Third-party funding: enforcement proceedings in Switzerland
- Swiss Legal Finance
- Jul 8
- 4 min read
In this blog series, we’ve been looking at various aspects of third-party litigation funding in Switzerland. Our discussion has focused so far on what third-party funding is and the kinds of situations it’s used for. These include arbitration cases, divorce proceedings, inheritance disputes and class-action suits. Here, we turn our attention to another potential use for third-party funding in Switzerland: enforcement proceedings.
Enforcement proceedings come into play when the losing party in a dispute fails to comply with the award handed down by a court. As we will see, the Swiss legal system has well-developed procedures to enforce both domestic and foreign court rulings, and it provides for third-party funding in such cases.
Applicable law
When considering the applicable law for enforcement proceedings in Switzerland, we first need to distinguish between domestic and foreign judgments, and between monetary and non-monetary judgments.
Domestic judgments awarding monetary damages (i.e. judgments involving monetary awards handed down by a Swiss court) are enforced under the Swiss Federal Debt Collection and Bankruptcy Act; enforcement is exercised by local debt collection offices. Domestic judgments awarding non-monetary damages, on the other hand, are subject to Switzerland’s Civil Procedure Code (CPC), and enforcement is handled by civil courts.
Foreign judgments, whether for monetary or non-monetary damages, are governed by either the Lugano Convention or the Swiss Federal Act on Private International Law (PILA). The Lugano Convention applies to cases involving EU member states as well as Switzerland, Norway and Iceland. It covers commercial and civil cases but does not apply to tax, customs or administrative matters; to certain property rights (relative to marriage, wills and inheritance); or to bankruptcy or social security-related cases. The PILA is used for judgments not covered by the Lugano Convention, and it applies as long as three criteria are met: the judicial or administrative authorities of the state where the decision was rendered have jurisdiction; the decision is no longer subject to ordinary appeal or is a final decision; and there are no substantive grounds for denial.
Enforcement procedures
The enforcement of monetary claims is subject to the Swiss Debt Enforcement and Bankruptcy Act. The relevant Swiss debt-collection office will execute the proceedings to recover the assets needed to satisfy the claim, and will issue the order to pay. If the assets are held in Switzerland but the debtor is domiciled elsewhere, are held in Switzerland but the debtor is domiciled elsewhere, the debt collection office will serve the order to pay in the jurisdiction where the debtor is domiciled. Debtors have few avenues to contest an order to pay; they can argue that the claim was already paid or suspended, that the statute of limitations has expired or that the claim was miscalculated.
The enforcement of non-monetary claims – whether domestic or foreign – is governed by the CPC. The claimant must initiate enforcement proceedings with the civil enforcement court after the judgment takes effect, although in domestic cases enforcement measures can be set out in the judgment upon request by the claimant.
Staying enforcement
Debtors have limited options when it comes to staying enforcement under Swiss law. In domestic cases, they can claim lack of proper service, or they can argue extinction, deferment, prescription, or forfeiture of the right to due performance. And both the Lugano Convention and the PILA preclude Swiss courts from reviewing the merits of foreign judgments. That said, the PILA states that Swiss courts can nevertheless look at questions of service, jurisdiction and public policy. And under the Lugano Convention, Swiss courts can consider service, public policy and potential conflicts with previous judgments between the same parties, but the courts cannot look at jurisdiction.
Attachment and statute of limitations
In the case of monetary damages, creditors may ask the court handling the debt enforcement proceedings to issue an attachment order if they think enforcement measures may be necessary. But the debtor must show cause, which could include the debtor having no fixed domicile, being a flight risk, having widely spread assets, or having a history of unenforced debts.
For both domestic and foreign judgments, the statute of limitations for enforcement is generally 10 years. That said, the Swiss Federal Court recently held that, for foreign judgments, the applicable statute of limitations is the one specified in the law of the country in question, as long as the aims of that country’s law on the statute of limitations align with Swiss law.
Asset recovery
When it comes to asset recovery, there is little to say about domestic judgments, as Switzerland has functioning and effective recovery procedures. However, things can be more complicated with cross-border asset recovery. Switzerland is party to several international conventions on this topic, and Swiss domestic law includes the Federal Act on International Mutual Assistance in Criminal Matters (IMAC).
The Swiss Federal Office of Justice, acting under the IMAC, follows a well-established, four-step procedure for the return of unlawfully obtained assets. It consists of identifying any such assets in Switzerland, provisionally freezing the assets, transferring ownership to the rightful party and handing the assets over pursuant to an enforceable judgment.
Third-party funding
In Switzerland, third-party funders are permitted to cover the costs of enforcement actions. Contingency fees are not allowed, however, as the legal team’s compensation agreement must be based on time spent. Yet an incentive payment that does not exceed the base fee is allowed.
The losing party will be required to pay compensation to cover the winning party’s costs, but the amount of compensation is generally determined by set rates and may not actually cover the winner’s total outlay. It’s for this reason – and the fact that the funder bears the risk of the debtor ultimately defaulting on their debt – that funders tend to focus on cases with a higher potential payout.
Looking ahead
Enforcement proceedings can be complex, particularly when they involve foreign judgments. One complication has now been removed, as the revised CPC (which took effect on 1 January 2025) provides for English-language proceedings in international commercial courts in Switzerland. Arrangements for such proceedings are already under way in Zurich.
If you’d like to learn the ins and outs of Swiss enforcement proceedings – and explore the relevance of third-party litigation funding – drop us a line at Swiss Legal Finance: info@swisslegalfinance.ch or 022 512 37 37. And be sure to check out our website: www.swisslegalfinance.ch.
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