Swiss Courts Research Articles

Wage Demands and Fair Working Conditions of Seafarers on Cargo Ships Under a Flag of Convenience: Establishment of a Place of Jurisdiction in Switzerland

This article addresses the question of whether seafarers, regardless of the ordinary international jurisdictions in the country of ship registration or at the domicile of their employer, have a jurisdiction in Switzerland at their disposal to be able to enforce their rights effectively. The significance of maritime trade routes cannot be overstated, and demand continues to be strong. At the same time, many seafarers suffer from precarious working conditions, being often unable to enforce their wage demands and other claims. A key problem is the registration of vessels in flag of convenience (FOC) states which generally lack an effective judicial system or where access to justice may be constrained. Many shipping companies that profit greatly from maritime transport are domiciled in Switzerland, allowing the conclusion that jurisdiction in Switzerland can be established by piercing the corporate veil or, subsidiarily, asserting jurisdiction by necessity. Reasons that justify the registration in an FOC state are hardly apparent and the liability of a benefiting Swiss group company and thus a place of jurisdiction in Switzerland can well be justified. In any case, Switzerland has enshrined the jurisdiction by necessity in positive law and a too restrictive handling by Swiss courts could violate the human right of free access to justice.

Jurisdiction in Switzerland in cross-border successions

Abstract When a legal dispute has an international or so-called “cross-border” connection before the Swiss courts or authorities, the private international law of Switzerland (codified in the Federal Act on Private International Law) determines whether Swiss courts and authorities have jurisdiction, which substantive law is applicable, and the recognition and enforcement of foreign decisions, measures, deeds, and rights. In Swiss international law, “residence” is the main connecting factor. Thus, the terminology of “residence” is to be defined, as it is typically the entry point of any case heard in Switzerland, which does not necessarily follow the tax authorities’ or other authorities’ assessment or tax rulings for residency. In recent years, the Federal Supreme Court has had the chance to decide on various cases where residence in cross-border inheritance cases was disputed and some findings led to unexpected and unintended results.

Article: Free Movement of Persons Between the EU and Switzerland: Quo Vadis?

Relations between Switzerland and the European Union (EU) have been shaped by various (bilateral) agreements. This contribution discusses one of the most important agreements between Switzerland and the EU; the agreement on the free movement of persons (AFMP). The AFMP does not have its own dispute settlement mechanism or supervisory body. Dispute resolution is now left to independent Swiss courts and the Court of Justice of the European Union (ECJ). On 23 November 2018, a first draft of an institutional framework agreement between Switzerland and the EU was published. The aim of this proposed framework agreement was partly to simplify the complex relations between Switzerland and the EU. In May 2021 the Swiss government pulled the plug on the institutional framework agreement because of concerns about migration, labour rights, and worries about the judicial authority the institutional agreement would give to the ECJ. The EC is however clear about what it wants. Amongst others, the dynamic alignment of Swiss law to EU law and a functioning dispute settlement mechanism are issues the EC wants to see solved. In this article the author explores, among other things, what the consequences could be for Swiss fiscal autonomy if Switzerland would follow the EC. The author also reflects in more detail on the ECJ’s case law on frontier workers and the final settlement on capital gains from shareholdings upon emigration to Switzerland. Free movement of persons, Switzerland, taxation, bilateral agreements, Wächtler judgment.

Country Note: Arm’s Length Principle from a Swiss Perspective: Profit Allocation to Inbound and Outbound Permanent Establishments

Switzerland continues to be one of the most preferred locations for many businesses when setting up a headquarters or permanent establishment (PE) structures. Thus, obtaining tax certainty and predictability is crucial for such structures. Swiss tax law does not provide for detailed rules for international profit allocation and particularly the arm’s length principle (ALP) for the determination of an enterprise’s profit. Therefore, the Swiss tax authorities and courts largely rely on general national tax law principles for their assessment of the allocation and calculation of the taxable profit of a company or a PE in Switzerland. They have developed a sophisticated system of profit correction in order to determine the relevant taxation basis, in particular when prices between related entities or within PE relationships are deemed to not be set at arm’s length. This practice is continuously evolving, and the Authorized OECD Approach (AOA) is increasingly integrated in the assessment of each individual case. Against this backdrop, the present contribution discusses the application of the ALP from a Swiss tax treaty and Swiss national law perspective as applicable to transactions among separate entities as well as to head office and PE relations. With respect to the latter, the reader will find an overview of the profit allocation rules applicable in domestic and international cases. Moreover, for illustration, two case studies are developed and analysed for cross-border relations with fixed place PEs (inbound and outbound cases) and an example is provided for the interaction between international and domestic profit allocation. Switzerland, profit allocation, AOA, permanent establishment, arm’s length principle, transfer pricing, international, intercantonal, developments, cases.

Swiss Courts Facing the Challenges of COVID-19

The COVID-19 pandemic took courts in Switzerland by surprise, just as it did most courts and other public institutions in Europe. This contribution summarises the situation as it has affected courts in Switzerland during the COVID-19 pandemic and tries to draw some initial conclusions. In Switzerland, there was a failure to include the justice system in the emergency/pandemic plans and in the organisation of the response to the crisis. In addition, the situation revealed that Switzerland is lagging behind other states on court technology, which led to difficulties in conducting court proceedings during the coronavirus crisis.

The Eritrean Military/National Service Programme: Slavery and the Notion of Persecution in Refugee Status Determination

Despite the overwhelming evidence of human rights violations within the Eritrean Military/National Service Programme (“MNSP”), adjudication of asylum applications made by Eritreans remains a challenge. Narrow interpretations of slavery have created obstacles for protection under the 1951 Convention Relating to the Status of Refugees (“1951 Refugee Convention”). This article discusses MST and Others, the latest Country Guidance case on Eritrea issued by the UK Upper Tribunal Immigration and Asylum Chamber (“UTIAC”), and also the lead case E-5022/2017 of the Swiss Federal Administrative Court (“FAC”), which to a large extent replicated the UTIAC’s approach. The article focuses on how slavery, servitude and forced labour under article 4 of the European Convention on Human Rights (“ECHR”) have been interpreted in the British and Swiss case-law. While both, the British and the Swiss Courts, had recourse to the European Court of Human Rights’ (“ECtHR”) interpretation of article 4(1) ECHR (the right not to be subjected to slavery or servitude), they refused the applicability of international criminal law notions to this provision, and thus to the concept of “persecution” in article 1A(2) of the 1951 Refugee Convention. In doing so, the UTIAC and the FAC set unreasonable requirements to satisfy article 4(1) ECHR. Due to the very limited case-law pertaining to slavery by the ECtHR, the ECHR does not offer an appropriate framework for examining asylum applications of victims of slavery. It is therefore suggested that slavery cases are considered against a wider legal framework, which involves the examination of concepts developed by international criminal law (“ICL”). ICL has indeed developed a significant body of jurisprudence on the interpretation of the international law concept of slavery and its application to contemporary situations. The article contrasts the British and Swiss Courts’ position to develop an interpretative approach that connects different areas of international law, including not only international refugee law and international human rights law (“IHRL”), but also ICL. If applied in line with the principle of systemic integration and according to the overall purposes of the 1951 Refugee Convention, this approach would yield consistent results. Ultimately, this article seeks to assist asylum decision-makers and practitioners in the interpretation and application of the refugee definition to asylum applications of persons from Eritrea.

The Use of English Before Swiss Courts: The Current Debate

In the aftermath of the Brexit referendum in 2016 and the withdrawal of the UK from the EU on 31 January 2020, several jurisdictions established so-called «international commercial courts», at which English is the standard language. Thus far, there have been few such initiatives in Switzerland. However, according to the ongoing revisions to both the Federal Act on International Private Law and the Swiss Civil Procedure Code, it is intended to allow the use of English in certain situations. Unsurprisingly, this has given rise to a wideranging debate in multilingual Switzerland. The present contribution outlines this discussion and proposes several practical solutions on how to deal with this delicate political issue.

Data Interfaces: Tensions between Copyright and Competition Law – A New Swiss Court Practice for an Old Problem

Abstract The reconciliation of intellectual property rights laws with competition rules is a difficult task. For decades, courts and legal doctrine have been trying to draw fine lines in order to balance corresponding (yet partly differing) interests. Recently, the Swiss Federal Administrative Court ruled on the tensions between copyright and competition law, particularly assessing data interfaces in the credit/debit card payment transactions business. The Court applied a restrictive approach in respect of the exclusively protected sphere of the rightholder–its behaviour of building entry barriers for potential competitors was considered non-compliant with the Cartel Act. This contribution outlines the general principles applied in relation to the reconciliation of intellectual property rights with competition rules in the Swiss law environment and analyses the detailed, concrete reasoning of the recent decision in the light of the needs of the growing information society.

How do and should domestic courts interpret international law? Insights from the jurisprudence of HLA Hart and Duncan Kennedy

ABSTRACTJurisprudential theories have rarely taken international law into account, yet can provide insights into how domestic courts can and should conceptualise their interpretative activity. This paper relies on the works of HLA Hart and Duncan Kennedy to show that the domestic judicial interpretation of international law should be conceptualised as analogous to a hinge. The hinge analogy highlights the connecting role of domestic courts between international and domestic law, their dynamic, law-creating powers in both the domestic and the international legal order, and the legal frame they need to observe when interpreting international law. Moreover, like a good hinge that is robust and well-oiled and, therefore, fulfils its purpose, the interpretative reasoning of domestic courts must display specific characteristics in order to fulfil its role. To illustrate the different prongs of the analogy, I rely on the case law of Swiss courts.

The Swiss Tax Case on Short Sales cum Dividend

This article discusses the recent Swiss court case on cum-ex short sales and the tax treatment of secondary withholding tax payments.

Federal Supreme Court Rejects Swiss Withholding Tax Reclaims Made by an Italian Bank under Italy-Switzerland Tax Treaty

By decision dated 5 April 2017, CH: Supreme Court, case no. 2C_964/2016. the Federal Supreme Court essentially upheld a judgment rendered by the Federal Administrative Court (FAC) on 29 August 2016, CH: Federal Administrative Court, case no. A-2902/2014. rejecting Swiss withholding tax refund claims brought by an Italian bank regarding dividends received on Swiss listed shares for an amount of approximately CHF 10.7 million. Only in respect to a reclaim amount of CHF 11,600, the Supreme Court reversed the decision of the FAC and referred the matter back to the FAC for further review, as it found the consideration of the evidence made by the FAC regarding one particular share position to be arbitrary. In this report, we will however focus on the main claim of the Italian bank, which was rejected by both Swiss courts.

Enforcement of Arbitral Awards under the New York Convention in Switzerland – An overview of the current practice and case law of the Swiss Supreme Court

This article presents an overview of the current practice and case law of the Swiss Supreme Court in relation to the implementation of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. More specifically, this article examines the decisions rendered by the Swiss Supreme Court over the period 2000-2016. Decisions are discussed in relation to the relevant provision of the Convention on an article-by-article basis. For each provision of the Convention, a short commentary is included highlighting the relevant requirements and thresholds that need to be met in light of the recent case law of the Swiss Supreme Court in order for a party to obtain or to successfully resist the recognition and enforcement of a foreign award in Switzerland. The decisions of the Swiss Supreme Court rendered during the period under review are of particular interest as the Supreme Court has examined several Convention provisions for the first time, whilst confirming, clarifying and even overturning its earlier case law. These decisions confirm that Swiss courts continue to take a liberal, pragmatic and pro-enforcement approach to the New York Convention in practice.

International Maintenance Law in Legal Relations between Switzerland and the EU

Three new instruments, which have only recently entered into force, have changed the field of international maintenance law: the 2007 Maintenance Convention (the Hague Convention of 23 November 2007 on the International Recovery of Child Support and Other Forms of Family Maintenance), the 2007 Maintenance Protocol (Hague Protocol of 23 November 2007 on the Law Applicable to Maintenance Obligations) and the EU Maintenance Regulation (Council Regulation [EC] No 4/2009 of 18 December 2008 on jurisdiction, applicable law, recognition and enforcement of decisions and cooperation in matters relating to maintenance obligations (OJ [2009] L 7/1; EU Maintenance Regulation). Whereas the EU is bound by all of these instruments, Switzerland has not ratified nor acceded to the Hague instruments yet, nor have the provisions of the EU Maintenance Regulation been extended by means of a parallel instrument to cover Switzerland. This new legal situation raises questions regarding the applicability of these instruments in cross-border cases involving Switzerland and the EU. The key issue discussed in this essay is the question of jurisdiction in cross-border cases involving Switzerland and the EU Member States, and in particular how to disentangle the scope of the 2007 Lugano Convention from the scope of the EU Maintenance Regulation. As none of these instruments regulates its applicability explicitly, the answer to this question has to be found by interpreting the relevant provisions. The authors conclude that whenever there are proceedings pending before a Swiss court, the 2007 Lugano Convention applies, whereas the courts of an EU Member State have to assume jurisdiction exclusively according to the EU Maintenance Regulation. As a result, different provisions apply, which leads to a conflict of jurisdiction regarding choice of court agreements. If jurisdiction has been assumed by a court of an EU Member State, the applicable law is determined by the 2007 Maintenance Protocol, whereas in Switzerland, the 1973 Hague Maintenance Convention (the Hague Convention of 2 October 1973 on the Law Applicable to Maintenance Obligations) applies. Again, the different provisions enable forum shopping, with undesirable consequences.

Gaps and changed circumstances in energy contracts: the devil in the detail

Gaps and changed circumstances in energy contracts: the devil in the detail

What Europeans Can Learn from an Untold Story of Transjudicial Communication: The Swiss-Turkish Experience

The role of the use of foreign law in the courts is shaped by the legal context in which it takes place, and by the structure of the legal system it serves. Swiss courts have considered foreign law on numerous occasions when filling a gap in the current domestic law, or when interpreting existing domestic rules. A study based upon 1,541 instances has shown that slightly more than 10 per cent of the decisions refer to foreign law (notably to German, but also to French, Austrian, Italian, British, American, Belgian, Dutch, and even to Swedish and Turkish law). In the same way, Swiss law is a source of inspiration for foreign legislatures and courts. The accessibility of Swiss private law to ordinary citizens, its solutions (which are pragmatic rather than conceptual), and the wide discretion given to judges as well as some additional historical facts and circumstances played a key role in the adoption by the Turkish legislature of the Swiss civil codes and, to some extent, of the Swiss rules of international arbitration.

Dog leg claim: what does Swiss law think about the 'animal'?

This article discusses the extent and the limits of the liability of directors of companies incorporated in Switzerland acting as trustees. In particular, it examines whether trust beneficiaries may raise direct claims against the directors of trust companies before Swiss courts.

Arbitration clauses in sport governing bodies’ statutes: consent or constraint? Analysis from the perspective of Article 6(1) of the European Convention on Human Rights

General trend of the growing popularity of alternative dispute resolution is especially visible in the world of sport. There is a perception that arbitration tribunals, particularly the Court of Arbitration for Sport, have exclusive jurisdiction over sport-related disputes. This is enhanced by mandatory arbitration clauses inserted in statutes and bylaws of various sport governing bodies. These are safeguarded by a threat of imposing disciplinary sanctions on those who refrain from fulfilling the said obligations. Due to professionalization of sport and the monopolistic position of international federations, athletes, as well as clubs, have no other choice than to submit their disputes to arbitration. Although, the validity of these provisions can be questioned, they are upheld by the Swiss Federal Supreme Court. Jurisprudence of the European Court of Human Rights shows that private arbitration agreements tainted with constraints contravene the Article 6(1) of the European Convention on Human Rights, specifically the right to access to court. Although the horizontal effect of fundamental rights is limited, the concept of positive obligations allows for concluding that states and their organs, in this case particularly Swiss courts, are obliged to interfere in private relationships to secure the effective enjoyment of rights.

The Preclusive Effect of U.S. Class Action Judgments in Switzerland: Does a Judgment in an Opt-Out Class Action before a U.S. Court Preclude Absent Plaintiff Class Members from (Re)-Litigating Their Individual Claims in Switzerland?

The Swiss legislator has so far refused to implement any substantial form of representative litigation into national civil procedure law. As an indirect consequence of the absence of domestic group litigation in Switzerland, it is unclear how Swiss courts have to deal with foreign class actions. One crucial question is whether money judgments in foreign class actions are enforceable in Switzerland, i.e. whether a class representative is able to enforce a judgment in favor of the class in this country. Yet foreign class actions also raise the additional issue whether absent class members are precluded from individually litigating their claims, particularly in case the class action was unsuccessful. While, according to the concept of U.S. opt-out class actions, individual claimants are generally barred from suing upon their own causes of action that have already been litigated in the context of a class action, the same issue is so far unresolved in the international context. Absent a relevant statutory provision or case law regarding this question, the opinions in Switzerland differ considerably.In the United States, the issue of preclusion of class members in other countries has attracted increasing interest over the last few years. Acknowledging the risk that plaintiff class members might attempt to (re-)litigate their claims in foreign jurisdictions, U.S. courts have started to take the anticipated recognition/non-recognition of the class action judgment in the plaintiffs’ home countries into account when asked to certify an international plaintiff-class.In this article, I will analyze the issues arising when a defendant argues in a Swiss court proceeding that the plaintiff was part of a class which has already litigated its members’ claims in the United States and that the plaintiff should therefore be precluded with his individual lawsuit. Then, I will examine how well Switzerland fares with its current provisions on the international level, in particular in light of the mentioned development in U.S. law regarding transnational class actions.

The Hague Trusts Convention five years on: the Swiss Federal Supreme Court's decision in Rybolovlev v Rybolovleva

On 26 April 2012 the highest court in Switzerland handed down judgment in Rybolovlev v Rybolovleva. This was one of the first since Switzerland’s ratification on 1 July 2007 of the Hague Convention on the Law Applicable to Trusts and on their Recognition to consider foreign trusts in the context of its matrimonial property regime. It serves as an important signal of the country’s willingness to respect the settlor’s chosen law. It is likely that the judgment will be viewed as a disappointment. Whilst the Swiss Courts considered the trusts were valid, they concluded that the husband was the sole beneficial owner or in a position of control. The reason for these conclusions is not properly explained, making it impossible to divine whether these conclusions are confined to the facts of the case, or might be of wider application. Cypriot trusts law, which is supposed to determine questions over the nature and extent of a beneficiary’s interest under a trust, was overlooked. Basic consideration of Cypriot trust concepts suggest that the husband did not own or control trust property. The Federal Court invoked Article 15 of the Hague Trusts Convention when there must be some basis for doubting whether this article was engaged. The Federal Court applied concepts of Swiss law that relate to companies, but the Royal Court’s decision in Re Esteem suggests that these have no application to trusts. The Federal Court paid little or no regard to the interest of third parties, such the trustees or the other beneficiaries of the trusts. Swiss Courts have moved—from ‘fortress Switzerland’—onto the other end of the spectrum, assuming exorbitant jurisdiction, and disregarding norms of comity.

The Swiss court's approach to beneficial ownership

Following the conclusion of the agreement between Switzerland and the United States on the request for information from the Internal Revenue Service, the Swiss Federal Administrative Court (SFAC) has determined in a number of cases whether US persons were the beneficial owners of structures, in particular, Liechtenstein foundations, Liechtenstein Anstalts and irrevocable or revocable trusts. Based upon the principle of substance over the form, the concept of ‘beneficial owner’ refers to the economic reality as opposed to the legal from. As ruled by the SFAC, it is crucial to examine whether the founder or beneficiary of the structure ‘plays by the rules of the entity’.