On 2 March 2018, the Swiss Federal Council initiated the consultation phase regarding a partial revision of the Swiss Civil Procedure Code (CPC). A key objective of the revision is to strengthen collective redress mechanisms. In addition, the Preliminary Draft proposes a number of amendments with the dual purpose of improving the practical application of the CPC, which entered into force on 1 January 2011, and facilitating the enforcement of rights in Switzerland in general.
1 Background of the revision
Seven years have passed since the Swiss national CPC, which superseded the former cantonal codes and harmonized Swiss civil procedural law, entered into force. During this time, the CPC has proven its value in practice.
On the one hand, the proposed revision seeks to facilitate the assertion of mass damages claims by reinforcing group actions and introducing collective settlement proceedings. For this purpose, the CPC revision revisits proposals contained in the preliminary draft of the Financial Services Act (FIDLEG) of 2014, which at the time were rightfully rejected as their significance extends beyond the financial sector. On the other hand, the revision seeks to eliminate a number of weaknesses of the CPC which have come to light in practice. Hence, the revision combines a range of proposed adjustments in the area of civil procedural law.
This newsletter outlines the most significant revision items.
2 Strengthening of collective redress
2.1 Group actions under existing law
Currently, based on the so-called group action right enshrined in Art. 89 CPC, associations and other organizations may only bring non-monetary claims (cease and desist orders, declarations of unlawful conduct) in order to safeguard collective interests.
2.2 Expansion of group actions
The Preliminary Draft introduces a reparatory group action, allowing for the collective assertion of monetary claims in particular in cases involving mass damages. Pursuant to the annotations to the Preliminary Draft, possible practical applications include claims for product liability, antitrust violations or improper trade practices affecting a large number of persons.
In addition to the existing claims, the new Art. 89a would allow group actions to include claims for damages, unjust enrichment, and disgorgement of profits. In such cases, associations would submit claims in their own name, but based on the individual claims of members of the group they represent. Reparation claims for infringement of personality rights ("Genugtuungsansprche") would remain excluded from group actions.
Organizations would be entitled to bring group actions if they:
- are not profit-orientated;
- in their articles of association or bylaws provide for
organization authorized to bring a group action. Subsequently, a court, upon request, can approve the settlement and declare it binding upon all affected persons. As a consequence, the settlement would become binding on all affected parties, unless they declare their withdrawal from the collective settlement in writing within a deadline of at least three months ("opt-out" system). In addition, the parties to a collective settlement can agree that the settlement shall be revoked if more than a predefined number of affected persons declare their withdrawal within a certain time period.
"Unlike the reparatory group action, the approved collective settlement would be binding on all affected persons, unless they declare their withdrawal within a certain time period."
The Preliminary Draft contains provisions regarding the
the safeguarding of the interests of the affected group mandatory content of the collective settlement. At a
minimum, the following items would have to be specified:
>> have the knowhow as well as the organizational and >> the alleged legal violation and the resulting damage;
financial resources to safeguard the interests of the
affected group of persons.
>> the group of affected persons and their number;
The submission of a reparatory group action would >> the maximum settlement amount as well as the
approximate allocation between the affected persons;
>> the affected members of the represented group of persons are entitled to own financial claims based on a violation of rights;
>> any awarded sums would primarily accrue to the group of persons or be used exclusively in their interest;
>> the requirements for the payment of damages;
>> the procedure for the assertion, determination and payment of damages to the affected persons; and
>> the allocation of costs.
>> the affected members of the group of persons explicitly authorized the organization to initiate court proceedings; and
>> the organization in question is qualified to bring financial claims (e.g. based on nationwide activities and vast experience in the relevant field).
Affected persons who have not authorized the organization to initiate court proceedings would not be bound by any judgment regarding the group action ("opt-in" system). In light thereof, the organization would be obliged to inform the public at the latest upon filing the suit in order to give the affected persons the opportunity to join the suit.
2.3INTRODUCTION OF COLLECTIVE SETTLEMENT PROCEEDINGS
As a second main element to strengthen collective redress, the Preliminary Draft in Art. 352a et seq. provides for the introduction of collective settlement proceedings. The proposal is inspired by a similar model introduced in the Netherlands in 2005.
Essentially, a person accused of a legal violation shall have the opportunity to reach a collective settlement with an
The revision contains detailed provisions regarding the court proceedings for the approval and the declaration of binding effect of the collective settlement. Before approving a collective settlement, the court would be obliged to review the appropriateness of the agreed settlement amount. In addition, a collective settlement could only be approved if the legal violation in question affected a sufficiently large number of persons so as to justify a declaration of binding effect on all affected parties.
3 SELECTIVE AMENDMENTS TO THE CPC 3.1REDUCTION OF COST BARRIERS The revision proposes several adjustments to the provisions governing procedural costs. In particular, advances on costs may not exceed half of the anticipated court fees (Art. 98). Further, the court fees may only be set off against the advance paid by a party if that party is eventually ordered to bear the costs of the proceedings (Art. 111). In the future, the risks associated with the recovery of court costs would therefore lie with the state rather than the parties.
These amendments respond to broad criticism regarding the current provisions governing procedural costs. In particular, the current rules were criticized as creating a
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de facto barrier to court access or a "pay wall". At the same time, the Swiss Federal Council proposes not to adopt a complete abolishment of advances on costs or their reduction to mere "cautionary fees". The filtering function of advances on costs, i.e. the prevention of abusive or querulous suits, shall continue to apply.
Finally, when informing the parties of the expected costs of the proceedings (Art. 97 CPC), the courts would be required to draw the parties' attention to the possibility of third-party funding. If implemented, this proposed amendment is likely to cause third-party funding, a relatively new instrument in Swiss civil procedure, to gain further momentum.
3.2IN-HOUSE PRIVILEGE IN CIVIL PROCEEDINGS The new Art. 160a seeks to limit the duty of in-house counsel to cooperate in evidentiary proceedings. The proposed in-house privilege would only apply (i) to specific attorney-client related activities and (ii) if the legal department in question is supervised by a person qualified to practice law as an attorney. Art. 160a provides not only that in-house counsel may refuse to testify, but also that the production of documents created in cooperation with the in-house legal department may not be compelled.
"In-house privilege aims to prevent
procedural disadvantages vis--vis
The aim of the new provision is to prevent procedural disadvantages of Swiss companies compared to non-Swiss entities. Currently, the standard of professional confidentiality under criminal law (see Art. 321 of the Swiss Criminal Code), which also determines the scope of legal privilege in civil proceedings, can only be invoked by attorneys in private practice. In-house privilege has been the subject of many proposals in recent years, all of which were rejected until now.
3.3STRENGTHENING OF CONCILIATION PROCEEDINGS
The revision sees several ways to strengthen conciliation proceedings. Unlike under existing law, conciliation proceedings would, upon request of the claimant, also be possible if the claim falls within the jurisdiction of the commercial court or another cantonal court of sole instance pursuant to Art. 5 CPC. The aim is to encourage and increase the number of out-of-court settlements (pursuant to the annotations to the Preliminary Draft, 50% to 80% of the cases are currently settled at this stage) as well as to facilitate an efficient interruption of the statute of limitation. However, it should be noted that, due to its voluntary nature, the proposed solution would raise various questions regarding the commencement of the lis pendens effect, notably in international matters.
3.4STATUS OF PARTY-APPOINTED EXPERT REPORTS
Another proposal pertains to the reports of experts retained by the parties as opposed to reports by court-appointed experts. According to the revision, expert reports submitted by the parties shall have the status of evidence (Art. 177).
This new rule seeks to depart from the case law of the Swiss Federal Supreme Court whereby private expert reports are qualified as mere allegations of the submitting party. A formal qualification of private expert reports as actual evidence would mean that their evidentiary value may be freely assessed by the court with due regard to all relevant circumstances of the individual case (Art. 157).
3.5APPELLATE REMEDIES AGAINST DISMISSAL OF SUPERPROVISIONAL MEASURES
The Preliminary Draft provides for the inclusion of a new paragraph 4 to Art. 265 CPC, the purpose of which is to clarify the legal situation regarding the full or partial dismissal of requests for so-called superprovisional or ex parte measures. Superprovisional measures are preliminary measures which, due to their particular urgency, are ordered immediately and without granting the opposing party an opportunity to comment.
First, the revision seeks to remove the existing uncertainty as to whether or not a party may appeal the court's decision rejecting an application for superprovisional measures. The draft provision expressly provides for the possibility to appeal such decisions. Further, Art. 265(4) allows for the party seeking superprovisional relief to request the court to not communicate the decision regarding the dismissal of the request and to not invite the opposing party to a hearing or to comment in writing until the appeal against the decision has been decided. This would resolve the current difficulty that the opposing party may already be informed of the request for superprovisional measures prior to the commencement of the appellate proceedings, which potentially defeats the purpose of the requested measures.
3.6RELIEF REGARDING SUBMISSIONS TO THE WRONG COURT
The revision seeks to mitigate procedural pitfalls in the context of jurisdiction. Submissions shall be deemed to have been filed in accordance with the pertinent deadline even if they are erroneously filed with the wrong court (Art. 143(1)bis). In addition, in case of a judgment declining jurisdiction and upon the claimant's request, the claim may be transmitted to another court designated by the claimant, maintaining the lis pendens effect of the initially submitted claim (Art. 60a).
3.7IMPROVEMENT OF PROCEDURAL COORDINATION
Pursuant to the Preliminary Draft, the coordinated filing of several claims, i.e. joinder of parties, third-party intervention, joinder of actions, and counterclaims, is to be facilitated. In particular, the revision proposes to amend or even abandon the requirement that the proceedings be "of the same type", which is generally considered to be overly restrictive.
3.8NEW REGULATIONS REGARDING THE PUBLICATION OF DECISIONS AND STATISTICS
Finally, according to the Preliminary Draft, the Swiss Federal Council is to be granted authority to issue regulations regarding the electronic publication of decisions (Art. 400(2)bis) and to establish a basis for access to statistics and caseload figures regarding civil proceedings (Art. 401a).
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4 OUTLOOK The consultation phase will continue until 11 June 2018. The results are awaited with great interest.
As a final remark, with a view to the more distant future, it is noteworthy that the Swiss Federal Council in its annotations to the Preliminary Draft appears to be open to recent suggestions to further increase the attractiveness of Swiss courts as a venue for international disputes.
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