DEBA. Case law also specified that the ordinary limitation periods under the applicable substantive law must give way to this specific limitation period not only in case of claims based on civil law, but also in case of claims based on public law.
The meaning and the purpose of the provision make it clear that the extraordinarily long limitation period for a claim evidenced by a certificate of shortfall is so closely linked to further enforcement proceedings that it cannot be isolated from the entire complex of enforcement proceedings. The application of the rules of the DEBA is justified, irrespective of whether foreign or Swiss substantive law is applicable to the original claim. There is no reason why a claim evidenced by a certificate of shortfall should be dealt with differently only because foreign substantive law is applicable to the original claim. The fact that the substantive law of a foreign jurisdiction rather than Swiss law is applicable to the original claim does not exclude the application of Article 149a (1) DEBA.
The Swiss Supreme Court decided that the non-application of the limitation period of Article 149a (1) DEBA could not be based on the reservation of the provisions of the PILA stated by Article 30a DEBA. Rather, the ordinary limitation period under the applicable substantive law for the claim to be enforced had been replaced by the 20-year limitation period applicable to claims evidenced by a certificate of shortfall. Therefore, the Swiss Supreme Court granted the claimant's appeal and permitted the continuation of the enforcement proceedings.
The Swiss Supreme Court's decision, according to which Article 149a (1) DEBA is applicable to the limitation period of any claim evidenced by a certificate of shortfall even if the original claim has become time-barred under the applicable foreign substantive law, is a welcome clarification.
The Swiss Supreme Court's decision is convincing since the institution of the extraordinarily long limitation period of a claim evidenced by a certificate of shortfall is part of the enforcement proceedings, and the meaning and purpose of Article 149a (1) DEBA must be seen within the overall context of enforcement law. The privilege conferred by it to the creditor finds its counterpart in the favor granted to the debtor that interest no longer accrues on a claim evidenced by a certificate of shortfall.
Following this decision an award creditor must ensure to file for enforcement proceedings within the time limit applicable to the substantive claim granted in the award. However, if such enforcement is not successful and a certificate of shortfall is issued, the creditor can hereby extend the limitation period by 20 years starting from the time of the issuance of the certificate of shortfall.
It should be noted that the practical consequences of this decision are rather limited since to its full extent it is only applicable to the enforcement of claims directed against natural persons (individuals). In case of enforcement proceedings against legal persons (companies), certificates of shortfall will only be issued after the closure of the bankruptcy proceedings, which will lead to the deletion of the company from the Swiss Commercial Register. Following its deletion from the Commercial Register, a company cannot be pursued any more even if certificates of shortfall have been issued against it.