An extract from The Asset Tracing and Recovery Review, 8th Edition

Seizure and evidence

i Securing assets and proceeds

There are three ways of securing assets and proceeds in Switzerland: criminal freezing orders, civil attachment orders and insolvency freezing orders.

Article 263(1) SCPP provides that items and valuables belonging to the accused or to a third party may be frozen if it is expected that the items or assets:

  1. will be used as evidence;
  2. will be used as security for procedural costs, monetary penalties, fines or costs;
  3. will have to be returned to the persons suffering harm; or
  4. will have to be forfeited.

All assets that are likely to be forfeited at the end of proceedings based on Article 70 SPC must be seized during the investigation. These assets may be in Switzerland or abroad, in which case they must be seized by rogatory commission. The freeze takes precedence over any other decision obtained by creditors.

Freezing orders also extend to assets that may be seized to guarantee the replacement claim of the state in respect of crime proceeds that are no longer available for confiscation. In respect of those assets, the state has no preferable rights over those of other creditors.

Freezing orders may be issued in view of the restitution of assets to their rightful owner, but not to secure a claim for damages of an aggrieved person. Consequently, the aggrieved person may have to also obtain freezing orders through civil proceedings, namely attachments obtained in the context of debt collection proceedings or enforcement of foreign freezing orders.

The accounts targeted by a freezing order may be described in a generic form, such as 'any account of which designated persons are holders, beneficial owners, signatories or introducers, as well as any account that may have received transfers from or made transfers to, that account'.

Civil attachment orders have a narrower scope, as those can only affect the assets held at the moment when an order is received. The requirements for obtaining these orders are also stricter. The main difficulty for creditors is to identify assets located in Switzerland, as the likelihood of the existence of Swiss assets has to be brought before the civil court. Pre-enforcement discovery is not available.

The cause for a civil attachment by a creditor can be any of the following:

  1. the debtor has no fixed place of residence or abode anywhere, in Switzerland or abroad;
  2. the debtor has dissipated assets, and has fled the jurisdiction or is preparing to flee in order to defeat enforcement of undischarged debts;
  3. the debtor is in transit or is a person visiting markets or fairs, provided the relevant claim is of a nature that requires immediate payment;
  4. the debtor has no residence in Switzerland, and no other causes for an attachment are fulfilled, but the claim has a sufficient nexus with Switzerland or is based on a written acknowledgment of debt;
  5. the creditor holds certificates evidencing former unsuccessful attempts at enforcement in respect of undischarged debts of the debtor; and
  6. the creditor holds a title for final enforcement under the Swiss Debt Collection and Bankruptcy Act (SDCBA), typically a domestic or foreign judgment or arbitral award.

The court at the place where assets are located issues a freeze order ex parte if the creditor demonstrates, through documentary evidence, the likelihood that it has a monetary claim; there exists a cause for an attachment order as listed above; and there are assets at hand belonging to the debtor.

The likelihood of the existence of the assets to be attached may be demonstrated by direct or circumstantial evidence.

The attachment order describes specific assets and may target assets in several locations, including outside of the canton of the court.

The debtor may file proceedings of objection to the attachment. In parallel, the creditor must validate the attachment by requesting that an order to pay be issued against the debtor, who may object to it. The setting aside of the objection may take place through the enforcement of an existing Swiss or foreign judgment or by filing a civil action on the merits in Switzerland or abroad. The final seizure of the attached assets and distribution to the creditors cannot occur before the end of the proceedings on the setting aside of the objection to the order to pay.

If a company in bankruptcy is involved in a fraudulent scheme, as a victim or as a tool of the perpetrator, the judgment of bankruptcy, respectively the judgment on recognition of a foreign insolvency decree, triggers the opening of bankruptcy. Upon receipt of the judgment, the local bankruptcy office must immediately take all necessary measures in view of its execution, such as the freezing of bank accounts. These orders are issued ex officio and sent to the main Swiss banks. Only the accounts of the debtor can be frozen in the frame of insolvency proceedings. The assets and claims of the bankruptcy estate are listed in the inventory of the estate. If the Swiss liquidator of the bankruptcy does not intend to bring certain claims of the bankruptcy estate, creditors may request the assignment of the right to bring such claims on behalf of the bankruptcy estate at their own cost and risk against the right to be paid in priority over the recovery proceeds. In relation to foreign insolvent companies, Swiss privileged creditors have a priority right on the distribution of the Swiss assets, before the balance can be repatriated to the main foreign bankruptcy estate.

ii Obtaining evidence

The main obstacles in the obtention of evidence in Switzerland are bank secrecy, trade and business secrets and data protection. However, these pitfalls can be overcome, in particular in criminal and insolvency proceedings, where bank secrecy cannot be opposed to the state authorities. Recent Swiss case law on mutual assistance in civil matters also shows a trend in favour of the lifting of banking, trade and business secrets in favour of the manifestation of the truth in a foreign civil trial.

It is important to note that Switzerland has a blocking statute, contained in Article 271 SCP, which punishes with up to three years of imprisonment unauthorised activities conducted on Swiss territory on behalf of a foreign authority. The gathering of evidence in support of foreign proceedings is considered a breach of Article 271 SCP.

There are several alternative ways of obtaining evidence in Switzerland: by criminal disclosure and search orders, by the civil precautionary taking of evidence and civil production orders, and by orders of disclosure of information by the bankruptcy authorities. Together with the right of the parties to request that further evidence be taken (see above), the parties to criminal proceedings have the right to consult the file, which includes the right to levy copy, and to use such in other proceedings of any kinds, both in Switzerland or abroad. In principle, under Swiss law, parties do not have the obligation to keep an investigation secret. Therefore, they can access and use all the evidence in file, in particular the result of the disclosure orders issued by the prosecutor. Article 108(1) and (3) SCPP provides, however, that restrictions may temporarily apply when there is justified suspicion that a party is abusing its rights or when this is required for the safety of persons or to safeguard public or private interests in preserving confidentiality.

The type of documents that may be obtained include banking statements, KYC documents, visit reports and compliance reports.

Subject to exceptions deriving from the constitutional right to remain silent and not to self-incriminate, the holder of documents, information and other items is obliged to hand them over to the prosecutor.

Given that Switzerland is a civil law country, obtaining pretrial evidence is difficult. In that particular context, Article 158 SCCP provides for the possibility of taking evidence located in Switzerland at any time if the applicant shows likelihood that the evidence is at risk or that it has a legitimate interest to obtain the requested evidence. The Swiss Federal Court ruled that a legitimate interest is sufficiently demonstrated if the applicant wants to appraise the chances of success of a contemplated legal action. Precautionary taking of evidence is even granted if a trial will occur outside of Switzerland. The proceedings are conducted inter partes. In principle, gag orders are not available. This domestic tool is an interesting alternative route to requesting international judicial assistance (see below). It can be faster, and the rights of the civil plaintiff are broader than under a request for judicial assistance. However, the grounds for refusing the taking of evidence are much more limited in the context of the execution of a request for judicial assistance than in an independent request on the precautionary taking of evidence.

A civil claimant may also obtain evidence after the institution of a civil action. Production orders issued by the civil judge are, however, very narrow as the claimant has to target specific documents or evidence (see above). As the claimant has to quantify its damage by detailed prayers of relief and to allege all the facts necessary to prove the damage immediately in its first submissions, requesting the production of evidence during a civil trial is an inefficient strategy in fraud-related cases.

In bankruptcy proceedings, the debtor is obliged under threat of penal law sanctions to divulge all assets to the bankruptcy office and to hold himself or herself at the office's disposal. The debtor must open premises and cupboards at a bankruptcy official's request. If necessary, the official may use police assistance. Third parties who have custody of assets belonging to the debtor or against whom the debtor has claims have the same duty to divulge and deliver up as the debtor. Creditors and other interested parties have a right to consult the bankruptcy file and to use the evidence that it contains.