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06 February 2015
The Federal Supreme Court recently confirmed its settled case law concerning the possibility of freezing the assets of a debtor at the registered seat of a Swiss bank where the debtor is a client of the bank's foreign branch (case 5A_723/2013, September 3 2014).
The client – domiciled in Italy – was the holder of a bank account with the Singaporean subsidiary of a Swiss bank. One of the client's creditors successfully obtained a freezing order against the client's assets, both at the registered seat of the bank in Switzerland and at its Singaporean branch. Within the framework of the enforcement proceedings introduced against the debtor, the bank was considered a third-party debtor and the debt amount was therefore seized by the Debt Recovery Office at the registered seat of the bank. The bank appealed.
The court confirmed its settled case law, following which holders of accounts held with foreign branches of Swiss banks can be subject to enforcement measures in Switzerland at the place of the registered seat of the bank.
The court began by examining the territorial competence of the Swiss debt recovery authorities in the present case. Claims which are incorporated in certificated securities are located at the place where they are kept. Claims that are not incorporated in certificated securities are located at the domicile of the creditor. Where the latter is not domiciled in Switzerland, as in this case, but the third-party debtor (the bank) is, the claim can be seized at the Swiss domicile of the third-party debtor. There is no requirement that the Swiss bank be involved in the client relationship of the foreign branch. This should avoid negative conflict of competences arising and ensure that the claimant can enforce its claim.
The court answered criticisms made by certain legal scholars against the interpretation that the seat of a bank in Switzerland is a sufficient link to provide territorial competence for the Swiss debt recovery authorities.
However, the court admitted that this solution presents a risk for the bank of paying the same amount twice if the Swiss seizure is not recognised abroad. The bank could pay once to the creditor which initiated the enforcement proceedings and a second time to the subsidiary's client. According to the court, this does not justify the addition of further requirements when assessing territorial competence in Switzerland. There is also no legal basis that would take into account foreign recognition of the Swiss decision when examining Swiss competence.
While banks are in many cases not allowed to control the bank accounts of their foreign branches because of regulatory prohibitions and limitations, the head office is regularly informed of certain activities taking place abroad, including the seizure of assets. In the present case, the Swiss bank had already been informed of this measure, as it was directly targeted by the Swiss judge's freezing order.
Although many scholars regret the court's position, this new case confirms the line followed by the court. Swiss banks with branches abroad must therefore implement adequate organisational measures to address such situations in future and, for example, avoid double payment. They must also ensure that such measures are not contrary to foreign regulatory rules applicable to the branch and to cross-border activities of its Swiss seat.
For further information on this topic please contact Christophe Rapin, Christophe Pétermann or Daphné Lebel at Meyerlustenberger Lachenal by telephone (+41 22 737 10 00), fax (+41 22 737 10 01) or email (firstname.lastname@example.org, email@example.com or firstname.lastname@example.org). The Meyerlustenberger Lachenal website can be accessed at www.mll-legal.com.
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