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SWITZERLAND LAW DIGEST REVISERPestalozzi Lachenal Patry

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Reviser ProfileInternational commercial, corporate, tax and arbitration practice, industrial property and copyright. Fiscal, construction and administrative

matters. Banking and financial law. Estate planning. Civil litigation, all Swiss Courts.

REVISERS OF THE SWITZERLAND LAW DIGEST FOR THIS DIRECTORY.

ZURICHMEMBERS OF FIRM

Dr. Hans BollmannDr. Max Walter

Dr. Peter PestalozziDr. Urs Jordi

lic.iur. lic.oec. Christoph R. RamsteinDr. Marcus Desax, M.C.L.

Dr. Robert FurterDr. Silvia Zimmermann, LL.M.

Dr. Peter A. Straub, LL.M.Dr. Jakob Höhn, LL.M.

Dr. Jürg Borerlic.iur. Gerhard Niggli, LL.M.

Dr. Robert G. Brinerlic.iur. Christian Roos

Dr. Maja Bauer-Balmellilic.iur. Michael Kramer

lic.iur. Urs KlötiDr. Christoph G. Lang, LL.M.

Dr. Marc Veit

OF COUNSELDr. Rudolf HeizDr. Karl Arnold

Prof. Dr. Markus ReichDr. Sibylle Pestalozzi-Früh

Dr. Anne-Catherine Imhoff-ScheierProf. Dr. Andreas Furrer, LL.M.

ASSOCIATESlic.iur. Anita Schläpfer, LL.M.lic.iur. Oliver Widmer, M.SC.

lic.iur. Franz Schubiger, LL.M.lic.iur. Joachim R. Kloter, LL.M.

Dr. Lorenza Ferrari HoferDr. Thomas Rohner, LL.M.

Dr. Martin L. Mueller, LL.M.Dr. Michael Lips, LL.M.

lic.iur. Severin Roelli, LL.M.lic.iur. Tanja Planinic, LL.M.lic.iur. Roger Morf, LL.M.

lic.iur. Clara-Ann Gordon, LL.M.lic.iur. Martin Oesch, LL.M.

lic.iur. Marco E. Vitalilic.iur. Leandro Perucchilic.iur. Michael Cartier

lic.iur. Matthias Lerch, LL.M.

GENEVAMEMBERS OF FIRM

lic.iur. Jean Patrylic.iur. Jean-Charles Roguet

lic.iur. Claude Brechbuhllic.iur. Bernard Lachenal LL.M.

lic.iur. Alain Le Fortlic.iur. Guy-Philippe Rubeli

lic.iur. Philippe Cottierlic.iur. Christophe Emonet

lic.iur. Frédéric Cottierlic.iur. Gilles Thieffry, LL.M.lic.iur. Emmanuel Genequand

lic.iur. Serge Calamelic.iur. Sébastien Roy

ASSOCIATESlic.iur. Donatella Amaducci

lic.iur. Christian Schillylic.iur. Françoise Markarian

Dr. Carole van de Sandtlic.iur. Nadine Maier Viñaslic.iur. Daniel Udry, LL.M.

lic.iur. Pascal de Lucialic.iur. Azadeh Taleghani Naz

lic.iur. Lionel Constantinlic.iur. Olivier Blanc, LL.M.lic.iur. Zeina Wakim, LL.M.

lic.iur. Boris Vittozlic.iur. Jean-Philippe Nerfin

Dr. Thierry Afschrift

BRUSSELSMEMBER OF FIRM

lic.iur. Christophe Rapin, DEA

SWITZERLAND LAW DIGEST(The following is a list of all Categories and Topics, including cross-references, covered in this Digest.)

Category/Topic Page

INTRODUCTIONCURRENCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1GOVERNMENT AND LEGAL SYSTEM . . . . . . . . . . . . . . . . . . 1HOLIDAYS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1OFFICE HOURS AND TIME ZONE . . . . . . . . . . . . . . . . . . . . 1

BUSINESS ORGANIZATIONSAGENCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1ASSOCIATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1CORPORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1FOUNDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4HOLDING CORPORATIONS . . . . . . . . . . . . . . . . . . . . . . . . 4LIMITED PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . 4MEMBERSHIP ASSOCIATIONS . . . . . . . . . . . . . . . . . . . . . . 4PARTNERSHIPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

BUSINESS REGULATION AND COMMERCEBANKS AND BANKING . . . . . . . . . . . . . . . . . . . . . . . . . . 4BILLS AND NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5COMMERCIAL CODE . . . . . . . . . . . . . . . . . . . . . . . . . . . 5COMMERCIAL REGISTER . . . . . . . . . . . . . . . . . . . . . . . . 5CONDITIONAL SALES . . . . . . . . . . . . . . . . . . . . . . . . . . 5CONSUMER PROTECTION . . . . . . . . . . . . . . . . . . . . . . . . 5CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5DISTRIBUTORSHIPS . . . . . . . . . . . . . . . . . . . . . . . . . . . 6FIRM AND CORPORATE NAME . . . . . . . . . . . . . . . . . . . . . 6INFORMATION TECHNOLOGY, INTERNET AND NEW MEDIA . . . . . 6INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7LICENSES, BUSINESS AND PROFESSIONAL . . . . . . . . . . . . . . . 7MONOPOLIES, RESTRAINT OF TRADE AND COMPETITION . . . . . . 7NEGOTIABLE INSTRUMENTS . . . . . . . . . . . . . . . . . . . . . . 7REGISTER OF COMMERCE . . . . . . . . . . . . . . . . . . . . . . . . 8SALES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

CITIZENSHIPALIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8CITIZENSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8IMMIGRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9NATURALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

CIVIL ACTIONS AND PROCEDUREACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9DAMAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9DEPOSITIONS AND DISCOVERY . . . . . . . . . . . . . . . . . . . . . 9JUDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9LIMITATION OF ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . 9PRESCRIPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9PRODUCT LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

COURTS AND LEGISLATURECOURTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10LAW REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10LEGISLATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10STATUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

CRIMINAL LAWCRIMINAL LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

DEBTOR AND CREDITORASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10ATTACHMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10BANKRUPTCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11COLLECTION OF DEBTS AND BANKRUPTCY . . . . . . . . . . . . . . 11ENFORCEMENT OF DEBTS AND BANKRUPTCY . . . . . . . . . . . . 11EXEMPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11GARNISHMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11PLEDGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

DISPUTE RESOLUTIONALTERNATIVE DISPUTE RESOLUTION . . . . . . . . . . . . . . . . . . 11ARBITRATION AND AWARD . . . . . . . . . . . . . . . . . . . . . . . 12

Category/Topic Page

DOCUMENTS AND RECORDSACKNOWLEDGMENTS AND OTHER PUBLIC AUTHENTICATIONS . . . 12NOTARIES PUBLIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12PUBLIC REGISTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12SEALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

EMPLOYMENTLABOR RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

ENVIRONMENTENVIRONMENTAL REGULATION . . . . . . . . . . . . . . . . . . . . . 12

ESTATES AND TRUSTSADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12DEATH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12DECEDENTS’ ESTATES . . . . . . . . . . . . . . . . . . . . . . . . . . 13DESCENT AND DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . 13EXECUTORS AND ADMINISTRATORS . . . . . . . . . . . . . . . . . . 13FIDUCIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14TRUSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14WILLS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

FAMILYADOPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15DESERTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15DIVORCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15GUARDIAN AND WARD . . . . . . . . . . . . . . . . . . . . . . . . . 15HUSBAND AND WIFE . . . . . . . . . . . . . . . . . . . . . . . . . . . 15INFANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16MARRIAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16NAMES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

FOREIGN TRADE AND COMMERCECUSTOMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16EXCHANGE CONTROL . . . . . . . . . . . . . . . . . . . . . . . . . . 16FOREIGN EXCHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . 16FOREIGN INVESTMENT . . . . . . . . . . . . . . . . . . . . . . . . . 16FOREIGN TRADE REGULATIONS . . . . . . . . . . . . . . . . . . . . . 16

HEALTHBIOTECHNOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17FOODS, DRUGS, DEVICES AND COSMETICS . . . . . . . . . . . . . . 17MEDICAL PROFESSIONALS . . . . . . . . . . . . . . . . . . . . . . . 17POISONOUS SUBSTANCES . . . . . . . . . . . . . . . . . . . . . . . . 17

IMMIGRATIONALIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

INTELLECTUAL PROPERTYCOPYRIGHT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17DOMAIN NAMES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17PATENTS AND INDUSTRIAL DESIGNS . . . . . . . . . . . . . . . . . . 17TRADEMARKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18TRADE SECRETS/KNOW-HOW . . . . . . . . . . . . . . . . . . . . . . 18

LEGAL PROFESSIONADVOCATES AND COUNSELORS . . . . . . . . . . . . . . . . . . . . 18

MINERAL, WATER AND FISHING RIGHTSMINES AND MINERALS . . . . . . . . . . . . . . . . . . . . . . . . . 19

MORTGAGESCHATTEL MORTGAGES . . . . . . . . . . . . . . . . . . . . . . . . . . 19MORTGAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

PROPERTYABSENTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19CURTESY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19DEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19DOWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19IMMOVABLE PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . 19LANDLORD AND TENANT . . . . . . . . . . . . . . . . . . . . . . . . 20PERPETUITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20POWERS OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . . . . 20REAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Category/Topic Page

TAXATIONADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

ALCOHOL, BEVERAGES AND TOBACCO TAXES . . . . . . . . . . . . 20

CANTONAL TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

CUSTOMS DUTY AND TAX . . . . . . . . . . . . . . . . . . . . . . . . 20

DIRECT FEDERAL TAXES . . . . . . . . . . . . . . . . . . . . . . . . 20

GIFT TAX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

INCOME TAX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

INCOME AND PROPERTY TAXES . . . . . . . . . . . . . . . . . . . . 21

INDIRECT FEDERAL TAXES . . . . . . . . . . . . . . . . . . . . . . . 21

INHERITANCE AND GIFT TAXES . . . . . . . . . . . . . . . . . . . . . 21

Category/Topic Page

INHERITANCE TAX . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21LOCAL GOVERNMENT TAXES . . . . . . . . . . . . . . . . . . . . . . 21PROPERTY TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21SPECIAL TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21STAMP TAX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21TREATIES AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . 21VALUE ADDED TAX . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

TRANSPORTATIONMOTOR VEHICLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22SHIPPING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

TREATIES AND CONVENTIONSTREATIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

SWITZERLAND LAW DIGEST

SWITZERLAND LAW DIGESTRevised for 2007 edition by

PESTALOZZI LACHENAL PATRY, of Zurich and Geneva.

(BGBB indicates Federal Law on Rural Land; C.C. indicates Civil Code; C.O. indicates Code of Obligations; KKG indicates Federal Law on Consumer Credits.)

Note: This revision incorporates legislation through August 31, 2006.

INTRODUCTIONCURRENCY:

Basic monetary unit is franc of 100 centimes. Bank notes are legal tender. See alsocategories Business Regulation and Commerce, topic Banks and Banking; Foreign Tradeand Commerce, topic Exchange Control.

Liechtenstein uses Swiss franc currency and subjects its banks to supervision of SwissNational Bank. See Currency Agreement of June 19, 1980.

GOVERNMENT AND LEGAL SYSTEM:

Position within Europe: see category Treaties and Conventions, topic Treaties.(Federal Constitution of the Swiss Confederation of Dec. 18, 1998, as am’d, in force

since Jan. 1, 2000.)Switzerland (Swiss Confederation) is federation of 26 states called cantons. Six can-

tons send only one senator to Senate instead of two and have only one-half of vote infederal referenda requiring not only majority of voters but also majority of cantons. Eachcanton has its own cantonal constitution. Cantons are competent in all matters notreserved by Federal Constitution to Confederation.

Every Swiss male and female over 18 years can participate in federal, cantonal andlocal elections and referenda. Some cantons and municipalities extend right to vote toforeign residents.

Total revisions of the Constitution and constitutional amendments must be submittedto popular referendum and require majority of voters and of cantons (mandatory con-stitutional referendum). With respect to popular referenda of federal statutes, etc. (op-tional and mandatory legislative referendum), see subhead Legislative Power, infra. Onehundred thousand voters have right to request total revision of Constitution, or consti-tutional amendments (Initiative).

Human Rights.—Switzerland is party to European Convention on Human Rights.Fundamental rights of individuals are set forth in Constitution. Governing principles areRule of Law and Art. 8: ‘‘All human beings are equal before the law.’’ Based on thatprovision Swiss Federal Supreme Court (see subhead Judicial Power, infra) has devel-oped extensive practice for protection of individuals against arbitrary measures by can-tonal authorities which also enforce most federal statutes. Men and women have equalrights and right to equal pay for work of equal value. Implementing statute in force sinceJuly 1, 1996. Switzerland has joined international convention on elimination of all formsof racial discrimination (1965).

Constitution guarantees special freedoms of individuals. These include: right to live inpersonal freedom, protection of children and young people, right to aid in distress, rightto privacy, right to marriage and family, freedom of religion and philosophy, freedom ofopinion and information, freedom of the media, freedom of language, right to primaryeducation, freedom of science, freedom of art, freedom of assembly, freedom of asso-ciation, freedom of domicile, protection against expulsion, extradition and removal byforce, right to property, economic freedom, freedom to unionize, general proceduralguarantees, habeas corpus, presumption of innocence, right of petition. Court must havejurisdiction according to rules on conflict of jurisdiction. Court cannot accept or denyjurisdiction arbitrarily. Exceptional courts are not permitted.

German, French, Italian and Romansch are national languages. The first three areofficial languages in which all amendments to Federal Constitution, all federal statutes,and certain decrees of Federal Assembly, Federal Government and its departments, andFederal Supreme Court are published. Three published texts are equally authentic. In-ternational treaties concluded in one of three official languages are published withtranslations into two others; only original text is authentic, provided treaty itself does notstipulate otherwise.

As a general rule the organization of the federal authorities is built on principle ofseparation of powers. Independence of courts is safeguarded by provisions of Consti-tution and statutes.

Legislative Power.—Legislative power is vested in Federal Parliament consisting oftwo chambers: (a) House of Representatives (Nationalrat, Conseil National, ConsiglioNazionale) of 200 members and (b) Senate (Staenderat, Conseil des Etats, Consiglio degliStati) of two members for 20 cantons and one member for six cantons. There are fourordinary sessions of three weeks each in spring, summer, fall and winter per year,extraordinary sessions as necessary.

Certain matters, mainly elections, are deliberated and voted in joint session of bothchambers. For all other matters separate approval of both chambers is required. Reso-lutions are passed in form of federal statutes or federal decrees.

Federal statutes and federal decrees must be submitted to popular referendum ifrequested by 50,000 voters or eight cantons. Majority of voters decide on acceptance orrejection. Same applies to federal decree approving certain International treaties, unlessFederal Government concludes treaty based on prior authority by Federal Assembly.Federal decrees may be enacted at once for limited time by majority of members in eachof two chambers. Such decrees, however, cease to be in force after one year, if notaccepted by popular referendum if referendum was requested by 50,000 voters or eightcantons. If such decrees are not based on Constitution, popular referendum requiringmajority of voters and of cantons is mandatory within one year, otherwise validityexpires.

Executive Power.—Seven member Federal Government (Bundesrat, Conseil Fédéral,Consiglio Federale), elected for four years by House and Senate in joint session. Eachmember of Federal Government heads one department of federal administration. Everyyear another member acts as president and another as vice-president of Swiss Confed-eration with largely ceremonial powers.

Judicial Power.—The members of the Swiss Federal Supreme Court (Bundesgericht,Tribunal Fédéral, Tribunale Federale) are elected by House and Senate in joint session.See category Courts and Legislature, topic Courts.

HOLIDAYS:

Provisions for legal holidays are set by Confederation and by each individual canton.In Zürich, following are legal holidays: New Year’s Day, Good Friday, Easter Monday,May 1, Ascension, Whitsun-Monday, Aug. 1, Christmas Day, and Dec. 26. If holiday fallson Sun., next day is usually not holiday. For legal purposes Sats. and Suns. are consideredto be equal to legal holidays. Transactions on Sats., Suns. and holidays are legally valid.

Switzerland adheres to European Convention on the Calculation of Time Limits datedMay 16, 1972.

OFFICE HOURS AND TIME ZONE:

Switzerland is in the Central European (GMT +01:00) time zone. Office hours aregenerally from 8 a.m. to 5 p.m.

BUSINESS ORGANIZATIONSAGENCY:

Swiss law distinguishes between power of attorney and underlying legal instrumentsthat authorize power of attorney. Specifically, power of attorney is unilateral authorizationby principal that vests power to perform legal acts on behalf of principal in agent. (C.O.32). Power of attorney may be effected by following instruments: ordinary mandate orsome other contract.

Ordinary Mandate.—Agent owes responsibility to principal to carry out mandatefaithfully and carefully. If it is agreed upon or customary, agent is due compensation.Principal is required to reimburse agent for outlays and/or expenses incurred in dulycarrying out mandate, together with any interest, and, similarly, to discharge agent fromany obligations assumed. Mandate may at any time be terminated by revocation or noticeby any party. Where it is terminated at unreasonable time, terminating party is requiredto indemnify other party for any damages arising from that termination. (C.O. 394-406).

Contracts analogous to such mandate with partially deviating provisions are: Lettersand Orders of Credit (C.O. 407-411); Brokerage (C.O. 412-418); Commercial Agency(C.O. 418a-418v); Commission (C.O. 425-439); Shipping Contract (C.O. 440-457). Seecategory Property, topic Powers of Attorney.

ASSOCIATIONS:

Associations for noneconomic or economic purposes may be created in various formseither by agreement or incorporation.

Associations by agreement include various forms of partnerships. See topic Partner-ships. Corporate bodies are legal entities (juristische Personen, personnes morales, per-sone giuridiche) and, therefore, entitled to all rights and subject to all liabilities, unlesssuch rights and liabilities are based on human characteristics, such as sex, age or familialrelationship. As general rule, corporate bodies pursuing economic goals become legalentities upon their entry in Register of Commerce. Corporate bodies not required toregister become legal entities as soon as they are organized according to law. (C.C.52-59).

Examples of legal entities include membership associations, foundations, share cor-porations, limited liability companies, cooperative corporations, and corporate bodiesunder federal, cantonal or local public law. See topic Corporations.

CORPORATIONS:

Share Corporation.—(Aktiengesellschaft, société anonyme, società anonima). Gov-erned by Swiss Code of Obligations. Amended Share Corporation Title has been in forcesince July 1, 1992.

Legal entity with fixed capital divided into shares. No personal liability of shareholdersfor debts and obligations of company. (C.O. 620).

Purpose.—Any defined lawful purpose is permissible, mostly business. (C.O. 620).Corporate Name.—Chosen freely; however, if names of living persons are included in

corporate name, reference to corporation’s legal nature must be included. (C.O. 950).See also category Business Regulation and Commerce, topic Firm and Corporate

Name.Duration of Corporate Existence.—Perpetual (or limited if provided in articles).Incorporators.—At time of incorporation there must be at least three shareholders.

(C.O. 625). No restrictions as to nationality of shareholders, but see catchline AlienShareholders, infra.

Capital.—Minimum capital CHF 100,000. (C.O. 621).

See note at head of Digest as to 2006 legislation covered.

See Topical Index in front part of this volume.SWZ – 1

CORPORATIONS . . . continuedIf shareholder pays for shares in kind, or purchase of assets by corporation from

shareholders or third parties is planned, details of transaction must be provided in articles.Same for privileges granted to incorporators or other persons. (C.O. 628).

Articles must state following: corporate name, place of registered office, purpose ofenterprise, capital and contributions made thereto, par value and types of shares to beissued, manner of calling meetings, voting rights of shareholders, organization of man-agement and internal auditing, and form of announcements by corporation. (C.O. 626).

Articles may provide for regulations (by-laws) specifying powers of various bodies incharge of management.

Incorporation.—Resolutions adopted in organizing meeting must be embodied in pub-licly authenticated deed with basic documents attached. Same applies to any amendmentof articles, especially any increase or reduction of capital, and for resolution of disso-lution. (C.O. 637, 638, 647, 650, 736).

Following information must be recorded in Register of Commerce: Date when articleswere passed, corporate name and place of registered office, purpose, proposed length ofexistence, amount of capital, amount paid up, number and par value of shares, types ofshares issued, transferability of shares, preferential rights of certain classes of shares,property received in payment of shares, privileges granted to certain classes of share-holders or to incorporators, number of profit sharing certificates indicating content ofrights connected therewith, manner in which directors and officers may act and sign forcorporation, names, residences and nationalities of directors and officers, name or cor-porate name of auditors and their seat or registered office, and manner in which corporateannouncements will be made. (C.O. 641).

Corporation is incorporated upon its entry in Register of Commerce. Shares issuedprior to registration are void. (C.O. 643-644).

Incorporation Tax or Fee.—Federal issuance stamp tax. (See category Taxation, topicTaxes.) Notary drawing up public deed of constituent meeting is entitled to fee, fixed bycantonal law.

License.—No license required to do business, except for purposes for which publicconcession is required, such as insurance and railroads; for banking, see category Busi-ness Regulation and Commerce, topic Banks and Banking.

Paid-in Capital Requirements.—If capital consists of bearer shares, they must be paidin full. If there are registered shares, at time of constituent incorporators’ meeting, at least20% of capital must have been paid in cash or other assets, but not less than CHF 50,000.(C.O. 632).

Amendment of articles must be approved by general meeting of shareholders or boardof directors and embodied in publicly authenticated deed.

Amendments to change purpose, to create shares with privileged voting rights, torestrict transferability of registered shares, to create or increase authorized capital, subjectto condition out of equity against contributions in kind or for purpose of acquisition ofassets and granting of special benefits, to limit or withdraw preemptive rights and tochange domicile of company, require consent of at least two-thirds of votes representedand absolute majority of par-value shares represented. (C.O. 704).

Increase of Share Capital.—(a) For ordinary increase of share capital, general meetingmay resolve to increase share capital; resolution must then be carried out by board ofdirectors within three months (C.O. 650, 652-652h); (b) authorized increase of sharecapital, general meeting may amend articles to authorize board of directors to increaseshare capital within, at most, two years (C.O. 651, 651a, 652-652h); (c) for conditionalincrease of share capital general meeting may grant conversion or option rights toemployees or bondholders (C.O. 653-653i).

Reduction of Share Capital.—Resolution of general meeting to reduce capital (withoutsimultaneously increasing original share capital using new, fully paid capital) may onlybe effected if auditor qualified in these matters issues report stating that, notwithstandingcapital reduction creditors’ claims remain covered. Such resolution must be publishedthree times in Swiss Official Journal of Commerce, and in manner of publication des-ignated in articles, notifying creditors that they may file their claims and demand paymentor surety within two months of third publication date. Notarized deed containing audi-tor’s report must evidence compliance with legal provisions. Notification is not requiredif share capital is reduced exclusively to eliminate impairment of capital caused by losses.(C.O. 732/35).

Acquisition of Own Shares.—Corporation may purchase its own shares if freely dis-posable equity in necessary amount is available and if total par value of these shares doesnot exceed 10% of share capital or 20% of registered shares acquired in connection withrestriction of transferability. Such shares cannot vote in shareholders’ meeting. Specialprovision must be made in financial statement in amount of purchase price of shares.(C.O. 659-659b).

By-laws.—See supra, catchline Articles.Shares may be issued in registered or bearer form. (C.O. 622). Corporation must keep

register of owners of registered shares. (C.O. 686). Both types of shares may be issuedin any proportion fixed by articles, which may also provide for subsequent changesbetween two types of shares and for issue of preferred shares. Minimum par value ofshare is CHF 0.01.-, except in case of reorganization. Bearer shares may be issued onlyif fully paid-up. (C.O. 622, 654, 656, 683, 687).

Articles may provide for participation capital (like nonvoting rights), which shall notexceed twice amount of share capital. Participation certificates are issued against con-tribution, have par value and do not grant voting rights. (C.O. 656a-656g).

Articles may provide for shares with preferential rights as to dividends, shares in caseof liquidation, subscription of newly issued shares (preferred shares); founder’s shares(Gründervorteile, privilèges de fondateur), dividend-right certificates (Genussscheine,bons de jouissance) or bonds convertible into shares. (C.O. 627 No. 9, 628, 654-656,657).

Share certificates must state corporate name, seat, nominal value, paid-up amounts,kind of shares (registered or bearer), kind of share in case there are different kinds.Document must be signed by at least one member of board of directors; if there is largenumber of issued shares, facsimile signature is permissible. (C.O. 622).

Transfer of Shares.—Share certificates are negotiable instruments. Bearer shares aretransferred by mere transfer of instrument; registered shares must also be endorsed orassigned, and with respect to corporation, shareholder must be entered in shareholders

register. (C.O. 683-686a). There are special rules in case of restriction of transfer byarticles. They differ between registered shares listed and not listed on stock exchange.(C.O. 685-685g).

Shareholders have within provisions of law fundamental right to equal treatment, tovote, to contest resolutions of general meeting, to request ordinary audit, to receivedividends, and to share in distribution of assets in case of liquidation. (C.O. 660, 689,692, 697-697b, 717).

Alien Shareholders.—Corporation law as rule does not prevent or limit formation ofcorporations by aliens or nonresidents. In few areas (e.g., vessels under Swiss flag; banks;real estate companies; enterprises for exploitation of Swiss oil wells) special provisionsrequire specific majority of Swiss citizens as shareholders or fulfillment of furtherrequirements for companies controlled by foreigners. There are no limitations regardingnonresident alien shareholders of domestic subsidiaries of foreign corporations, and noextraordinary accounting procedures. Alien shareholding, however, may be bar to doubletaxation treaty benefits. See also category Property, topic Immovable Property, subheadAcquisition by Nonresidents.

Shareholders’ Liabilities.—Only capital of corporation is responsible for liabilities ofcorporation. Shareholder is liable only up to amount of his subscription. (C.O. 620, 680).

Shareholders’ Meetings.—General shareholders’ meeting is highest authority of cor-poration. It may amend articles, elect and discharge board of directors and internalauditors, approve balance sheet, profit-and-loss statement and declare dividends. It iscalled by directors ordinarily within six months after close of each business year and ifnecessary by auditors; shareholders representing at least one-tenth of all shares maydemand that shareholders’ meeting be called by stating purpose of meeting and motionsof shareholders in writing. Notices of meetings must be given at least 20 days in advance,unless waived by all shareholders. (C.O. 698-701).

General meetings outside of Switzerland are possible. If general meeting has to makeresolutions for which publicly authenticated deed is required, law of foreign placegoverning public authentications must be observed, which fact has to be certified bycompetent foreign authority. (Decree of Swiss Federal Government concerning Registerof Commerce, as of June 7, 1937, art. 30).

Unless otherwise provided in articles, registered shareholder may issue written proxyto third party; in case of bearer shares possession gives right to vote. Representative shallcomply with instructions of represented person. (C.O. 689-689e). For some purposes,qualified majorities may be required by law or articles.

Directors and Offıcers.—Board of directors consists of one or more members who mustbe shareholders. (C.O. 707). Majority of directors must be Swiss citizens residing inSwitzerland. Federal Government may grant exceptions for holding corporations, ifmajority of their holdings are in foreign countries. (C.O. 708).

If there are several groups of shareholders with different legal status, articles mustprovide for each group right to elect at least one representative on board of directors.(C.O. 709). Articles may also provide for representative of participants on board. (C.O.656e).

Directors are elected and removed by general meeting. Articles specify term duringwhich every director holds office, whereas six years being maximum term. (C.O. 710).Vacancies are filled by general meeting only.

Reelection is possible. (C.O. 707).At least one member of board of directors residing in Switzerland must be authorized

to act and to sign for corporation. (C.O. 708). Unless articles or by-laws provide oth-erwise, all directors manage and act and sign for corporation individually. (C.O. 718).Articles may empower board of directors to delegate in accordance with regulationsmanagement or any part thereof to one or more members of board (managing directors),or to third persons (managers). (C.O. 716b). Nontransferable and inalienable powers:ultimate management of corporation and giving of necessary directives, establishment oforganization, structuring of accounting system and financial controls, appointment andremoval of persons entrusted with management and representations, ultimate supervisionof persons entrusted with management, preparation of business report and preparation ofgeneral meeting of shareholders and implementation of its resolutions, notification ofcourt in case of negative equity. (C.O. 716a).

Persons with power to represent corporation may carry out in name of corporation allacts which purpose of corporation may require. Corporation is liable for all acts, in-cluding torts, that its directors and officers commit in business capacity. (C.O. 718a, 722).

Statutory Auditors.—General meeting of shareholders elects one or more statutoryauditors to check balance sheet and profit-and-loss statement against books, and checkwhether result and financial position of corporation so represented comply with legalrequirements as to accounting and any special provisions of articles. (C.O. 727, 728). Atleast one auditor must have domicile, seat or registered branch office in Switzerland.Auditors must be qualified to fulfill duties with corporation to be audited and mustmeet—under some circumstances—special professional qualifications, e.g. if corporationhas outstanding bond issues or if shares are listed on stock exchange. (C.O. 727a, 727b).

Auditors must be independent from board of directors and from shareholder withmajority vote. (C.O. 727c). Statutory auditors must submit written report to generalmeeting recommending acceptance or rejection of annual accounts with or withoutreservation, and advising it with respect to annual accounts. (C.O. 729-729c).

Liability of Founders, Directors, Offıcers, Auditors and Liquidators.—Directors andother officers in charge of management, founders, statutory auditors and liquidators ofcorporation are responsible to corporation and its shareholders for damage caused bytheir willful misconduct or negligence in performing their duties. Officer who rightfullydelegates duties to another legal entity is liable for any damage caused by it unless officerproves that necessary care in selection, instruction and supervision was applied. (C.O.752-754). Except for direct damages, shareholder can bring derivative suit only. Creditorsof corporation have similar claims in case corporation has been declared bankrupt. Directand derivative personal liability under corporate, tax and social security laws has con-siderably increased under recent holdings by Swiss courts.

Claim of shareholder is barred if brought after six months after discharge by generalmeeting, or if shareholder has consented to discharge, or if shareholder has acquiredshares with knowledge of discharge. (C.O. 756-758).

Dividends can be declared only from audited net earnings or reserves constituted forthat purpose. (C.O. 675).

BUSINESS ORGANIZATIONS MARTINDALE-HUBBELL LAW DIGEST - 2007



CORPORATIONS . . . continuedBooks and Records.—Corporation must keep accurate books, as required by nature and

extent of its business, reflecting financial status, assets and liabilities connected withbusiness and annual results. Board of directors prepares for each year business reportwhich is composed of annual financial statements and annual report. Annual financialstatements are composed of profit-and-loss statement, balance sheet and notes to financialstatements. Notes to financial statements include information required by law, e.g. totalamount of guarantees, indemnity liabilities and pledges in favor of third parties, totalamount of assets pledged or assigned for securing of own liabilities, liabilities to welfareinstitutions and information regarding own shares. Principles applying to balance sheetand profit-and-loss statement are set forth by statute. Inventory, profit-and-loss statementand balance sheet must be signed by management. Groups of corporations must prepareconsolidated financial statements. Corporations whose shares are listed on stock ex-change must include important shareholders and their participations in attachment tobalance sheet. (C.O. 957-961, 662-674).

Merger and Consolidation.—Mergers of legal entities of same or of different legalforms are allowed under Swiss Merger Act (SMA) that came into force July 2004.Mergers are basically possible for general partnerships, limited partnerships, corpora-tions, corporations with unlimited partners, limited liability companies cooperatives,associations, foundations, pension funds and institutions under public law. (SMA art. 4,78 et seq., 88 et seq., 99 et seq.). Mergers between two or more legal entities may beperformed without liquidation of dissolved company (SMA art. 3, para 22); its businesswill be transferred to surviving company by way of universal succession (SMA art. 22,para 1). Shareholders of dissolved legal entity receive shares of acquiring legal entity.(SMA art. 7).

Swiss Merger Act also regulates spin-offs (SMA art. 29 et seq.), conversions (SMAart. 53 et seq.) and transfer of assets and liabilities (SMA art. 69 et seq.) and itsprocedures as well as documents needed by commercial register. Special provisions forprotection of creditors and employees apply.

Cross-border mergers from and to Switzerland are possible (arts. 163a and 163b ofSwiss Act on International Private Law [PIL]) if applicable law of foreign company alsoadmits such merger. Other cross-border transactions like spin-offs and transfer of assetsand liabilities are allowed. (PIL art. 163d).

Dissolution.—Share corporation may be dissolved in accordance with its articles pur-suant to resolution of general meeting of shareholders, in case of bankruptcy, or, withcause, by court at request of shareholders representing at least 10% of capital. (C.O. 736).As a rule, board of directors carry out liquidation of corporation, but general meeting orarticles of incorporation may appoint other liquidators. At least one liquidator residingin Switzerland must have right to act and sign for corporation. Names of liquidators mustbe registered in Register of Commerce. Status of corporation as legal entity is notaffected, but words ‘‘in liquidation’’ must be added to its corporate name. (C.O. 739,740). When liquidation procedure is terminated, corporation will be deregistered inRegister of Commerce with consent of tax authorities. (C.O. 746).

Transfer of Seat into and out of Switzerland.—Immigration of companies into Swit-zerland as well as emigration of companies out of Switzerland is permitted withoutliquidation and new foundation. (PIL arts. 161-163). Immigration into Switzerland is onlyallowed if governing foreign law permits such transfer, if company fulfills prerequisitesset by foreign law, and if adaption to one of Swiss forms of legal organization is possible.(PIL art. 161). Emigration out of Switzerland may be performed if prerequisites ac-cording to Swiss Law are fulfilled and company continues to exist under foreign law.Creditors are specially protected. (PIL art. 163).

Limited Partnership with Shares.—(Kommandit-Aktiengesellschaft; Société encommandite par actions; Società in accomandita per azioni). Limited partnership withshares is corporation with corporate name and capital divided into shares in which, inaddition to corporate capital, which is held by shareholders comparable with those ofshare corporation, one or more shareholders have joint unlimited personal liability insame way as partners of general partnership. (C.O. 764). This legal form is rarely used.

Unless specifically provided otherwise, provisions governing share corporations apply.(C.O. 764).

Corporate Name.—Same as for limited partnership. (C.O. 947).Members Generally Liable.—Must be named in articles. They conduct business, act

and sign for corporation, and form, by operation of law, board of directors.Consent of members generally liable is required for resolutions of general meeting for

change of purpose, extension or restriction of scope of business or extension of durationbeyond period fixed in articles. (C.O. 766).

Statutory auditors must be appointed by general meeting, in which members generallyliable have no right to vote.

In cases of bad faith, this supervising body may sue directors, even if their liabilityhas been discharged. (C.O. 768-769).

Dissolution.—Limited partnership with shares is dissolved by retirement, death, in-capacity or bankruptcy of all members generally liable. In other respects provisions fordissolution of share corporations apply. (C.O. 770). Dissolutions relating to transactionsin form of mergers or conversions are regulated by Swiss Merger Act.

Member generally liable may withdraw from partnership upon notice to it like generalpartner, but, unless provided for otherwise by articles, partnership continues to exist ifat least one member generally liable remains. (C.O. 771).

Limited Liability Company.—(Gesellschaft mit beschränkter Haftung; Société à re-sponsabilité limitée; Societa a garanzia limitata). These are companies of at least twonatural persons or legal entities for commercial, industrial or other profit-making purposewith own corporate name and common capital fixed in advance. Every member par-ticipates in common capital with its capital contribution. (C.O. 782, 824-827).

Corporate Name.—Limited liability corporation may freely choose its corporate name,which must disclose that it is limited liability corporation. (C.O. 949).

Capital.—Minimum capital is CHF 20,000 and maximum CHF 2,000,000. Capitalcontributions of members may be unequal in multiples of CHF 1,000 with minimum ofCHF 1,000 for each member. Payment may be made in kind. Member may participatewith only one capital contribution. At least 50% of each capital contribution must bepaid-in at time of incorporation. (C.O. 773-774).

Articles of Incorporation.—Articles must state corporate name, seat, purpose, amountof common capital, capital contribution of each member, and form of notice given bycorporation. There are no restrictions as to nationality of members. To be valid, stipu-lations between members altering provisions of law must be mentioned in articles, e.g.:provision extending liability of members beyond amount of common capital, votingrights, prohibition or restrictions affecting assignment of capital parts, delegation ofmembers to make additional capital contributions. All members must execute publiclyauthenticated deed to effect that they incorporate limited liability corporation and abideby its articles, that they have subscribed all capital contributions, and that amountrequired by law or by articles has been paid-in. Company is incorporated upon its entryinto Register of Commerce. Any amendment of articles must be publicly authenticatedand entered in Register of Commerce. (C.O. 775-785).

Parts in Capital.—Capital contribution of member determines member’s part. Docu-ment issued for part is not negotiable instrument but only documentary proof. All capitalcontributions and alterations thereof must be recorded in and communicated yearly toRegister of Commerce. Assignment of part requires public deed and becomes effectivewith respect to limited liability company only after Register of Commerce has receivednotice and entered transfer in register of parts; subject to contrary provisions in articles,entry requires consent of at least three-fourths of all members and of common capital,except in case of transfer by death or marital property law. (C.O. 789-793).

Meeting of Members.—Is supreme body of company. Every member has one vote foreach CHF 1,000 contribution unless articles provide otherwise. Total exclusion of mem-ber from voting is prohibited. (C.O. 808). For certain measures, exclusive competencelies with members’ meeting, e.g. change of articles, appointment and removal of man-agers and internal auditors, adoption of balance sheet and profit-and-loss statement,distribution of profits, discharge of managers. (C.O. 810).

Management and Representation.—All members participate jointly in management andrepresentation, unless articles or resolution of company provide otherwise. Articles orresolution of company may confer management and representation upon nonmembers.At least one manager must reside in Switzerland. Managers sign for limited liabilitycompany by adding their names to corporate name. (C.O. 811-813, 815).

Provisions on share corporations apply with certain modification to scope of repre-sentation of limited liability company. (C.O. 814).

Liability of Members.—Members of Company are jointly liable for debts of companyup to registered common capital. To extent that common capital has been paid-in and notbeen repaid in any form, liability of member is reduced. Articles may provide for limitedadditional contributions to eliminate losses shown on balance sheet. (C.O. 802-803).

Withdrawal.—Articles may grant right of withdrawal to members. Members maypetition court to grant withdrawal or to dissolve corporation with cause. Company may,for same reason, request court to expel member, but only with consent of majority ofmembers representing majority of common capital. (C.O. 822).

Dissolution and Liquidation.—Dissolution is effected according to articles by publiclyauthenticated resolution of at least three-fourths of members representing at least three-fourths of capital, in event of bankruptcy, or for other grounds provided in law. (C.O.820, 822, 775).

For liquidation, provisions for share corporations apply. (C.O. 823).

Cooperative corporation (Genossenschaft, Société coopérative, Società cooperativa)is incorporated association of unrestricted number of legal entities or natural persons tofurther or safeguard certain economic interests by their joint action. (C.O. 828).

Corporate Name.—See subhead Share Corporation, supra.Incorporation.—Cooperative corporation is incorporated by registration in Register of

Commerce. Its articles (containing corporate name, seat, purpose, liabilities of members(if any), organization, and form of publication) must be in writing and approved bymeeting of at least seven incorporators. (C.O. 830-838).

Capital.—Amount of cooperative corporation’s capital cannot be determined before-hand. (C.O. 828).

Certificates of Membership.—Articles may provide for certificates of membership.Such certificates are made in member’s name. They do not constitute documents of titlebut only documents of proof.

Transfer of certificate of membership confers membership rights to transferee if reso-lution of admittance is passed. (C.O. 852-853, 849).

General Meeting, Directors and Auditors.—Supreme authority rests in general meetingof members. It has following powers: Pass or amend articles, elect directors and internalauditors, approve operating accounts and balance sheet, distribute profits, grant releaseto directors and exercise other powers provided by law or articles. Majority of directorsmust be members and Swiss citizens residing in Switzerland. Auditors must examineconduct of business and yearly accounts. Directors, members of executive committee,auditors and liquidators are liable for damage due to willful violation of their duties ornegligence. (C.O. 888, 893, 920).

Admittance and Withdrawal of Members.—New members may be admitted at any timeupon written application. For as long as termination of cooperative corporation has notbeen decided, members may withdraw at any time subject to restrictive conditionsprovided for in articles. (C.O. 839, 842).

Liability of Members.—Members are not responsible for liabilities of cooperativecorporation, unless articles provide for limited or (subject to authorized insurance co-operative corporations) unlimited responsibility of members for liabilities of cooperativecorporation, or for unlimited or limited contributions of members to cover losses ofcooperative corporation. (C.O. 868-871).

Dissolution takes place as provided for in articles, or upon resolution of generalmeeting of members, or in case of bankruptcy, or in other cases. (C.O. 911).

Holding Corporations.—For such corporations law for share corporations or limitedliability corporations applies, with some exceptions: (1) If majority of participations areoutside Switzerland, with permission of Swiss Federal Government, majority of membersof board of directors need not be Swiss citizens residing in Switzerland. (C.O. 711).However, one member of board entitled to represent holding corporation must reside inSwitzerland. (2) Holding corporations are exempt from certain provisions concerningcreation and use of legal reserves. (C.O. 671). Federal and many cantonal tax lawsprovide advantages for holding corporations.

SWITZERLAND LAW DIGEST BUSINESS ORGANIZATIONS



CORPORATIONS . . . continuedApplicable Law.—Law of country of registration applies.See also topics Foundations, Membership Associations; categories Business Regula-

tion and Commerce, topics Register of Commerce, Firm and Corporate Name; Property,topic Immovable Property, subhead Acquisition by Nonresidents; Taxation, topic Taxes.

FOUNDATIONS:Foundation (Stiftung, fondation, fondazione) is legal entity, created by dedication of

assets for specific purpose which can be of public, charitable, private or business char-acter. (C.C. 52-59, 80-89 bis).

Formation and Organization.—Dedication must be made by publicly authenticateddeed or by will. It must provide for organization of foundation, which consists in mostcases of foundation council. Entry into Register of Commerce is mandatory except forfamily and ecclesiastical foundations. If not provided otherwise in deed, legal domicileof foundation is at its place of current administration, which must be in Switzerland.

Supervision.—Most foundations are subject to supervision to ensure that assets offoundation are used for intended purpose. Depending on scope of purpose, federal,cantonal or municipal authorities supervise.

Dissolution.—Foundations are lasting legal institutions. Foundation can be dissolvedif purpose becomes unachievable or illegal or immoral. General clause entitling founder,foundation council or any other person to dissolve it at will is not permissible.

Taxation.—See category Taxation, topic Taxes.

Family and ecclesiastical foundations are governed by special provisions. (C.C. 52,87, 335). Family foundation may be created for benefit of particular family, with fol-lowing purposes: Defraying expenses of education, endowments, support of family mem-bers or similar purposes. These purposes are narrowly interpreted. Swiss courts considerfamily foundations for general support as invalid. Family foundations and ecclesiasticalfoundations need not be entered in Register of Commerce, unless, incidentally to theirpurpose, they conduct business. They are not subject to official supervision, unless publiclaw provides otherwise. See category Estates and Trusts, topic Trusts.

HOLDING CORPORATIONS:See topic Corporations.

LIMITED PARTNERSHIP:See topics Corporations, Partnerships.

MEMBERSHIP ASSOCIATIONS:Membership association (Verein, Association, Assoziazione) is legal entity organized

for nonprofit purpose. It must have constitution with provisions as to its purpose, fi-nancing, organization, and name. It need not be entered in Register of Commerce, unless,incidentally to its purpose, it conducts business. (C.C. 60-79).

PARTNERSHIPS:

Ordinary partnership (Einfache Gesellschaft, Société simple, Societá semplice)(C.O. 530-551) is contractual association of two or more persons (individuals or entities)to achieve common purpose by joint efforts. (C.O. 530). Partnership cannot, as such,acquire rights and assume liabilities, and has no standing to sue or be sued. It may notbe entered in Register of Commerce and has no company name.

Formation.—No special form required.Rights and Liabilities of Partners as Between Themselves.—Every partner must con-

tribute equal share in capital (goods, credits) or labor, and has equal share in profits orlosses. (C.O. 531, 533). All partners participate jointly in management, unless they agreeotherwise. (C.O. 535). No partner may frustrate purpose of partnership (in particular, hemay not conduct business in competition with partnership). Property acquired for part-nership is joint property of all partners, and not property of individual partners, unlessotherwise agreed. (C.O. 544).

Rights and Liabilities of Partners as to Third Persons.—If management has beenconferred upon partner, third parties may assume that such partner may act for part-nership (or all partners). (C.O. 543). If partnership agreement does not provide otherwise,creditors of one partner personally can execute only his share of liquidation of partner-ship. But partners are jointly and severally liable for liabilities entered into by partnershipor its representative. (C.O. 544).

Dissolution.—Partnership can terminate by (1) failure or achievement of purpose, (2)by agreement, (3) death, (4) incapacitation or bankruptcy of partner, (5) by judicialdissolution with cause, and, in some circumstances, (6) by timely notice. (C.O. 545).Partners remain liable to third parties. (C.O. 551). Partnership continues for purpose ofwinding-up until liquidation terminated. (C.O. 548-550).

General or collective partnership (Kollektivgesellschaft, Société en nom collectif,Società in nome collettivo) (C.O. 552-593) is association of two or more individuals(entities cannot be partners) to conduct (commercial, industrial or other) business underjoint firm name. (C.O. 552). All partners are jointly and severally responsible for li-abilities of partnership. (C.O. 568). General partnership is not separate legal entity.However, it can, as such, acquire rights and assume liabilities, and it has standing to sueand be sued. (C.O. 562).

Formation.—Entry into Register of Commerce is mandatory. (C.O. 552). If purposeis not commercial, legal existence begins with registration in Register of Commerce, ifpurpose is commercial, legal existence begins with conclusion of partnership contract.(C.O. 553).

Firm name must include at least one surname of partner followed by indication ofpartnership with “& Co.”, “& Cie”, or “& Partner”. (C.O. 947).

Rights and Liabilities of Partners as Between Themselves.—Relationship betweenpartners is laid down by partnership agreement or, in absence of such agreement, by rulesfor ordinary partnerships, with certain modifications relating to accounting and profitdistribution (financial items). (C.O. 557-561).

Rights and Liabilities of Partnership and Partners as to Third Persons.—Generalpartnership is not corporation. However, it can, as such, acquire rights and assume

liabilities, and it has standing to sue and be sued. Partnership is liable for torts committedand legal transactions carried out by partner when acting for partnership. (C.O. 567).

In order to be valid against third persons, restrictions as to representation of partnershipmust be entered into Register of Commerce. Otherwise, third parties in good faith mayassume that each partner has right to act for partnership. (C.O. 563-564). With causepartner may be deprived of his right to represent partnership at any time. Third partiesmay only be appointed to act for partnership with consent of all partners. (C.O. 565-566).

Partners are jointly and severally liable with their entire assets for liabilities of part-nership. (C.O. 568). New partner is liable for preexisting liabilities of partnership. (C.O.569). Bankruptcy of general partnership does not entail bankruptcy of individual partners,nor vice versa. (C.O. 570-571). To receive satisfaction or security for their claims,personal creditors of partner may execute only from partner’s partnership interest, re-muneration, profits and share of liquidation. (C.O. 572). However, if partnership isbankrupt, has been dissolved or creditors have not been satisfied, partner can be renderedliable for claims against partnership, even if he has left partnership. This does notprejudice personal guarantee of partner. (C.O. 568).

Claims against individual partner for liabilities of partnership are unenforceable afterfive years after publication of partner’s resignation or of dissolution of partnership inSwiss Official Journal of Commerce. (C.O. 591-593).

Dissolution.—With certain exceptions, rules governing dissolution of ordinary part-nership also apply to general partnership. General partnership can also be dissolved byits filing for bankruptcy. (C.O. 574). Liquidation is attended to by partners having rightto act for partnership. If partnership is dissolved, partners and, in some cases, competentcourt may appoint or remove special liquidators. Appointments must be entered intoRegister of Commerce. (C.O. 582-583).

After liquidation firm name must be cancelled in Register of Commerce. Books anddocuments must be deposited for ten years in place determined by partners or, in caseof disagreement, by Register of Commerce. (C.O. 589-590).

See also category Business Regulation and Commerce, topic Register of Commerce.

Limited partnership (Kommanditgesellschaft, Société en commandite, Società inaccomandita) (C.O. 594-619) is association of two or more persons (individuals orentities) to conduct commercial, industrial or other business under joint firm name. Atleast one partner (general partner) has unlimited responsibility for liabilities of partner-ship and one or more partners (limited partners) are liable only up to fixed amount.Individuals may be both general and limited partners, entities may only be limitedpartners. (C.O. 594). Limited partnership may, as such, acquire rights and assume li-abilities and has standing to sue or be sued in same manner as general partnership. (C.O.602).

Formation.—Similar to general or collective partnership. (C.O. 594-595).Firm Name.—Similar to general or collective partnership, must include surname of at

least one general partner and indicate existence of partnership. (C.O. 947). See alsocategory Business Regulation and Commerce, topic Firm and Corporate Name.

Rights and Liabilities of Partners as Between Themselves.—Relationship betweenpartners is governed by partnership agreement. (C.O. 598). In absence of such agreement,provisions for general partnership apply with following changes: General partners are incharge of managing partnership. Limited partner has no rights or obligations in thisrespect and cannot object to ordinary business transactions. Limited partner is entitledto copy of balance sheet and of profit-and-loss statement, which may be audited bypartner or by independent expert. Limited partner shares in losses only up to fixedamount of partner’s contribution. (C.O. 599-601).

Rights and Liabilities of Partners as to Third Parties.—Limited partnership may, assuch, acquire rights and assume liabilities and has standing to sue and to be sued in samemanner as general partnership. (C.O. 602). Limited partnership is represented by generalpartners, same provisions as for partners in general partnerships apply. (C.O. 603).

Limited partner is jointly and severally responsible for liabilities of partnership up toamount of partner’s contribution, as entered into Register of Commerce, unless partner,or partnership with partner’s knowledge, has led others to believe that partner would beliable up to higher amount. (C.O. 605). Limited partner is subject to unlimited liability:(1) for transactions concluded by partner for partnership without express statement thatpartner acted as agent or under power of attorney, (2) for liabilities incurred beforeregistration of limited partnership or of limitation of partner’s contribution in the Registerof Commerce, unless creditor knew partner’s actual status, or (3) if name of limitedpartners forms part of firm name of partnership. (C.O. 604-609). Creditors of limitedpartnership have right to sue limited partner only after dissolution of limited partnership.(C.O. 610). For general partners, generally, same provisions apply as for partners ingeneral partnership.

Dissolution.—Provisions for dissolution and liquidation of general partnership areapplicable, except that death of, or incapacity or establishment of guardianship for,limited partner does not cause dissolution of partnership. (C.O. 619).

Limited Partnership with Shares.—See topic Corporations.

Firm Name.—See category Business Regulation and Commerce, topic Firm andCorporate Name.

BUSINESS REGULATION ANDCOMMERCE

BANKS AND BANKING:

Banks are defined by Federal Banking Statute of Nov. 8, 1934 (‘‘Banking Statute’’),Federal Council’s implementing ordinance of May 17, 1972 (‘‘Banking Ordinance’’) andFederal Banking Commission’s practice as natural and/or legal persons whose mainbusiness activity is devoted to finance area and who are engaged in publicly offering theirservices as depositories of money in order to finance in any way on their own accountundetermined number of individuals and/or corporations which do not form part of samegroup as financing bank; or refinancing themselves to considerable extent from variousother banks for purpose of financing for their own account undetermined number ofindividuals and/or corporations which do not form part of same group as financing bank.

BUSINESS ORGANIZATIONS MARTINDALE-HUBBELL LAW DIGEST - 2007



BANKS AND BANKING . . . continuedBanks in above-mentioned sense are subject of permanent supervision of Federal Bank-ing Commission. Term ‘‘Bank’’ and other related terms are reserved to banks in above-mentioned sense. Banks which are directly or indirectly controlled by foreign owners aresubject to additional licence requirements. All banks, irrespective of whether they arecontrolled by Swiss or foreign owners have to comply with extensive regulation re-garding equity and liquidity requirements and lending limits and are subject of specialaccounting and auditing rules. Business of providing auditing services to banks is re-served to qualified auditing firms which need to be licensed by Federal Banking Com-mission.

Swiss National Bank has specific powers to regulate Swiss currency. It may, forinstance, fix limits and set mandatory reserves, require foreign currency liabilities to becovered by foreign currency assets in specific percentages and make prescriptions onpublic issues of shares, bonds and the like. Presently no significant measures in place.In this context, banks are subject of certain reporting duties vis-à-vis Swiss NationalBank such as filing of their annual financial statements.

Bank secrecy is safeguarded by special provision of law. However, federal andcantonal regulations on securing evidence in criminal cases take precedence. BankingStatute authorizes Swiss subsidiary bank to transmit information which is protected bybank secrecy to its foreign parent company if information in question is needed by parentcompany for purposes of (i) internal control within group or (ii) consolidated supervisionof banks and other financial intermediaries. In addition, transmission of such informationrequires that (i) parent company and foreign supervisory authority are bound by pro-fessional or official secret and (ii) information received from Swiss bank may not bepassed on to third parties unless Swiss bank has approved such passing-on or, in alter-native, applicable treaty provides for general authorization of passing-on such informa-tion.

Furthermore, Banking Statute authorizes Federal Banking Commission to transmitdirectly information which may be protected by bank secrecy to foreign supervisoryauthority which is competent for supervision of banking or finance sector provided (i)transmitted information is exclusively required and used for purpose of performing directsupervision over banks and other financial intermediaries whose business activity maynot be performed without licence; (ii) foreign supervisory authority is bound by officialsecret; (iii) information received from Federal Banking Commission may not be passedon to third parties unless Federal Banking Commission has approved such passing-on or,in alternative, applicable treaty provides for general authorization for passing-on suchinformation. However, passing-on of information by foreign supervisory authority toforeign public prosecutor is forbidden if relevant facts are such that Switzerland wouldrefuse international judicial assistance to respective foreign country.

Subject to requirements and restrictions set out in previous paragraph, Banking Statuteprovides that Federal Banking Commission may authorize foreign supervisory authorityto effect inspections of Swiss banks (subsidiaries, branch offices, and representativeoffices) on Swiss territory at business premises of respective Swiss bank. However, incourse of such inspections, foreign supervisory authority may only request informationwhich is necessary for consolidated supervision over respective bank. Any informationwhich pertains directly to particular customer within bank’s asset management or de-positary business may only be requested by Federal Banking Commission. Customerrelated information may only be transmitted to foreign supervisory authority if customeragrees or, alternatively, if final court decision authorizes transmission of customer relatedinformation.

Federal Statute on International Judicial Assistance in Criminal Matters of Mar. 20,1981, as am’d, allows granting specific assistance (such as supplying information andobtaining evidence) in cases of allegations which would, if adjudicated under Swiss lawconstitute criminal act, including tax fraud. As matter of rule, in cases of simple taxevasion international judicial assistance is not available. However, under tax treaty withU.S. Swiss Federal Tax Administration may under specific preconditions obtain infor-mation (also from Swiss banks) for U.S. Internal Revenue Service in case of U.S. taxfraud and the like. Under treaty with U.S. on assistance in criminal matters court hearingwitness decides under specific preconditions whether or not bank secrecy should belifted.

Money Laundering.—Federal Statute regarding combat against money launderingdated Oct. 10, 1997, provides for various obligations of financial intermediaries (such asbanks and other financial intermediary) to prevent money laundering. Statutory duties ofbanks in this field are detailed in Federal Banking Commission’s Ordinance for pre-vention of money laundering of Dec. 18, 2002 and include, inter alia, duty of identifyingcustomers and beneficial owners of assets, duty to systematically supervise transactionsand money flows, duty of notifying central notification agency and Federal BankingCommission in cases of suspected attempts of money laundering and duty of temporarilyfreezing all assets which may be subject of suspected money laundering attempt.

Under Agreement on Swiss banks’ code of conduct with regard to exercise of duediligence convention as in force since July 1, 2003 between Swiss Banker’s Associationand member banks, signatory banks undertake: (i) To verify identity of their contractingpartners and to obtain from contracting partner declaration setting forth identity ofbeneficial owner of assets entrusted to bank; (ii) not to provide any active assistance inflight of capital; and (iii) not to provide any active assistance in cases of tax evasion orsimilar acts, by delivering incomplete or misleading attestations. Agreement does notmodify obligation to observe banking secrecy, it lays down rules of good conduct in bankmanagement.

Foreign banks which wish to establish branch offices, agency or representative officein Switzerland have to apply for special licence with Federal Banking Commission.Details for granting of such licence are laid down in Federal Council’s Foreign BanksOrdinance dated 21 Oct. 1996. These entities which are legally dependent on their foreignheadquarters are subject to Swiss banking supervision with exception of requirementregarding equity ratios and risk spreading.

Acquisition of majority of shares of existing bank with Swiss ownership, acquisitionof substantial part of shares of bank with foreign ownership and creation of new bankby foreigners is also subject to license of Federal Banking Commission. Preconditions

include proof of reciprocal right in respective foreign area, and undertaking to complywith credit and foreign exchange policies of Swiss National Bank.

Investment Funds (Anlagefonds).—Swiss Investment Funds.—The Federal Act on Investment Funds dated 18 Mar. 1994

(‘‘IFA’’) supplemented by two implementing ordinances on investment fund adopted byFederal Council and Federal Banking Commission provide, inter alia, for (i) definitionof Swiss investment funds, (ii) natural and legal persons who may engage in investmentfund business and type of licenses required for such business activities, (iii) type ofinvestment funds allowed under Swiss law and investment restrictions applicable to eachtype and (iv) investor’s right vis-à-vis parties which are engaged in investment fundbusiness.

Swiss investment funds may only be established in contractual form, i.e. in form ofcollective investment contract which is deemed to be concluded between each investor,fund management company and custodian bank. Collective investment schemes whichare organized in corporate form may be established, but must not use term ‘‘Anlage-fonds’’ or any equivalent term which suggests that investment fund within meaning ofIFA exists. Contractual form of investment fund implies that fund’s assets are special poolof assets owned on fiduciary basis by fund management company which has to keepfund’s assets segregated from its remaining fund with custodian bank.

IFA provides for three main types of investment funds, namely (i) securities funds, (ii)real estate funds and (iii) other funds. Securities funds are comparable to undertakingsfor collective investments in transferable units (‘‘UCITS’’) within meaning of EU di-rective on UCITS dated 20 Dec. 1985, as amended. However, for time being, Swisssecurities funds may not be freely sold within EU. Real estate funds may invest in Swissand foreign real estate directly held by fund or indirectly held by fund through holdingsin real estate company. Other Funds within meaning of art. 35 IFA may depart fromrestrictive investment provisions applicable to securities funds. Other Funds may bestructured as hedge-funds, i.e. they may apply in alternative investment strategies and/orinvest in derivatives, precious metals or commodities and if fund employs (at least tosome extent) riskier investment techniques such as short sales or taking up of substantialcredits (leveraging), it must be specifically labeled.

Establishment of new Swiss investment fund is subject to authorization of FederalBanking Commission. Business activities of fund management company, custodian bankand fund distributor require license granted by Federal Banking Commission.

Foreign Investment Funds.—Public solicitation and sale of units of foreign invest-ment fund in or from Switzerland is—irrespective of legal form of foreign investmentfund—subject to authorization by Federal Banking Commission. Such authorization willonly be granted to mandatory Swiss representative to be designated by foreign investmentfund. In addition foreign investment fund has to appoint Swiss paying agent. Further-more, authorization will only be granted for investment funds whose home jurisdictionis acknowledged by Federal Banking Commission to be comparable with IFA in termsof protection provided to investors. For time being, only investment funds establishedunder laws of member state of European Economic Area, U.S., Guernsey and Jersey areacknowledged to meet above-mentioned requirement. There are relaxed authorizationrequirements for foreign investment funds which comply with European Union’s direc-tive on UCITS.

See topic Securities; category Criminal Law, topic Criminal Law.

BILLS AND NOTES:See topic Negotiable Instruments.

COMMERCIAL CODE:Swiss Code of Obligations of Mar. 30, 1911 with amendments governs contracts and

corporations and other business organizations. Separate statutes cover banking, insurance,unfair competition, etc.

COMMERCIAL REGISTER:See topic Register of Commerce.

CONDITIONAL SALES:See topic Sales.

CONSUMER PROTECTION:Price supervision statute of Dec. 20, 1985 applies to goods and services.Contracts with consumers are normally governed by law of habitual residence of

consumer. (Art. 120 Private International Law Statute).Statutes on product liability and on consumer credit and consumer information apply.See category Civil Actions and Procedure, topic Product Liability.

CONTRACTS:Applicable Law.—Contract is subject to law expressly agreed on by both parties.

Otherwise, applicable law is that of country of habitual residence of party that undercontract is required to perform obligation that is characteristic for type of contract inquestion. (Art. 117 Private International Law Statute). Special conflicts rules apply tocontracts on immovables or with consumers, employment contracts and license agree-ments. Same law is applied to contract formation. Different law may apply to specificquestions such as form of contract, power of attorney, etc. See topic Sales.

Formation.—Contract requires: (a) Mutual agreement, express or implied; (b)‘‘causa’’ only in certain cases, i.e., transfer of personal or immovable property; and (c)capacity of parties to contract. Every person who is of age (18) and sound mind hascapacity. Minors of sound mind can validly accept only purely gratuitous benefits withouttheir guardian’s concurrence.

Consideration is not required.Contracts are valid without any special form unless the law provides otherwise. If a

form is legally prescribed, its observance is usually a condition of validity. Principallyprescribed forms are written form and publicly authenticated instrument—usually bynotarized deed. Where parties, without requirement of law, have stipulated use of special

SWITZERLAND LAW DIGEST BUSINESS REGULATION AND COMMERCE



CONTRACTS . . . continuedform, presumption is that they shall not be bound unless special form is complied with.Registration of contracts is only necessary as rule in connection with immovables.

An offer including a time limit for acceptance binds offeror for period concerned. Anoffer with no time limit made in the presence of a prospective party or over the phoneceases to be binding if it is not accepted immediately. If made to a party at a differentplace it is binding until an answer should have been received, if dispatched in due courseand time. Where by reason of special nature of transaction or circumstances expressacceptance is not to be expected, contract is binding unless offer is refused withinreasonable time.

Formal Requirements.—Written form may be mandatorily prescribed by statute or chosen by parties. (C.O. 13,

16). Document must be signed by all persons obligated thereby. Letter or fax bearingsignature of person or persons thereby obligating themselves fulfills requirements ofwritten form. According to case law, emails or any other forms of electronic transmissiondo not fulfill requirements of written form (unless otherwise expressly agreed by parties).Federal act on digital signature is in process of consultation and final draft will beforthcoming (expected on Jan. 1, 2005).

Publicly authenticated instrument to extent that federal law does not have provisions,must follow form prescribed by cantonal law. (C.C. Final Title 55).

See category Documents and Records, topic Acknowledgments and Other PublicAuthentications.

Chosen Form.—Special form may be chosen by parties to contract, which otherwisewould need no special form in order to be valid, either (a) merely as means of proof,in which case parties are bound in ordinary way before execution of form but mayenforce such execution, or (b) as condition for validity of contract, whereby in case ofreservation by parties, intention of parties not to be obligated before conclusion ofcontract in special form is presumed (C.O. 16), but not for subsequent alterations ofcontract.

Mandatory Form.—For certain legal acts observance of special form is required. Thisis condition for validity unless law provides otherwise. (C.O. 11; C.C. 7). If form isprescribed for validity of legal act, it must also be observed for any alterations, butsupplementary nonessential clauses not in contradiction to act need not observe form.(C.O. 12).

Written form mandatory for: agreement for distribution of estate provided no newrights in rem are thereby created (see categories Estates and Trusts, topic Executors andAdministrators; Property, topic Immovable Property); assignment of choses in action, butnot promise to assign (see category Debtor and Creditor, topic Assignments); promise ofgift of movable property, i.e., all kinds of property except immovables and rights in remin immovables (C.O. 243); consumer credit contracts (Arts. 9-12 of Federal Act onConsumer Credits dated 23 Mar. 2001); several labor law specific contracts and clauses(see category Employment, topic Labor Relations).

Publicly Authenticated Instrument Mandatory.—See category Documents and Records,topic Acknowledgments and Other Public Authentications. Mandatory for inter alia:matrimonial property contract (see category Family, topic Husband and Wife); public willand inheritance pact including promise of gift to be performed at death of donor (seecategory Estates and Trusts, topic Wills, and C.O. 245); most agreements for conveyanceor encumbrance of immovable property (see category Property, topic Immovable Prop-erty); incorporation and certain legal acts pertaining to share corporations and to limitedpartnership corporations (see category Business Organizations, topic Corporations).

Contracts of guaranty (einfache Buergschaft, cautionnement simple, fideiussione sem-plice [C.O. 495]), or of suretyship (Solidarbuergschaft, cautionnement solidaire, fideius-sione solidare [C.O. 496]), are subject to special provisions, inter alia to following: Asa rule, written form is required; and maximum amount of liability of guarantor or ofsurety must be mentioned in instrument, in case of suretyship also several liability ofsurety. Special rules apply if guarantor or surety is natural person (with exception ofguaranty or suretyship in favor of Swiss Confederation including its establishments orof canton for custom duties, taxes, etc.): if amount of liability of guarantor or of suretyexceeds CHF 2,000, publicly authenticated instrument containing inter alia maximumamount of liability and signature of guarantor or surety is required; for lesser amount,written form is sufficient, however with statement of maximum amount of liability inguarantor’s or surety’s own handwriting in instrument, in case of suretyship also soli-darity clause (C.O. 493); if guarantor or surety is married and spouses not judiciallyseparated, written consent of spouse required before or at entering of obligation, exceptif guarantor or surety is recorded in Register of Commerce (see category Documents andRecords, topic Records) in certain capacities (C.O. 494). Special rules apply for sub-sequent alterations of such contract of guaranty or suretyship.

General Terms and Conditions.—Switzerland has no statutory control over contentof general terms and conditions at moment. Based on general principles of Swiss privatelaw and Art. 8 of Federal Act on unfair competition, Swiss Federal Court developed tworules applicable to interpretation of such general terms and conditions as case law. (1)Rule of Unusualness: Clause of globally accepted general terms and conditions is notapplicable if such rule is unusual for specific type of contract and if accepting party didnot or did not have to anticipate such rule for specific contract. (2) Rule of Unclarity:Clause of general terms and conditions that is, even after extensive construction, stillunclear, always has to be interpreted to disadvantage of composer.

Particular duties to provide access to general terms and conditions to addressees andparticular duties to inform them concerning content of such terms and conditions arisein case of labor-, insurance- and package holiday-contracts.

Excuses for nonperformance are: impossibility of performance by circumstancesbeyond party’s control, force majeure, and clausula rebus sic stantibus.

Government Contracts.—As a rule there are no special requirements for contractingwith governmental bodies. However, governmental procurement is regulated, both onfederal and cantonal level in accordance with principles of General Agreement on Tradeand Tariffs. According to Federal Act on Governmental Procurement dated 16 Dec. 1994,as amended, prior to any conclusion of contract between federal governmental body andcontracting party, tender procedure has to be established and effected usually if contract

value exceeds CHF 640,000 in case of delivery of goods or services and CHF 8 millionin case of construction order. When establishing tender procedure, responsible govern-mental body has to disclose criteria relevant for decision to which competitor contractshould be awarded. Tender procedure will be terminated by order of responsible gov-ernmental body specifying competitor to whom contract was awarded. This order maybe challenged by way of public appeal by other competitors.

See also topics Consumer Protection, Distributorships, Sales; categories Civil Actionsand Procedure, topic Damages; Debtor and Creditor, topic Pledges; Employment, topicLabor Relations; Mortgages, topic Mortgages; Property, topic Landlord and Tenant.

DISTRIBUTORSHIPS:Sole Distributorship.—Special contract type not covered by C.O.Commercial Agency Agreement.—Noncompetition clause may be agreed on, but

gives agent mandatory claim for compensation in case of termination. If agent hasconsiderably enlarged circle of customers of principal and if after termination principalwill enjoy considerable advantages thereby, then agent has claim for adequate compen-sation if principal terminates. Agent does not have claim if he is reason for termination.This claim may not exceed agent’s net profit for one year calculated on basis of averageof agent’s net profits during past five years. (C.O. 418a-418v).

According to case law, there is no such termination compensation claim if soledistributorship is terminated.

FIRM AND CORPORATE NAME:When doing business, any individual or association of persons must use firm or

corporate name. (C.O. 944-956; Decree of Swiss Federal Government concerning Reg-ister of Commerce of June 7, 1937, Arts. 44-46; Federal Statute concerning penalprovisions to Law of Register of Commerce and Firm and Corporate Names, of Oct. 6,1924). No reservation of name is possible.

Selection of Firm and Corporate Names.—Meaning of name may not be deceptiveor against public policy. Advertising claims may not be included in name. Firm nameof individual must mention individual’s last name, with or without first name. (C.O. 945).

To determine availability and admissibility of name, inquiries should be addressed toFederal Commercial Registry Office beforehand. However, clearance and actual regis-tration by Registrar does not have binding legal effect. Aggrieved third parties may stillsue for change of name.

Branch offices must use name of head office, possibly with additions valid only forbranch office. Branch office of foreign enterprise must include place of business of headoffice and of branch office, and explicit designation as branch office. (C.O. 952).

Foreign Firm and Corporate Names.—If such names violate mandatory rules ofSwiss law, they may not be used for Swiss branches of foreign enterprises.

Exclusiveness of Registered Firm and Corporate Name.—Two businesses in samerelevant area may not have same name. (C.O. 946, 951).

INFORMATION TECHNOLOGY, INTERNET AND NEW MEDIA:Computer programs are protected without registration by Federal Statute on Copy-

right of Oct. 9, 1992. Protection lasts for 50 years after originator’s death. Ideas andprinciples being basis of elements of computer programs or interfaces are not protected.

Originators have exclusive right to grant license to copy, modify, translate or arrangecomputer programs and to distribute or hire out originals or copies of computer programs.Right of user to copy software for backup purpose cannot be contractually excluded. Withcertain limitations, users may reverse engineer computer programs to acquire necessaryinformation to secure interoperability with other independently created computer pro-grams. Commercial rights in computer programs produced by employee in conductingduties under his employment or according to instructions of employer vests exclusivelyin employer.

E-Commerce.—At moment, Switzerland has no specific E-Commerce law enacted.However, Swiss Federal Council has submitted preliminary draft on amendment of Codeof Obligations regarding electronic contracts. This draft is mainly focused on consumerprotection issues (e.g. right to withdraw from contract within certain time period, war-ranty for goods) and therefore not applicable to business-to-business transactions.Planned amendment of Act against Unfair Competition provides for certain requirementsregarding provision of information before electronic contract is entered into. These rulesalso prevail for contracts between commercial entities. Both amendments will be enactedat earliest in 2004.

Database Protection.—There is no particular legislation on database protection inSwitzerland. Databases may enjoy some protection under Federal Statute on Copyrightof Oct. 9, 1992 or Federal Statute on Unfair Competition of Dec. 19, 1986.

Digital Signature.—Although digital signatures are not considered equivalent to hand-written signature, digital signatures legally bind parties unless law provides for specificform. The Ordinance of the Swiss Federal Council on Certification Authorities of Apr.12, 2000 provides for public key infrastructure (PKI) where digital certificates are issuedby certification authorities, who must meet several requirements in order to be accreditedby certification body, itself being accredited by Swiss Federal Council. However, legaleffects of digital signatures based on PKI are not altered by Ordinance.

In Jan. 2001, Swiss Federal Council presented draft Federal Statute on ElectronicSignatures. Draft provides for recognition of digital signature as equal to handwrittensignature if based on electronic certificate issued by accredited certification authority.Draft will not be enacted before 2004.

Telecommunication facilities (telecommunication lines, access to networks, intercon-nection and other telecommunication facilities) are regulated by Federal Statute onTelecommunication of Apr. 30, 1997. Law provides for need of license for provision ofcertain telecommunication services, such as transmission circuits, telecommunicationlines, telephone services and like. Provides for rules on interconnection in order tostrengthen competition in telecommunication market.

In July 2002, Swiss Federal Council has presented draft amendments of Federal Statuteon Telecommunication, providing for unbundling of last mile and other adjustments to

BUSINESS REGULATION AND COMMERCE MARTINDALE-HUBBELL LAW DIGEST - 2007



INFORMATION TECHNOLOGY, INTERNET AND NEW MEDIA . . . continuednew EU framework, including new regulatory competences to strengthen competition.Liberalization of last mile, as well as leased lines prices being subject to interconnectionregime, have been imposed in advance by Ordinance on Telecommunication Services ofMar. 7, 2003, in force since Apr. 1, 2003.

INTEREST:

No interest is chargeable on money debts except when parties explicitly or implicitlyagree to it, or if provided for by statute (e.g., in case of default of debtor, C.O. 104).However, in case of debts resulting from business transactions, e.g., commercial loan,interest is presumably owed. (C.O. 314).

Interest rate, unless agreed by parties, depends on custom, in case of loan presumablyat rate customary for particular loan at time and place where it was made. Frequently,with special cases excepted, rate is 5% (C.O. 73, 314); in case of recourse on draft orcheck rate is 6% (C.O. 1045/46, 1130). Legal rate is determined by cantons in form ofconvention to 18% (intercantonal concordat against abusive interest rates dated 8 Oct.1957). For consumer credit contracts, legal rate is determined by Swiss government (Art.14 of Federal Act on Consumer Credits dated 23 Mar. 2001) and should, as general rule,not exceed 15%. Stipulations for compound interest are not valid except when customaryin business, as for current accounts and for savings bank accounts. (C.O. 314).

Federal law does not fix a maximum interest rate. However, it provides that, in caseof manifest disproportion of mutual considerations of the parties, caused by one partytaking advantage of distress, inexperience, or carelessness of other party, prejudiced partycan rescind contract and demand restitution within one year of conclusion of contract.(C.O. 21). Cantons may fix maximum interest rate for debts secured by immovableproperty. (C.C. 795). Legislation against abuses by agreed interest rates may be enactedby public law (C.O. 73), and exists in several cantons, e.g., Zurich, where lenders maycharge monthly maximum 1% for interest and commission plus 0.5% for managementcost and disbursements. Usury is punishable. (Swiss Criminal Code 157).

LICENSES, BUSINESS AND PROFESSIONAL:

Applicable Law.—Law of habitual residence of licensor applies. Choice of law ispermitted.

Manufacturing and Similar Licenses.—No specific requirements or forms have tobe observed for license agreements. License agreements for patents can, but need not,be entered in patent register.

Other Licenses and Restrictions.—Aliens must obtain residence and work permitsto exercise profitable activity in Switzerland. (See category Citizenship, topic Aliens.)Apart from this general provision and those concerning state monopolies, there are fewrestrictions for foreign enterprises or subsidiaries. Specific requirements apply to own-ership, management and residence in connection with oil drilling and oil exploitation onlands in Switzerland (Concordat Sept. 24, 1955); pipelines (statute Oct. 3, 1963); nuclearpower plants (statute Dec. 23, 1959); Swiss seagoing vessels (statute Sept. 23, 1953) (seecategory Transportation, topic Shipping); aircraft registered in Switzerland (statute Dec.21, 1948). Acquisition of Swiss immovable property may not be refused if foreignenterprises will use it mainly for manufacturing, trading, or other commercial establish-ment. See categories Foreign Trade and Commerce, topic Foreign Investment and Prop-erty, topic Immovable Property.

Professional licenses required for medical and other professions. See topic Banks andBanking; categories Documents and Records, topic Notaries Public; Legal Profession,topic Advocates and Counselors.

MONOPOLIES, RESTRAINT OF TRADE AND COMPETITION:

Unfair Competition.—Law of country of market applies. Federal Statute of Dec. 19,1986 forbids unfair practices, especially incorrect, misleading or unnecessarily sharpdepreciation of products or services of competitors or praise of one’s own products orservices, unwarranted use of titles or professional distinctions, measures which maycreate or foster confusion with goods of competitors, using or copying competitor’s workproduct, inducing employees or agents of competitor firms to take measures which aredetrimental to their employer or to betray trade secrets, any surreptitious obtainment oftrade secrets as well as non-observance of labor conditions binding competitors.

Persons suffering from or threatened by impairment from above mentioned acts,whether as competitors or as customers, may request civil courts to prohibit imminentor to remove ongoing infringement. Moreover, there is claim for damages and com-pensation under specific rules governing such claims. If these acts have been committedby employees, impaired party can also proceed against employer. Upon request ofimpaired party, unfair trade practices can, if willfully committed, be subject to criminalprosecution. If they have been committed by employee on behalf and with knowledgeof employer, employer may also be criminally prosecuted.

Antitrust.—Law of country of market applies. In Switzerland, no damages will beawarded beyond those permissible under Swiss law. Federal Act on Cartels and OtherRestraints of Competition of Oct. 6, 1995 applies to horizontal and vertical agreementsand concerted practices affecting competition, to practices of enterprises having dominantpositions, and to mergers. Agreements are unlawful if they may not be justified ongrounds of economic efficiency or lead to elimination of effective competition. Practicesof enterprises having dominant position are deemed unlawful when such enterprises,through abuse of their position, prevent others from competing in market or when theyconstrain trading partners. Pre-notification of mergers is mandatory above certain thresh-olds (2 billion worldwide or 500 million turnover in Switzerland and 100 million turn-over in Switzerland of at least two of enterprises concerned). Competition Commissionmay intervene if merger creates or strengthens dominant position leading to eliminationof effective competition. Amendment to Act dated 1 Apr. 2004, allows direct sanctionsup to 10% of turnover achieved in Switzerland over last three business years to beimposed on enterprises participating in illicit restraints of competition.

NEGOTIABLE INSTRUMENTS:

Drafts.—(Wechsel, lettre de change et billet a ordre, cambiale e vaglia cambiario[paghero]; C.O. 991-1099). Switzerland adhered to Geneva Conventions of 1930 and1931 concerning uniform law of Drafts and Checks, on certain rules of conflicts of laws,and on stamp tax statutes connected therewith.

Requirements as to Content.—(1) Designation as draft or bill of exchange within textof document as drawn, (2) unconditional order to pay certain sum of money, (3) nameof drawee, (4) maturity, (5) place of payment, (6) name of person to whom or to whoseorder payment is to be made, (7) date and place of drawing, (8) signature of drawer. (C.O.991).

Maturity.—Draft not mentioning maturity is payable at sight. Draft not mentioningplace of drawing is deemed to have been drawn at place indicated with name of drawerwritten on draft. (C.O. 992).

Transfer.—Delivery of draft with unconditional endorsement on draft or on sheetattached, or with written assignment. If draft contains clause ‘‘not to order’’ or equivalentclause, transfer is effected only by delivery of draft with written assignment. (C.O.1001-1003, 165).

Presentment and Acceptance.—Draft may be presented for written acceptance bydrawee at drawee’s place until date of maturity unless prohibited in terms of draft; suchprohibition is permissible only under certain conditions. Acceptance binds drawee forpayment at maturity. Draft payable at sight must be presented within one year from dateof drawing, unless otherwise stipulated. (C.O. 1011-1019, 1024).

Draft has to be presented by holder on date of payment or on one of two followingworking days. (C.O. 1028).

Payment.—If draft calls for payment in currency other than legal tender at place ofpayment, amount may be converted into local currency at rate of exchange prevailing ondate of maturity. If debtor delays payment, holder has option to demand payment eitherat rate of exchange in force on date of maturity or at rate prevailing on day of actualpayment. Value of foreign currency is determined according to commercial custom atplace of payment. Drawer may, however, in draft itself prescribe rate of exchange to beapplied in converting foreign currency. (C.O. 1031).

Protest.—Drafts not accepted or not paid must be protested in usual manner, unlessprotest is waived. (C.O. 1034-1041, 1043).

Recourse in Default of Acceptance or Payment.—Holder may exact payment fromendorsers, drawer and others liable on draft at maturity. This right also exists beforematurity in case of nonacceptance, acceptor’s insolvency or bankruptcy, or when ex-ecution on judgment against acceptor has been returned unsatisfied.

Any person paying draft has recourse against previous persons liable. (C.O. 1033-1052).

Days of Grace.—Not recognized; neither legal nor judicial. (C.O. 1083).Limitation of Actions.—Actions are barred by statute of limitations. Periods: Any

entitled persons against acceptor, three years after date of maturity; holder againstendorsers and drawer, one year after due protest or if protest is waived one year aftermaturity; endorser against other endorsers and drawer, six months after date of paymentor judicial enforcement. (C.O. 1069).

Insofar as drawer and acceptor of draft are unjustly enriched at expense of holder, theyremain liable to holder, even when their liability has become extinguished by statute oflimitations or because some formal requirements have not been met. (C.O. 1052).

Negotiable Instruments, Revenue Stamps.—Confederation may levy stamp duties onnegotiable instruments (Federal Constitution art. 132); drafts may be subject to stampduties under certain circumstances (i.e. collective capital raising).

Conflict of Laws.—Capacity of person to assume liability on draft is determined by lawof country of citizenship. If competency is denied by that law, liability nevertheless existsif signature has been given within country according to laws of which person is com-petent. (C.O. 1086). Form of contract on draft is governed by law of country wherecontract is signed. Form and time limits for protests and form of other acts necessary toexercise or preserve rights attaching to draft are governed by law of country in whoseterritory protest is to be made or where act is to be performed. (C.O. 1088). Effect ofcontracts on draft of acceptor and maker of promissory note are governed by law of placeof payment. Effects of other contracts on draft are governed by law of country wherecontracts were signed. (C.O. 1090). Payment of draft on maturity, calculation of datesfor maturity and payment and payment of draft made out in foreign currency aregoverned by law of country where draft is payable. (C.O. 1092). See C.O. 1086-1095.

Checks.—(C.O. 1100-1144). Check must contain designation ‘‘check’’. Checks pay-able in Switzerland may be drawn only on banks. (C.O. 1100, 1102). Check cannot beaccepted, it is payable on sight. Any provision to contrary is ineffective. (C.O. 1115). Ifcheck is ‘‘crossed,’’ it may only be paid to bank or to customer of drawee. If check is‘‘especially crossed’’, it may only be paid to especially designated bank or to bank’scustomer if bank is itself drawee. (C.O. 1123, 1124). Check may contain phrase: ‘‘foraccount only’’ or ‘‘for deposit only’’, in this case payment of check in cash is excluded.(C.O. 1125).

Other Negotiable Instruments.—Law defines negotiable instrument (Wertpapier, pa-piervaleur, titolo di credito or cartavalore) as document to which right is connected insuch way that right cannot be exercised against debtor nor transferred to third personswithout document. (C.O. 965). Such instruments may be issued in name of specificcreditor (C.O. 974-977) or payable to order of specifically named creditor (C.O. 1145-1152, 967-969) or to bearer (C.O. 978-989). Certain instruments are on order by op-eration of law, such as drafts, checks payable to specifically named person, registeredshares, commercial paper (including warehouse receipts, warrants, bills of lading), mort-gages issued on names. Instruments to bearer are frequently issued in Switzerland,especially for debentures and shares.

Transfer.—Full transfer may be effectuated only by delivery of instrument itself or ofmeans procuring power over instrument. No further requirement for transfer of instru-ments to bearer. For instrument payable to named person written declaration of assign-ment by transferor either on document itself or separately is required; for instrument toorder, either endorsement on instrument or sheet attached to it, or written assignment oninstrument itself or separately.

SWITZERLAND LAW DIGEST BUSINESS REGULATION AND COMMERCE



NEGOTIABLE INSTRUMENTS . . . continuedDefenses.—In any kind of negotiable instrument debtor (obligor) has defenses (1)

pertaining to validity and wording of instrument and (2) other defenses existing againstimmediate creditor.

In case of instruments to bearer or to order, other defenses of debtor based on legalrelations between debtor and assignors are excluded, except in case of fraud. Defensespertaining to validity of transfers are also excluded, but instrument to order must showuninterrupted chain of endorsements. (C.O. 979, 1007, 1146).

In case of instruments payable to named persons, additional defenses are possiblebased on legal relations between debtor and first creditor and all assignors; also defensespertaining to validity of all transfers. (See category Debtor and Creditor, topic Assign-ments.)

Special Kinds of Negotiable Instruments.—There are various forms of negotiableinstruments showing only some of features described above. Instrument to order by lawmay be restricted as to transferability by endorsement, which gives it legal character ofinstrument payable to named person (so-called ‘‘recta-instrument’’, C.O. 1001); instru-ment payable to named person may have clause that debtor is entitled (but not bound)to perform to any holder of instrument (so-called ‘‘limping bearer instrument’’, C.O.976). Instruments payable to named persons or to order may be subject to specialrestrictions of transfer (so-called ‘‘vinculation’’), i.e., in case of registered shares, consentof legal entity according to articles is condition subsequent for transfer. (C.O. 627 No.8, 684-686a).

REGISTER OF COMMERCE:Anyone in trading, manufacturing or other business must register firm’s name in

Register of Commerce (Handelsregister, Registre de commerce, Registro di commercio)of canton or district where seat is located (Decree of Swiss Federal Government con-cerning Register of Commerce, as of June 7, 1937, art. 52). Many legal entities, suchas share corporations, limited liability corporations, cooperative corporation, etc., comeinto existence only when entered into Register of Commerce.

Registration of Swiss corporations is effected on basis of publicly authenticated deed.Branch offıces of Swiss corporations are registered in canton or district in which branch

office has its place of business after registration of main office in its own district. (C.O.935).

Branch offıces of foreign corporations are registered in same way as branches of Swisscorporations. For such branches, agent residing in Switzerland and having power ofrepresentation must be appointed.

Nonregistered corporations etc. have no legal existence. Nonregistered branch officesmay still do business in Switzerland.

Registrar of Register of Commerce may levy fines on persons and firms not complyingwith law. (C.O. 943). Articles, names of partners, board members and officers must beregistered. Authenticated signatures of persons having signing power must be deposited.(C.O. 943, Decree of Swiss Federal Government concerning Register of Commerce, asof June 7, 1937, arts. 2-, 26 and 78 et seq.). Any alterations must also be registered. (C.O.937).

Certified copies and translations of foreign articles, extract of foreign Register ofCommerce (or equivalent), board resolution creating branch office and appointing resi-dent agent must be submitted.

Unless otherwise decreed, entries are published in Swiss Official Journal of Commerce(Schweizerisches Handelsamtsblatt, Feuille officielle suisse de commerce, Foglio ufficialesvizzero di commercio). As result, third parties shall have constructive notice of regis-tration. (C.O. 931, Decree of Swiss Federal Government concerning Register of Com-merce, as of June 7, 1937, art. 9).

See also topic Firm and Corporate Name; categories Business Organizations, topicsCorporations, Foundations, Membership Associations, Partnerships; Debtor and Creditor,topic Collection of Debts and Bankruptcy; Intellectual Property, topic Trademarks.

SALES:

International Sales.—Law of habitual residence of seller applies for movable objects.Choice of law is permitted. For contracts made from Mar. 1, 1991 onwards ViennaConvention on Contracts for the International Sale of Goods applies. See Part V.

Domestic Sales.—Sale of movable property is contract whereby seller agrees todeliver object of sale and to transfer ownership thereof to buyer, and whereby buyeragrees to pay purchase price to seller. (C.O. 184-215, 222-236, and also Federal Law onConsumer Credits).

In sales of movable property, unless otherwise provided by agreement or custom,delivery of property and payment of price are concurrent conditions. Price is consideredas sufficiently determined if it is ascertainable. (C.O. 184). When contract for sale ofpersonal property is entered into, benefit and risk of property pass to buyer, unlessotherwise stipulated (C.O. 184, 185), but title remains in seller until transfer is effec-tuated.

In absence of contrary agreement or custom, seller must pay costs of delivery unlessgoods are to be shipped to place different from that of performance, in which case buyerhas to bear costs of shipment. (C.O. 188, 189).

Bills of Sale.—As a rule, no special instrument is mandatory for validity of sale ofmovable property. Sales agreement may be oral.

Transfer of Title.—Title to movable things passes by transfer of ‘‘possession’’ tobuyer, either of thing itself or instrument granting power of title in thing. Bona fidetransferee of movable thing becomes its owner as soon as transferee’s possession isprotected according to rules of possession, even if transferor had no right to transferownership. (C.C. 714, 922-925).

When goods are sold on approval or subject to inspection, seller remains owner untilapproval. (C.O. 223).

Stoppage in Transitu.—Shipper may stop goods in hands of carrier, unless bill oflading has come into hands of consignee, or shipper is unable to return carrier’s receipt,or consignee has been notified in writing to take delivery, or consignee has notifiedcarrier after arrival of goods at place of destination that consignee is ready to takedelivery. To exercise this right shipper need not specify any reasons. It is immaterial

whether or not goods are actually in transit, provided they have not yet reached con-signee. (C.O.443).

Warranties.—Seller warrants title, except if buyer knew risk of claim of third personsat time of contract. (C.O. 192). Seller warrants further, by law, quality of object of saleand its fitness for intended use, even if seller has no knowledge of defects. (C.O. 197).Agreements excluding or limiting such warranties of seller are void where seller inten-tionally (C.O. 192) (in case of claims of third persons) or fraudulently (C.O. 199) (in caseof defects) conceals claims of third persons or defects.

Remedies of Buyer.—Upon receipt of the goods buyer should promptly inspect themand notify seller of any deficiencies lest goods are deemed to be accepted. Deficiencieswhich cannot be detected by customary examination are excepted, but must be com-municated immediately upon later discovery. (C.O. 201).

If seller’s warranty for deficiencies is established, buyer may either rescind sale orclaim difference resulting from deficiencies (reduction). Court at its discretion may grantreduction even if complaint asks for rescission. (C.O. 205).

In case of delivery of fixed quantity of fungible goods buyer is entitled to claim eitherrescission, or reduction, or goods of same kind. Unless goods are shipped from anotherplace, seller may forestall any claim of buyer by delivering goods of same kind. (C.O.206).

If sales agreement provides for fixed delivery date and seller defaults, it is assumedthat buyer foregoes delivery and claims damages. Should buyer, however, elect to requiredelivery, buyer must notify seller immediately of default. Buyer’s damages consist ofdifference between contract price and price at which buyer replaces goods in good faith.Where there is market price, or commodities exchange price, buyer may claim differencebetween contract price and price on date fixed for performance, irrespective of whethersubstitute goods were purchased. (C.O. 190, 191).

Notices Required.—Notice of nonconforming delivery is preferably and customarilygiven in writing by registered letter.

Statute of Limitations.—Buyer’s claim for warranties barred after one year of deliveryto buyer even if buyer discovers deficiencies only later (unless seller has given warrantyfor longer period). Buyer has to file formal action in court within one year from delivery.Objections of buyer based on deficiencies are not proscribed if buyer has properlynotified seller within one year. One year limitation cannot be invoked by seller, if seller’sfraudulent behavior can be proven. (C.O. 210).

Remedies of Seller.—If goods are sold only against prepayment or on terms providingfor delivery against payment, seller may withdraw from contract on immediate notice ifbuyer has defaulted. If goods were delivered before payment and buyer defaults, sellermay rescind sale and demand return of goods only if seller has explicitly reserved thisright. (C.O. 214).

If buyer fails to pay in time, seller is entitled to damages, which between merchantsmay be determined as difference between purchase price and price obtained by sellerthrough bona fide resale of goods. If goods have market or exchange price, seller mayabstain from resale and claim difference between sales price and market or exchangeprice at time of performance. (C.O. 215).

Credit agreements with consumers are restricted under Federal Law on ConsumerCredits of Mar. 23, 2001 (e.g. credit grantors must verify consumer’s credit capacity,interest rate limited to 15% per annum, credit agreements can be revoked within sevendays after signature). (Arts. 14, 16 and 28 of Federal Law on Consumer Credits).

Conditional Sales.—Sale of movables with reservation of property rights by seller isrecognized in Switzerland provided such transaction has been duly recorded in Registerof Reservation of Ownership. (C.C. 715). See category Documents and Records, topicRecords.

Price Supervision.—Federal Statute of Dec. 20, 1985 applies to goods and services.See also topic Distributorships.

SECURITIES:

Securities dealers must comply with Federal Stock Exchange Statute of Mar. 24,1995, and are subject to supervision of Federal Banking Commission. Rules on super-vision of securities dealers similar to those for banks. Professional secrecy equivalent tobank secrecy.

Stock exchanges must obtain license under Stock Exchange Statute. Presently onestock exchange, Swiss Exchange, operates nationwide electronic trading system.

Takeover Offers.—Regulated in Stock Exchange Statute. Provisions apply to publictender offers for securities of Swiss corporations quoted on Swiss Exchange. TakeoverBoard monitors takeovers. Stock Exchange Statute requires minimum disclosure byofferor, equal treatment of shareholders, etc. Target is limited in taking defensive mea-sures after offer is announced. Large shareholdings in Swiss listed corporations must bereported. Obligation to make public tender offer if acquiror of securities exceeds certainthresholds.

See topic Banks and Banking; category Criminal Law, topic Criminal Law.

CITIZENSHIPALIENS:

See category Immigration, topic Aliens.

CITIZENSHIP:

Swiss citizenship derives from citizenship of one or more Swiss cantons; cantonalcitizenship is intrinsically connected with citizenship of one or more municipalities (citiesor villages) within that canton. (Federal Constitution Arts. 37-38 and Federal Statute onAcquisition and Loss of Swiss Citizenship, of Sept. 29, 1952, as am’d Mar. 23, 1990).

Governing principles for acquisition and loss of Swiss citizenship are jus sanguinis,preservation of unity of family, and equality between men and women. There is noacquisition of Swiss citizenship by jus soli in Swiss law.

BUSINESS REGULATION AND COMMERCE MARTINDALE-HUBBELL LAW DIGEST - 2007



CITIZENSHIP . . . continuedAcquisition.—Inter alia by (a) birth of child in wedlock, if father or mother is Swiss

(except by former marriage), or out of wedlock if mother is Swiss or if father is Swissand marries mother after birth of foreign minor child; (b) naturalization of aliens; (c)reinstatement into Swiss citizenship of certain former Swiss citizens; (d) adoption offoreign minor child by Swiss citizen or by spouses one of which is Swiss (except byformer marriage).

Naturalization by ordinary procedure may be granted by Swiss canton and munici-pality within that canton with preceding authorization of federal authorities. Applicantmust as a rule have been domiciled in Switzerland for total of 12 years, three of themduring last five years preceding application. Years between tenth and 20th birthday ofapplicant count twice. If one spouse fulfils conditions other can also apply for Swisscitizenship, if spouse has lived in Switzerland for total of five years, including yearpreceding application. Same rule applies to spouse of person who has already beengranted naturalization in Switzerland.

Naturalization by facilitated procedure may be granted free by federal authorities, asrule with consent of canton, (a) to alien spouse of Swiss citizen if spouse has lived inSwitzerland for total of five years, including year preceding application, and has beenmarried to Swiss for three years; (b) to alien spouse of Swiss citizen who lives or haslived abroad if spouse has been married to Swiss for six years and if spouse is closelyrelated to Switzerland; (c) to child being born before July 1, 1985 in wedlock to mother,Swiss of origin, naturalization or adoption, and alien father, if child lives in Switzerlandand application is made before child turns 32; if child older than 32, its father must havelived in Switzerland for total of five years, including year preceding application; (d) tochild born in wedlock to mother, Swiss by previous marriage, and alien father, if motheris related closely to Switzerland or if child lives in Switzerland and has lived there fortotal of six years; (e) to alien child of Swiss father out of wedlock if application is madebefore child turns 22, if child has been living in Switzerland for one year or has beenliving with father for one year or child has permanent close relation to father or if childis stateless.

Reinstatement into Swiss citizenship may be granted by federal authorities, as a rulewith consent of canton, to Swiss woman who lost Swiss citizenship when marrying alien,and to Swiss citizen born abroad who lost Swiss citizenship at age 22 because ofomission to register. See infra, subhead Multiple Citizenship.

Loss.—(a) If parental relationship to parent who has given Swiss citizenship is an-nulled; (b) by release from Swiss citizenship; (c) by expatriation, admissible only fordouble or multiple citizens, see subhead Multiple Citizenship, infra; (d) by adoption ofSwiss minor child by foreigner if child thereby acquires nationality of foreigner oralready possesses foreign nationality of adopting person.

Release from Swiss Citizenship.—Prerequisite is that person in question possesses orhas reliably been assured citizenship of another country, is not domiciled in Switzerland,and is at least 20 years old. Granted by canton or cantons of which applicant is citizen.

Minor child of applicant who is under parental power is included in release, providedsuch child also has no domicile in Switzerland; child over 16 must consent in writing.

Multiple Citizenship.—Subject to above exceptions, Swiss citizen who by virtue offoreign law or by naturalization acquires one or more citizenships of foreign countriesdoes not lose thereby Swiss citizenship (multiple citizenship). However, Swiss multiplecitizen born abroad loses citizenship upon becoming 22, unless registered with Swissauthority in Switzerland or abroad or written declaration to keep Swiss citizenship wasfiled. Reinstatement into Swiss citizenship is possible within ten years in case of ex-cusable reasons for omission of such notification or declaration. Furthermore, Swissmultiple citizen who seriously impairs interests or reputation of Switzerland may bedeprived of Swiss citizenship by federal authorities with consent of canton.

For jurisdiction of Swiss court at place of origin, Swiss citizenship suffices. Forapplicable law, citizenship with which person has closest connection counts. For rec-ognition and enforcement of foreign decisions in Switzerland any citizenship will do.(Art. 23 Private International Law Statute).

Military Service.—See category Treaties and Conventions, topic Treaties.

IMMIGRATION:See category Immigration, topic Aliens.

NATURALIZATION:See topic Citizenship.

CIVIL ACTIONS AND PROCEDUREACTIONS:

All actions must be brought before courts, with exception of summary, administrativeprocedures for collection of debts. See category Debtor and Creditor, topic Collection ofDebts and Bankruptcy.

Action is basically commenced in Switzerland when first procedural step is taken, suchas conciliation procedure before justice of peace. Civil procedure is cantonal. Service ofprocess is effectuated by courts, not by parties. Service of process for foreign proceedingsmust go through diplomatic channels and cannot be accomplished by Swiss lawyers.American lawyers may apply to local U.S. Consular Office in Switzerland for informa-tion. Lugano Convention applies, see topic Judgments.

Swiss courts have judicial notice of foreign law but may in disputes of financialinterest impose burden of proof on parties. If content of foreign law is unascertainable,Swiss law applies. Switzerland has joined European Convention of June 7, 1968 oninformation on foreign law.

Limitation of.—See topic Limitation of Actions.

DAMAGES:Party to contract is liable for damages in case of nonfulfillment unless party proves

lack of fault.

If there is no contract, general rule is that a person is liable for damage caused toanother only if person has behaved unlawfully, be it willfully or by gross or slightnegligence. This rule applies also to product liability. See also topic Product Liability.

There are special fields where liability results from causal relationship only and faultis not required, i.e., railways, motor vehicles, nuclear, water pollution, etc.

Statute concerning compensation to victims of violent crime provides for subsidiaryGovernment payments.

DEPOSITIONS AND DISCOVERY:

Depositions in Switzerland are taken following court orders by special court pro-cedure.

Letters rogatory addressed to particular court or generally to any court having juris-diction will be executed by proper authorities. Written questionnaires must accompanyletters rogatory, and should be drawn with special regard for difference between commonlaw and civil law methods of taking testimony.

Attorneys or parties may not obtain depositions for foreign court procedure except withspecific permit received from Division for International Judicial Assistance, FederalOffice of Justice at Federal Department of Justice and Police (http://www.ofj.admin.ch).Swiss Government will not permit commissions from foreign countries addressed toconsuls, notaries, or any other individuals to be executed in Switzerland. U.S. Depart-ment of State has instructed American consular officials not to execute commissionsaddressed to them in Switzerland.

Depositions outside of Switzerland are obtained by courts through Swiss diplomaticchannels with help either of competent foreign courts or of Swiss consular officers.

Switzerland is party to International Convention Concerning Civil Procedure, con-cluded in The Hague Mar. 1, 1954, and to Hague Convention of Mar. 18, 1970, on Takingof Evidence Abroad in Civil or Commercial Matters.

JUDGMENTS:

Judgments by courts in Switzerland in matters of private law relating to money claimsor other kinds of claims must be recognized and enforced anywhere in Switzerland(Federal Constitution, art. 122), provided they are res judicata, rendered by competentcourt, and with due citation of defendant (who in case of incapacity must have beenlegally represented). Same holds for money claims for federal administrative decisions,also for certain cantonal administrative decisions, e.g., tax claims and for federal andcantonal penal judgments and decisions.

Foreign judgments in matters of private law are recognized and enforced: (a) underLugano Convention of Sept. 16, 1988 on jurisdiction and enforcement with Austria,Belgium, Denmark, Finland, France, Germany, Gibraltar, Greece, Iceland, Ireland, Italy,Luxembourg, Netherlands, Norway, Poland, Portugal, Spain, Sweden, U.K. Other EU andEFTA countries expected to join; (b) under bilateral treaties, e.g. with Czech Republic,Liechtenstein, Slovakia; (c) otherwise, Private International Law Statute.

For procedure of enforcement, see category Debtor and Creditor, topic Collection ofDebts and Bankruptcy.

See category Dispute Resolution, topic Arbitration and Award.

LIMITATION OF ACTIONS:

Under Swiss law statute of limitation for actions is part of substantive law, not of lawof procedure.

Regular statute of limitation for claims is ten years, provided federal civil law doesnot specifically provide for different period (C.O. 127), e.g., five years for rents, interestsand other periodical payments, for food and board, for work done by craftsmen, for retailsales, for professional services of doctors, attorneys, law agents and notaries, for wages(C.O. 128), six months for right of borrower to receive loan and of lender for acceptance(C.O. 315). For claims based on responsibility against incorporators, directors and man-agers of corporations statute of limitation is five years, beginning with first knowledgeof damage, at latest ten years from damaging act. (C.O. 760). If general meeting hasgranted release, dissenting shareholder must file claim for responsibility within sixmonths. (C.O. 758). Claims for torts are barred after one year from time when damagedparty has received knowledge of damage and of identity of person responsible therefor,but in any event in ten years after injury took place, except if criminal law provides forlonger statute of limitation. (C.O. 60). Certain special statutes, such as federal statuteson liability of railways etc. of Mar. 28, 1905, and on road traffic etc. of Dec. 19, 1958,provide for two years. For statute of limitation of mortis causa dispositions, see categoryEstates and Trusts, topic Wills.

Suspension or Interruption of Statutory Period.—Statute of limitation does notcommence and, if it has begun to run, is suspended in cases of certain parental or maritalrelations, as between parent and child, guardian and ward, between spouses, in caseusufruct on debt exists, also as long as claim cannot be brought before Swiss Court. (C.O.134).

Statute of limitation is interrupted (1) by acknowledgment of debt by debtor, par-ticularly by payment of interest and instalments, constitution of pledge or guaranty, (2)by commencement of proceedings for collection or court action by creditor. (C.O. 135).

See also categories Business Regulation and Commerce, topic Sales, subhead Rem-edies of Buyers, catchline Statute of Limitations; Introduction, topic Holidays.

PRESCRIPTION:

See topic Limitation of Actions.

PRODUCT LIABILITY:

Federal Statute in force since Jan. 1, 1994. Mainly based on EU law. Strict liabilityof producer and importer for consequential damages caused by defective products.Compensation for death, personal injury and loss or damage to property in case ofconsumer goods.

SWITZERLAND LAW DIGEST CIVIL ACTIONS AND PROCEDURE



COURTS AND LEGISLATURECOURTS:

Cantonal Courts.—Most courts are cantonal courts.Each canton has its own judicial organization, its own system of procedure. Civil

jurisdiction is harmonized by Federal Act on Civil Jurisdiction, in force since Jan. 1,2001.

There are special inferior courts, such as ‘‘Justice of the Peace’’, in some cantonsmainly for conciliatory purposes before introduction of case to trial court.

Trial courts of general jurisdiction are variously called ‘‘District Court’’, ‘‘CircuitCourt’’, ‘‘Court of First Instance’’, ‘‘Cantonal Court’’, etc.

In many matters appeal is possible to intermediate appellate court, called ‘‘SuperiorCourt,’’ ‘‘Court of Appeal,’’ ‘‘Cantonal Court,’’ etc.

Commercial and industrial matters are in some cantons reserved to ‘‘CommercialCourt’’. Other separate courts are competent for labor, landlord and tenant, police mat-ters, etc.

Swiss Federal Supreme Court (see category Introduction, topic Government andLegal System) with its main seat in Lausanne and chamber in Lucerne acts basically asappellate court and has final review of wide range of decisions or measures taken bycantonal and federal authorities, as in following matters: Complaints for violation ofconstitutional rights of individuals, recourses and complaints for violation of federalstatutes on civil, penal or administrative matters, including federal tax statutes. SwissFederal Supreme Court also has final jurisdiction in matters concerning internationaltreaties where such jurisdiction is not reserved to other federal authorities. It only actsas trial court in special matters, such as litigation between Confederation and cantons.

The question, however, whether or not federal statute, federal decree of generalobligatory character (see category Introduction, topic Government and Legal System,subhead Legislative Power), or international treaty concluded by Confederation violatesFederal Constitution is not subject to review by Swiss Federal Supreme Court.

Swiss Federal Criminal Court in Bellinzona is court of first instance in criminalmatters under federal jurisdiction such as money laundering, terrorism financing, andorganized crime.

Swiss Federal Administrative Court will take up activity in 2007, replacing FederalAppeal Commissions in administrative matters. Its seat will be in St. Gall.

Separate Federal Military Criminal Courts have jurisdiction in matters involvingfederal military criminal law.

LAW REPORTS:

Major decisions of Swiss Federal Supreme Court are published currently in its officialcollection ‘‘Entscheidungen des Schweizerischen Bundesgerichtes, Amtliche Sam-mlung’’, ‘‘Arrêts du Tribunal Fédéral Suisse, Receuil Officiel, and Internet (http://www.bger.ch)’’. Numerous, mostly unofficial reports and periodicals, publish court de-cisions, e.g.: ‘‘Praxis des Bundesgerichtes’’, ‘‘Blätter für Zürcherische Rechtssprechung’’,‘‘Journal des Tribunaux’’, ‘‘Semaine judiciaire’’, ‘‘Zeitschrift des Bernischen Juristen-vereins’’, ‘‘Basler Juristische Mitteilungen’’, ‘‘Repertorio di Giurisprudenza Patria’’.

LEGISLATURE:

See category Introduction, topic Government and Legal System.

STATUTES:

All federal statutes are published in ‘‘Amtliche Sammlung der eidgenössischenGesetze’’, ‘‘Receuil officiel des lois et ordonnance de la Confédération suisse’’ and insystematic looseleaf edition called ‘‘Systematische Sammlung des Bundesrechts’’, ‘‘Re-ceuil systématique du droit fédéral’’ (also available at www.admin.ch).

Each canton publishes its statutes in its own official cantonal collection.

CRIMINAL LAWCRIMINAL LAW:

Federal Criminal Code of Dec. 21, 1937 with amendments governs crimes, offensesand main delinquencies. Cantonal and federal statutes govern criminal procedure.

Art. 100quater holds company criminally responsible, if during course of businesscrime is committed in company, which cannot be traced to specific person due to lackof organization and defined responsibilities. If crime relates to money laundering, briberyor terrorism financing, company is also held responsible and can be fined if it failed toput in place adequate safeguards to prevent such criminal acts by its employees.

Art. 161 forbids use or communication to third party by member of board, manage-ment or auditors of company or their agents of confidential information disclosure ofwhich will considerably influence price of securities on stock exchange. Use of suchinformation by tippee also falls under prohibition.

Art. 179-bis forbids direct recording of non-public conversation without consent ofparticipants.

Art. 273 forbids to disclose business secrets to foreign state agency, organization orprivate enterprise. Direct or indirect interest in Switzerland worthy of protection isrequired. Waiver of secrecy by individuals or legal entities concerned is insufficient ifthird parties or Switzerland are involved.

For database transfer abroad permit required under Art. 6 Data Protection Statute.Art. 271 forbids to exercise on Swiss territory acts for foreign state which are reserved

to public officers. Foreign tax officer may therefore not make inspections on Swissterritory, even though Swiss corporation concerned may have given its consent. Anypersons furthering such acts fall under same penalties. Taking of evidence or service ofdocuments are prohibited without specific permit received from Swiss authorities. Seecategory Civil Actions and Procedure, topic Depositions and Discovery.

Art. 305-bis and 305-ter forbid money laundering and negligence to identify customerswhen accepting money deposits.

Art. 322septies forbids bribing judges, arbitrators, officials or members of armed forceswho work for foreign state or international organization. Also accepting bribes in one ofthese capacities is forbidden.

Art. 4a of Federal Statute on Unfair Competition of Dec. 19, 1986 forbids both bribingand accepting bribes in private sector.

Federal Statute on International Judicial Assistance in Criminal Matters of Mar. 20,1981 defines preconditions and applicable measures.

Switzerland is party to European Convention on Assistance in Criminal Matters of Apr.20, 1959 and to European Convention on Extradition of Dec. 13, 1957. It has concludedvarious similar agreements with various countries, including U.S. (Treaties, 1973, 1990).

See also category Treaties and Conventions, topic Treaties.

DEBTOR AND CREDITORASSIGNMENTS:

Applicable Law.—Law chosen by assignor and assignee, with respect to obligor onlywith obligor’s assent, otherwise law applicable to obligation. Form of assignment gov-erned by law applicable to contract providing for assignment.

Assignability.—Obligations are assignable without obligor’s assent, unless not per-missible by law, agreement, or nature of legal relationship. Obligor may not raise defensethat assignment of obligation was excluded by agreement, if third person has becomeobligee in good faith based on written acknowledgment of indebtedness which does notmention its unassignability. (C.O. 164).

Instrument Transferring Title.—Assignment must be in writing; but promise toassign need not be in writing. (C.O. 165).

Notice.—Validity of assignment does not depend on notice to obligor. However,obligor in good faith without notice of assignment is validly discharged if obligorperforms to former obligee. (C.O. 167).

Delivery of Evidence.—Assignor must deliver to assignee any document pertainingto obligation and other proof which assignor has. (C.O. 170).

Effect.—Rights connected with obligation pass ipso iure to assignee, unless insepa-rably connected with assignor’s person. (C.O. 170).

Warranty.—In case of assignment for valuable consideration assignor warrants ex-istence of claim at time of assignment, but warrants solvency of obligor only if so agreed.In case of assignment without valuable consideration, assignor is not even liable forexistence of claim. (C.O. 171).

Defenses of Obligor.—In addition to special defenses against assignee, obligor has alldefenses against assignor (and former assignors), provided such defenses existed at timeobligor learned of assignment (C.O. 169); obligor has also defenses pertaining to validityof assignment or previous assignments.

ATTACHMENT:Constitutes provisional security measure under Federal Statute on Collection of Debts

and Bankruptcy of Apr. 11, 1889, as amended (especially Dec. 16, 1994), in order toprotect creditor before effectuation of seizure in collection proceedings or bankruptcy.See topic Collection of Debts and Bankruptcy.

Prerequisites.—Allowable for money claims of private law including establishmentof security by deposit of money. In case of claim secured by pledge or mortgageattachment is only admissible for noncovered amount of claim. Creditor may be indi-vidual or legal entity, residing in Switzerland or abroad. Any movable or immovableproperty of debtor in Switzerland may be attached.

Grounds are: (1) Debtor has no fixed domicile; or (2) is suspected of evading obli-gations by flight or removal of assets; or (3) is in transit or at fair or market, butattachment is only for debts payable forthwith; (4)(a) no other attachment ground isgiven, (b) debtor has no domicile in Switzerland, and (c) there is either sufficientconnection with Switzerland or enforceable (or arbitral) judicial award or acknowledg-ment of debt signed by debtor; (5) creditor has ‘‘Certificate of Loss’’ against debtor. Ingeneral, claims must be matured, except in case of grounds (1) or (2). Particular rulesapply to attachments for claims against foreign countries.

Order to Attach.—Creditor has to file petition with competent attachment court (notarbitral tribunal) at place where property is located. Provided existence of claim, groundfor attachment and fact that there are assets at hand belonging to debtor appear to becredible, authority issues ‘‘Order to Attach’’ pursuant to which attachment will be ef-fectuated similarly to seizure and recorded in document of attachment. Debtor maycontest ground of attachment by action to be brought before competent attachment courtat place of attachment within ten days after cognizance of document of attachment.

Indemnity.—Creditor is liable for damages resulting from unjustified attachment.Therefore attachment court usually orders creditor to furnish security.

Validation.—If creditor has not previously instituted court action or collection pro-ceedings for claim, he must do so within ten days after receipt of document of attach-ment. Unless Lugano Convention applies or specific jurisdiction has been agreed uponby parties, attachment creates forum for claims against nonresidents where creditor cansue. ‘‘Opposition’’ of debtor must be removed by creditor within ten days after com-munication either by applying for objection to be set aside in summary proceedings orby filing court action to have his claim confirmed. If application in summary proceedingsis rejected, court action must be filed within ten days of judgment.

Alleged rights of third persons to attached property must be notified to CollectionOffice within certain time after knowledge of attachment, otherwise they are deemed tobe renounced for attachment procedure. If notified, such rights will be dealt with inseparate court procedure.

If ‘‘Opposition’’ has not been declared by debtor or has been successfully removed,creditor must continue collection proceedings, either by way of seizure or by bankruptcyagainst debtor. In case of seizure, attaching creditor has some preferential rights withregard to other creditors of debtor, namely, (a) creditor participates in seizure of attachedproperty effectuated by other creditors after issuance of order to attach but before

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ATTACHMENT . . . continuedattaching creditor could request seizure provided creditor makes such request withincertain period of time, and (b) creditor is entitled to recover expenses of attachment fromproceeds of attached property. In case of bankruptcy attached property belongs to bank-rupt estate and attaching creditor has no special preferential rights.

Release of property from attachment will be granted to the debtor against securitywhich may, inter alia, also be given by joint guaranty or by deposit. See topic Collectionof Debts and Bankruptcy.

BANKRUPTCY:See topic Collection of Debts and Bankruptcy.

COLLECTION OF DEBTS AND BANKRUPTCY:Collection of Debts.—Collection of money claims including establishment of security

by deposit of money is regulated by Federal Statute concerning Collection of Debts andBankruptcy of Apr. 11, 1889, as amended (especially Dec. 16, 1994, Mar. 24, 2000 andDec. 19, 2003). Enforcement of other kinds of claims is subject to procedural laws ofcantons. Following explains summarily main features of collection under federal law.Periods of time are omitted; in certain instances, such periods may be extended in favorof debtor residing outside of place of collection, especially outside of Switzerland.

Initial Procedure.—Collection of debts begins with ‘‘Order to Pay’’ (Zahlungsbefehl,Commandement de payer, Precetto esecutivo) issued upon request of creditor by en-forcement office to debtor who can then declare ‘‘opposition’’ (Rechtsvorschlag, oppo-sition, opposizione). In case such declaration is made, creditor must remove such ‘‘op-position’’ either by applying for objection to be set aside in summary proceedings or byfiling court action to have his claim confirmed. When instituting summary court pro-cedure, creditor may obtain decree to remove ‘‘opposition’’ (Rechtsoeffnung, mainlevee,rigetto), (1) Finally, upon evidence of enforceable judgment or other decision, alsoforeign judgment or arbitral award, (2) provisionally, upon evidence of publicly authen-ticated deed or of acknowledgment of debt signed by debtor. Provisional ‘‘removal’’becomes final if debtor fails to bring ordinary court action for declaratory judgment thatdebt does not exist.

If ‘‘opposition’’ has not been declared or has been removed by ordinary judgment or‘‘removal decree,’’ enforcement continues at request of creditor in three possible ways:(1) Ordinarily, by seizure of specific property of debtor (Pfaendung, saisie, pigmora-mento); or (2) for debts secured by pledge or mortgage, by realization of such property(Pfandverwertung, realisation du gage, realizzazione del pegno); (3) against merchants,by bankruptcy proceedings comprising all assets and liabilities of debtor (Konkurs,faillite, fallimento).

Seizure.—Property estimated sufficient to cover debt with interest and costs will beseized; property necessary for maintenance of livelihood and profession of debtor ordebtor’s family is not seizable (domestic animals inclusive). Other creditors who requestseizure within period of time can participate in seizure (whereby additional property maybe seized for additional coverage). All those creditors form ‘‘group of creditors’’, severalof which can be formed for purpose of seizure of additional property. Claims of thirdparties for liberation of property from seizure because of ownership or security interestor another right thereto, are, if contested, adjudicated. Upon request of creditor, aftercertain time, seized property will be sold and proceeds distributed to creditors. Certainclasses of claims are privileged, e.g., for salaries, family support payments or socialsecurity premiums. In cases of privileged creditors and of insufficient proceeds, scheduleof creditors (collocations plan) is established before distribution. Schedule can be chal-lenged in court. For unpaid claim, creditor receives ‘‘certificate of loss’’ (which does notbear interest and is subject to statute of limitation of 20 years). This constitutes groundfor attachment. See topic Attachment.

Realization of Pledge or Mortgage.—Procedure is roughly similar to procedure incase of seizure. For unpaid claim, creditor receives certificate evidencing that fact, butit does not have legal effects of ‘‘certificate of loss’’. See subhead Collection of Debts,topic Seizure, supra.

Bankruptcy.—Not all debtors are subject to bankruptcy proceedings, only those re-corded in Register of Commerce, further those whose whereabouts are unknown, or whohave defrauded their creditors, etc. Debtor otherwise not subject to bankruptcy mayvoluntarily declare insolvency, thereby bringing about bankruptcy proceedings. Specialrules apply if liabilities exceed assets of share or cooperative corporation (C.O. 725, 903),and to liquidation of estate of decedent by Bankruptcy Office; see category Estates andTrusts, topic Executors and Administrators.

Initial Procedure.—As outlined above. If debt is evidenced by draft or check creditorcan request special ‘‘draft collection’’. Periods of time are then shorter and ‘‘opposition’’has to be granted by court order. There is no initial procedure in case of bankruptcy ofdebtor ordinarily not subject thereto.

Opening.—At creditor’s request, debtor is notified and threatened with bankruptcy.Thereafter, bankruptcy court, unless certain permissible objections of debtor are sus-tained, declares bankruptcy opened. This will be entered in land register within ten daysif real estate is at stake.

Bankrupt Estate.—Comprises all property of bankrupt except certain property neces-sary for maintenance of livelihood and professional activity of debtor and debtor’sfamily. All claims against debtor due except to extent secured by realty; non-money debtsare converted into money debts. Dispositions of bankrupt with regard to property ofestate are not valid with respect to creditors. Claims of third persons for separation fromestate of tangible property (or securities) in (exclusive) possession of bankrupt, e.g.,because of ownership, are adjudicated, if contested. Return of unpaid goods forwardedto bankrupt but not yet in bankrupt’s possession when bankruptcy proceedings wereopened may be demanded by seller (right of stoppage in transit).

Ordinary Procedure.—Bankruptcy office draws up inventory and publishes bankruptcy,ordering all creditors and debtors to file their claims and debts. Estate is administeredby bankruptcy office, which may be replaced by one or more persons elected by creditors;they may also elect committee of creditors to supervise administrators and authorize themto take certain important measures. For such elections, and for other urgent matters,meeting of creditors is held. Administration must establish schedule of creditors (col-

location plan). Thereafter, second creditor’s meeting passes on all matters, includingrealization of assets by public auction or private sale; subsequent meetings may be held.After distribution of proceeds, Bankruptcy Court receives final accounting, and declaresbankruptcy closed. Every creditor receives ‘‘certificate of loss’’ for unpaid balance ofclaim. See subhead Collection of Debts, catchline Seizure.

Summary procedure may be ordered by bankruptcy court if assets do not warrantexpenses of ordinary procedure. Bankruptcy office then proceeds to liquidations withoutparticipation of creditors. Any creditor can demand ordinary proceedings by advancingcosts.

Closure for Lack of Assets.—If no assets are found, Bankruptcy Court orders bank-ruptcy closed. No ‘‘certificate of loss’’ is issued. However, within certain period of timecreditor can institute execution of seizure against debtor, thereby obtaining such cer-tificate.

Composition.—By agreement, debtor can conclude composition with all creditors.By official procedure, three main kinds of composition (Nachlassvertrag, Concordat,

Concordato) can be effectuated: (1) Stay of payment during certain time period; (2)payment of percentage of all non-privileged debts; (3) abandonment of all or part ofdebtor’s assets to creditors (composition liquidation). Such composition is possible forany debtor, even after execution procedure has started. Except in case of opened bank-ruptcy, debtor must petition for stay of payments with special ‘‘composition authority’’,submitting statement of assets and liabilities and draft of composition. If authority grantsstay, commissioner is appointed. Same entry in land register as in case of bankruptcywithin two days.

If composition liquidation is confirmed, creditor’s meeting elects liquidators, andcommittee of creditors to supervise liquidators. Realization of assets and distribution ofproceeds to creditors is similar to corresponding procedure in bankruptcy. No ‘‘certificateof loss’’ is issued.

Special statutes apply inter alia to banks and savings institutions, insurance compa-nies, cooperative corporations, municipalities and other state organisations.

Foreign bankruptcy or composition has limited effect in Switzerland under PrivateInternational Law Statute, Art. 166 ff.

See topic Attachment; category Treaties and Conventions, topic Treaties.

ENFORCEMENT OF DEBTS AND BANKRUPTCY:See topic Collection of Debts and Bankruptcy.

EXEMPTIONS:See topic Collection of Debts and Bankruptcy.

GARNISHMENT:Any property of debtor in hands of third persons or claims against them may be

reached by seizure for execution or attachment. See topic Attachment.

LIENS:Tangible movables and securities in hands of creditor with consent of debtor, may be

retained until claim is paid, provided it is payable and connected property under lien.Among merchants connection of both with business suffices. (C.C. 895).

Commission merchants have lien on consigned goods or their proceeds for advances,disbursements, commissions and accrued charges. (C.O. 434). Forwarding agents havesimilar rights. Common carriers and warehousemen have liens on property in their handsto extent of their charges and disbursements. (C.O. 451, 485). Landlords of businesspremises have lien on furniture and equipment in rented business premises for past year’srent and current six months’ rent. (C.O. 268). See category Property, topic Landlord andTenant.

PLEDGES:Contract to pledge is governed by proper law; pledge as such by law of place of thing.Movable property (with exception of cattle, domestic animals, aircraft and vessels) is

pledged by delivery into possession of pledgee. If property is represented by documentof title, delivery of title is sufficient. (C.C. 884-885). Claims are pledged by writtenagreement. Notification of debtor is optional, but debtor without notice may still paypledgor and so discharge obligation. Negotiable bearer instruments may be pledged bybeing delivered into possession of pledgee. Negotiable instruments to name must also beendorsed or assigned in favor of pledgee. If, besides instrument representing title tomerchandise, separate warrants have been issued in order to demonstrate existing pledgeon merchandise, they must be given into possession of pledgee, and notice thereof mustbe made on any other instrument representing title to merchandise. Pledgor keeps votingright in pledged shares. (C.C. 899-902).

More than one pledge can be given on same property. Pledgor must notify first pledgeein writing and instruct pledgee to deliver, upon payment of debt by pledgor, property tosecond pledgee. Pledgee may sub-pledge property only with consent of owner.

Pledge is not effective as long as property remains in exclusive power of pledgor;pledge is terminated when pledgee has lost possession or right to recover possession overproperty.

Pledgee must return property upon payment of debt. If debt is not paid in time, pledgeemay start execution proceedings or sell property by private sale, if specifically so agreed.Pledge extends to accessories and, if claims have been pledged, as rule, to incomederived therefrom. Pledges give security for principal, interest and costs of execution ofdebt. (C.C. 886-892). Similar provisions apply to statutory right of retention. See cat-egory Business Regulation and Commerce, topic Contracts.

DISPUTE RESOLUTIONALTERNATIVE DISPUTE RESOLUTION:

Mandatory.—In most cantons, all cases first go to Justice of Peace for conciliation.All courts may, and frequently do, promote amicable settlement.

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ALTERNATIVE DISPUTE RESOLUTION . . . continuedVoluntary.—See topic Arbitration and Award.

ARBITRATION AND AWARD:International arbitration (where at least one party did not have its domicile or

ordinary residence in Switzerland when arbitration clause was agreed) is governed byFederal Private International Law Statute. If parties have chosen arbitration rules, thesegovern appointment, challenge and removal of arbitrators exclusively. Arbitral Tribunalrules on its own jurisdiction. Parties or Arbitral Tribunal choose procedure and applicablelaw freely. Assistance of state courts available, also for interim measures issued byArbitral Tribunal. Challenges of award may be totally excluded if both parties arenon-Swiss, otherwise challenge (at best) only on limited grounds analogous to New YorkConvention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10,1958.

Arbitration in Geneva or Zurich is frequent, ad hoc under UNCITRAL Rules, orinstitutional under ICC or new unitary Swiss Chamber Rules, including fast track(http://www.swissarbitration.ch).

Domestic arbitration in all cantons is governed by Concordat of Mar. 27, 1969.Switzerland is party to New York Convention of 1958. No reservations.

DOCUMENTS AND RECORDSACKNOWLEDGMENTS AND OTHER PUBLIC AUTHENTICATIONS:

Publicly authenticated documents (Öffentliche Urkunde, acte authentique, atto pub-blico) are of two kinds: (a) ordinary authentication, attestation or certification of facts bypublic officials, which include attestation of genuineness of person’s signature based onidentification (Beglaubigung, legalisation, autenticazione), and other certifications, e.g.,as to conformity of copy with original, correctness of extract from document or register,etc., and (b) execution of publicly authenticated act or instrument by public officialpertaining to legal relevant declarations of private persons.

Publicly authenticated documentations of all kinds provide full proof of facts evi-denced therein, as long as inaccuracy of content is not proven. (C.C. 9).

Blind person is bound by signature only if authenticated. (C.O. 14). All cantons haveprovisions for ordinary authentication of signatures or of other facts. Formal requirementsof such ordinary authentications are within domain of cantonal law.

Form of publicly authenticated instrument is prescribed by federal law for validity ofmany legal acts of private law. (See category Business Regulation and Commerce, topicContracts, subhead Formal Requirements.) Inasmuch as federal law does not have per-tinent provisions, as for matrimonial property contracts (C.C. 184), public wills (C.C.499-504), inheritance pacts (C.C. 512), and certain contracts of guaranty or of suretyship(C.O. 493), formal requirements for publicly authenticated instruments are left to can-tonal law (C.C. Final Title, 55). Authenticating person must make sure that instrumentexpresses true intention, and that it complies with formal requirements of federal orcantonal law.

Authenticating persons for ordinary authentications and/or publicly authenticatedinstruments are designated by cantonal law; in certain instances (e.g., civil status officers)within framework of federal law. Authenticating persons are notaries, judges, clerks ofcourts, mayors, clerks of municipalities or districts, special officials, sometimes privatepersons authorized to perform certain public authentications and in this respect act asofficials. See topic Notaries Public.

Signature of authenticating persons may have to be legalized, usually if document isdesigned for foreign state, directly by Chancellery of State of canton where authenti-cating person functions. Signature of that person may further have to be superlegalizedby Federal Chancellery in Berne, or by foreign embassies or consulates situated inSwitzerland.

Switzerland is party to Convention for exemption of foreign public deeds from cer-tification concluded in The Hague on Oct. 5, 1961, providing for ‘‘Apostille’’. SeeInternational Conventions section.

NOTARIES PUBLIC:Legislation relating to notaries public pertains to domain of cantons. In most cantons

notaries are public officials, e.g., Zurich, Berne, Schwyz. In some cantons function ofnotary may be combined with other professions, as attorneys-at-law, e.g., Basle-City,Aargau, Vaud, Geneva. There are cantons without institution of special notaries, but alsothose cantons have legislation relating to ordinary authentications and other certificationsof facts and to execution of publicly authenticated instruments, e.g., Schaffhausen, St.Gall, Lucerne. In St. Gall and Lucerne attorneys-at-law domiciled in that canton arecompetent to execute public wills and inheritance pacts, but in Lucerne only if attorney-at-law has taken oath as authenticating person.

Notaries public and/or other authenticating persons, their functions, their fees, andkeeping of their records, are subject to strict regulations and supervision.

See also topic Acknowledgments and Other Public Authentications.

PUBLIC REGISTERS:See topic Records; also category Business Regulation and Commerce, topic Register

of Commerce.

RECORDS:Federal law provides for certain public registers to be maintained by cantons under

supervision of Confederation. Facts recorded therein are presumed to be true and known.(C.C. 9). Public registers are, with certain exceptions, open for public inspection andupon request authenticated copies of certain registered facts are issued. Most importantpublic registers are following:

Register of Commerce (Handelsregister, Registre du commerce, Registro di com-mercio).—See category Business Regulation and Commerce, topic Register of Com-merce.

Civil Status Register (Zivilstandsregister, Registre de l’état civil, Registro dello statocivile) for public recording of civil status of person. There are particular registers of birth,death, marriage, legitimization, recognition of illegitimate fatherhood. Family Register iskept at Swiss place of citizenship (see category Citizenship, topic Citizenship) of person.

Registers are kept by Civil Status Officials appointed by respective cantons.

Register of Matrimonial Property Rights (Gueterrechtsregister, Registre des régimesmatrimoniaux, Registro dei beni matrimoniali) retains information regarding spouseswishing to preserve marital property rights as provided for under C.C. prior to 1988.

Land Register (Grundbuch, Registre foncier, Registro fondiario) for the public re-cording of all immovables in Switzerland with rights and charges thereon as providedfor by law.

Right in rem on immovable property which by law has to be recorded in land registerexists as such only if it appears in land register. Whoever in good faith relies uponrecording in land register and acquires ownership or other rights in rem, is protected inthis acquisition. (C.C. 973).

Register of Reservation of Ownership (Eigentumsvorbehaltsregister, Registre despactes de réserve de propriété, Registro dei patti di riserva della proprietà) for registrationof movable property transferred under reservation of ownership. (C.C. 715).

SEALS:

Seals on private instruments including corporate documents are unknown.

EMPLOYMENTLABOR RELATIONS:

Law of habitual place of work applies. Choice of law is limited. Sex discriminationstatute in force since July 1, 1996.

Statutory termination period one to three months depending on length of employment.Reasons for terminating employment must be given on request. Damages if employment‘‘abusively’’ terminated. (C.O. 335 to 336b). Specific rules regarding termination ofemployment apply in case of mass dismissals. (C.O. 335d). Acquired rights legislationmay apply in case of business transfers. (C.O. 333).

Employers are required to grant long-time employees specific types of benefits. Specialfamily allowances are compulsory.

Federal old age and disability insurance and unemployment insurance are compulsorystate insurance (see category Taxation, topic Taxes, subhead Direct Federal Taxes,catchline Insurance: Old Age and Other), also specific Federal Accident Insurance foremployees (Federal Statute of Mar. 20, 1981). Private pension plans and disabilityinsurance compulsory (so called ‘‘Second Column’’) Federal Statute of June 25, 1982).

Work permits: see category Citizenship, topic Aliens.

ENVIRONMENTENVIRONMENTAL REGULATION:

Various federal, cantonal and local laws protect directly and indirectly environment,especially lakes and rivers, forests, air, etc. and regulate responsibility for people whoare deemed to be cause for troubling environment. Genetically engineered organisms andpathogenic organisms are also part of environmental regulation, but now regulated inseparate statute of Mar. 21, 2003.

Federal Environmental Protection Statute of Oct. 7, 1983, in force since Jan. 1, 1985,as amended (especially July 1, 1997, Mar. 21, 2003 and Dec. 16, 2005). Followingordinances and additional statutes are of importance: Ordinance on Handling of NoxiousSubstances; Air Pollution Ordinance; Noise Protection Ordinance; Dangerous SubstancesOrdinance; Ordinance on Contaminated Soils; Disaster Protection Ordinance; WaterPollution Statute.

Following principles rank amongst most important in environmental regulation: En-vironmental protection through zoning law wherever possible (especially as for noisecontrol); polluters pay; no excessive pollution levels neither at stage of creation of newbuilding, nor during use of building; all time application of state-of-the-art technologies;waste effluents must be treated before release into public water streams; need for en-vironmental impact study in case of large new projects (e.g. shopping centers, golfcourses, plants for heavy industry).

As for “polluters pay” legislation has become more and more detailed. Most recentamendment goes into force on Nov. 1, 2006 and deals with split of costs for sanitationof contaminated site amongst present and former owners as well as amongst differentpolluters.

ESTATES AND TRUSTSADMINISTRATION:

See topic Executors and Administrators.

CLAIMS:

See topic Executors and Administrators; category Civil Actions and Procedure, topicActions.

DEATH:

When exercising rights, whoever alleges death of person must prove it by Civil StatusRecords, or by other proof if such records are missing or proven to be incorrect.(Presumption of Life, C.C. 32, 33 subs. 1).

Survivorship.—When several persons die in a common disaster and it is impossible toprove which ones survived the others, their simultaneous death is presumed. (C.C. 32subs. 2).

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DEATH . . . continuedDisappearance.—In case of disappearance of person under circumstances indicating

certain death, even if corpse is not seen, death may be assumed and entered in CivilStatus Register by order of supervisory authority at request of any interested person. Inunlikely case of return of such registered person, register can be adjusted either byrectification ex officio or by action for modification of rights. (C.C. 42, 43).

Declaration of Absence.—If death of a person is highly probable, because person haseither disappeared under great peril or has been absent for long time without having givenany news, then at request of any person interested ‘‘Declaration of Absence’’ may bepronounced by competent court. Request can be presented only after one year followingdisappearance, and in case of absence after five years since last news. By appropriatepublication court must call upon anyone in position to give information to report withinstipulated time, in any case within one year after publication. If no report has beenreceived within that time, court pronounces person to be absent and orders correspondingentry into Civil Status Register. Rights deriving from death of person declared absentmay be exercised as if death were proven. Declaration of death dissolves marriage exofficio. (C.C. 38 subs. 3; Presumption of Death, C.C. 35-38).

Death certificate may be obtained, if death occurred in Switzerland, from Civil StatusOffice, where death was recorded in Register of Deaths.

Actions for Death.—Damages may be collected from person who caused death ofanother person for (a) funeral expenses, (b) cost of healing and inability to earn livingif death did not occur immediately, (c) so-called ‘‘bread-winner-damage.’’ Actions for (a)and (b) are as a rule limited to heirs. Claims for ‘‘tort-moral’’ may also be filed. (C.O.45).

Amounts awarded are as a rule very low by American standards. In certain cases theyare limited by specific statutes; e.g., Air Transport Regulation Art. 8 et seq.: withreference to art. 22 Warsaw Convention: CHF 250,000 per dead person, but Swiss aircarriers must cover each passenger with CHF 500,000, according to Art. 106 subs. 1 lit.aOrdinance on Aviation (SWISS national air carrier, by contrast, has more favorable ratesfor passenger damage compensation). As SWISS is signatory to Intercarrier Agreement,there is no limit to liability amount that may be claimed by relatives of victims. Anycompensation is based on level to which damage claim is proven under applicable Law.

See topic Wills; categories Documents and Records, topic Records; Property, topicAbsentees.

DECEDENTS’ ESTATES:See topics Descent and Distribution, Executors and Administrators, Wills.

DESCENT AND DISTRIBUTION:Applicable Law.—Swiss law applies if last domicile was in Switzerland, but non-

Swiss may choose law of citizenship. Swiss law applies if Swiss with last domicileabroad chooses Swiss law generally or for Swiss assets. Swiss law applies if foreignauthorities do not deal with estate of Swiss citizen unless domicile law chosen. Fornon-Swiss with last domicile abroad, law applicable according to conflicts rules atdomicile applies. Special rules for land.

Swiss inheritance law makes no distinction between immovable and personal property,with certain exceptions which are mainly with respect to farmland.

If decedent dies intestate, statutory heirs inherit. Statutory heirs receive any propertynot disposed of by decedent. (C.C. 481 subs. 2). Thus appointed heirs and statutory heirscan inherit side by side: Expression ‘‘estate inherited intestate’’ used below may be entireestate or only part thereof not disposed of by decedent.

Statutory heirs: (1) Surviving spouse (after marital property allocation, see categoryFamily, topic Husband and Wife) receives: (a) one-half if decedent leaves descendants;(b) three-fourths if decedent leaves no descendants, but leaves statutory heirs of line ofdecedent’s parents; (c) whole estate if decedent leaves none of above. (C.C. 462).

(2) Children of decedent in equal shares: Predeceased child is replaced by child’sdescendants in all degrees per stirpes. (C.C. 457).

(3) If decedent leaves no descendants, parents of decedent each inherit one-half ofestate; predeceased parent is replaced by his or her descendants in all degrees per stirpes.If predeceased parent leaves no descendants, whole estate inherited intestate goes to otherparent or that parent’s descendants. (C.C. 458).

(4) If decedent leaves no descendants and there are no descendants in either parentalline, estate is inherited by grandparents equally on both sides. (C.C. 459).

(5) Public Body.—If decedent has no statutory heirs, estate escheats to canton inwhich decedent was last domiciled, or to municipality designated by that canton. (C.C.466). As to restricted liability of public body for decedent’s debts see topic Executorsand Administrators, subhead Heirs.

Plural Relationship of Blood and Half Blood.—Relative of blood related several timesto decedent is entitled within group according to each of relative’s positions in mainstems or lower stems; half blood is entitled within group only in main stem to which halfblood belongs.

Advance.—Statutory heirs are mutually bound to adjust among themselves any lib-erality received from decedent during lifetime, provided decedent when granting liber-ality intended advance against future inheritance of recipient. That intention is deemedto exist for liberalities granted by decedent to descendant as marriage portion, outfitting,transfer of property, release of debt, etc., unless decedent at any time clearly directedotherwise by disposition mortis causa, in written form or orally. (C.C. 626-633). Ifliberalities are not to be adjusted, they are subject to claim for reduction by an heir whosecompulsory hereditary rights are thereby impaired. (C.C. 527 subs. 1). See topic Wills,subhead Testamentary Dispositions, catchline Compulsory Heirs; also subhead Contest,catchline Suit for Reduction.

Escheat.—The right of the public body to the estate inherited intestate (see subheadStatutory Heirs, supra) has legal character of hereditary right, not of occupancy right(escheat).

For compulsory heirs, appointed heirs by disposition mortis causa, and lawsuit forinvalidity or for reduction, see topic Wills. For distinction between heirs and legatees,see topic Executors and Administrators, subhead Succession of Heirs and of Legatees.

For liabilities of heirs, renunciation of inheritance, claims against decedent, administra-tion by heirs, partition of estate, and lawsuit for inheritance, see topic Executors andAdministrators.

EXECUTORS AND ADMINISTRATORS:There are no special probate or surrogate’s courts. Cantons must designate authorities

competent for inheritance matters. No simplified procedures are available for smallestates.

Succession of Heirs and of Legatees.—As general rule heir is distributee who suc-ceeds to entire estate of decedent, (assets and liabilities) or to fraction of estate, statutoryheir (see topic Descent and Distribution) and/or as heir appointed by dispositions mortiscausa (see topic Wills, subhead Testamentary Dispositions). Upon decedent’s death,immovable and movable property vests immediately by force of law as universal suc-cession in statutory and/or appointed heirs. Several heirs constitute undivided communityof heirs until distribution. Heirs become joint owners and creditors, of all of decedent’simmovables, claims, and other inheritable rights; they become joint obligors of all ofdecedent’s obligations under joint and several personal liability. (C.C. 560, 602-603).

A legatee receives a specific asset, including usufruct, by disposition mortis causa(C.C. 484) or by operation of law. Legatee is singular successor into asset and has merelypersonal claim against heir or heirs or legatee (sub-legacy) charged (C.C. 562 subs. 1);above-mentioned legal usufructs are, however, rights in rem (C.C. 563). Legatee is notliable for decedent’s debts. See also topic Wills, subhead Legacies.

Capacity to Acquire.—In order to qualify as heir or as legatee person must survivedecedent. Unworthy person lacks capacity to acquire from decedent’s estate, e.g. ifperson wilfully caused or attempted to cause death of decedent, or committed certainfraudulent acts in connection with decedent’s disposition mortis causa; such unworthinessis removed if forgiven by decedent. (C.C. 542, 543, 539-541).

Heirs.—If there is no testamentary executor (see subhead Testamentary Executors,infra) administration, liquidation and partition of estate is left to heirs. Competent au-thority at decedent’s last domicile must order certain protective measures, as (1) sealingof estate if provided by cantonal law, (2) inventorization if heir is under guardianship orlastingly absent without representation or requests it, or (3) appointment of officialadministrator of estate (see subhead Official Administrators of Estate, infra). (C.C. 551-555).

Measures Limiting Liability of Heirs.—To avoid personal liability heir may either: (a)Renounce inheritance within three months, but renunciation is presumed, if deceased’sinsolvency was publicly known or officially established; or (b) demand public inventoryand thereafter either accept inheritance unconditionally, or renounce it, or accept itsubject to inventory, which means that heirs will be liable only for debts specified ininventory; or (c) demand official liquidation, but requests for official liquidation are notgranted if another heir accepts inheritance. (C.C. 566-597). Public body inheriting asstatutory heir is liable only for decedent’s debts to extent of property received. (C.C.592). See topic Descent and Distribution, subhead Statutory Heirs.

Presentation of Claims.—Claims against decedent should be promptly presented be-cause in case of public inventory (see catchline Measures Limiting Liability of Heirs,supra) authority has to call on creditors and debtors by publication to file their claimsand debts within period fixed in each case, but no less than one month from first dayof publication. Claims and debts appearing in public records or in decedent’s papers areincluded in inventory as matter of course. If unsecured creditors omitted to file claims,and their claims are not otherwise included in inventory, they forfeit personal liabilityof heirs with respect to assets in estate. If creditor omitted to file claim without fault orif filed claim was not included in inventory; heirs are liable inasmuch as enriched byinheritance. (C.C. 582-583, 590).

Determination of Heirs.—In case of intestacy, see topic Descent and Distribution; incase of heirs appointed by disposition mortis causa, see topic Wills.

Administration by Heirs.—If no testamentary executor or official administrator (seesubheads Testamentary Executors and Official Administrators of Estate, infra) has beenappointed, administration of estate is right and duty of heirs, who must act jointly, notseverally. At request of co-heir competent authority may appoint representative of heirsup to distribution. (C.C. 602). Representative is solely entitled to act for heirs.

Distribution by Heirs.—Distribution of inheritance may be requested by any co-heirat any time, except when bound to continue community of heirs by agreement, and incertain cases provided by statute such as serious detriment to value of assets by distri-bution (in such case only temporary deferment is possible), and with regard to posthu-mous child. (C.C. 604-606).

All heirs have equal claim to assets of estate, except if statute or testator providesotherwise. If no executor is acting, heirs must establish as many portions out of estateassets as there are heirs or stems of heirs. If they do not agree, competent authorityestablishes portions at request of any one heir. Portions are allotted by agreement or bydrawing lots among heirs. (C.C. 610-611). There are special provisions for distributionof immovable property, especially farm land. (C.C. 617-619 partially reversed by BGBB,Jan. 1, 1994). (See category Property, topic Immovable Property.) Distribution becomesbinding upon heirs with acceptance of portions or with conclusion of distribution agree-ment in writing. (C.C. 634).

Performance of Legacies.—See topic Wills, subhead Legacies.

Testamentary executors may be appointed by (a) will or (b) inheritance pact, butprovision in pact has nature of will and is, therefore, subject to unilateral revocation oramendment.

Eligibility.—Any legally capable natural person, resident or nonresident, citizen ornoncitizen of Switzerland, including legal entity located inside or outside of Switzerland,is eligible.

Issuance of Letters.—Letters testamentary in sense of American practice are not ex-ecuted. However, certificates containing appointment of executors are issued by judicialor administrative authorities.

Removal may be made by supervising authority on serious grounds.Powers and Duties.—Executors derive their powers directly from will, which may

grant unlimited powers or powers limited to certain executorial functions. Several ex-ecutors act jointly, unless will provides otherwise. If will has no limitation as to powers

SWITZERLAND LAW DIGEST ESTATES AND TRUSTS



EXECUTORS AND ADMINISTRATORS . . . continuedof executor, executor has sole power and duty to administer estate, including makingsales, paying decedent’s debts, distributing legacies, and distributing to heirs accordingto will or statute. (C.C. 518).

Notice of Appointment.—Executor must be notified by authority opening will (see topicWills). Within 14 days after receipt of this notice acceptance or refusal of office mustbe declared; silence means acceptance. (C.C. 517).

Actions.—Executor sues and is sued, as a rule, in executor’s own name on behalf ofestate.

Final Accounting.—After distribution executor must render final accounting to heirs.Compensation.—Executors are entitled to proper compensation; no scale is fixed by

Code. (C.C. 517). Contests on this are decided by competent authority.Supervision.—Executors are subject to supervision by competent authority.

Official administrators of estate are appointed by competent authority under specificconditions only, mainly (1) if heir is lastingly absent and without representation, providedthat heir’s interests require it, (2) if none of claimants can prove right to inherit satis-factorily, or if it is uncertain whether there is heir (except public body), (3) if not all heirsare known, or (4) if statute provides for in it special cases. Executor appointed by willmay but does not have to be appointed as official administrator. (C.C. 554, 556). Seecategory Property, topic Absentees.

Evidence of appointment is by certified copy of appointing decree or special certifi-cation by appointing authority.

Powers and Duties.—Official administrator must administer estate as conservatorymeasure. Distribution is not a duty. During time for which official administrator isappointed, administrative powers of heirs or executor are suspended.

Supervision.—Official administrator is subject to supervision by appointing authority.

Official liquidation of estate is ordered by competent authority (1) at request of anyheir if no other heir accepts inheritance unconditionally or subject to inventory (seesubhead Heirs, supra), or (2) at request of creditors or legatees who have good reasonsto fear that their claims will not be paid, unless security is given to them. (C.C. 593-594).

Procedure.—Official liquidation may be handled by authority itself or by one or severalliquidating administrators appointed by authority. Property of decedent is sold, immov-able property by public auction unless all heirs consent to another manner of sale; alldebts must be paid, and legacies distributed after payment of all debts. Any surplus isdistributed to heirs. (C.C. 595-596).

Supervision.—Competent authority supervises appointed official liquidators. Heirs maybring recourse against liquidation measures intended or already taken. (C.C. 595).

Liquidation of Estate by Bankruptcy Office.—If all next statutory heirs renounceinheritance, it is liquidated by bankruptcy office according to bankruptcy law. If ordinaryor summary bankruptcy proceedings take place, any surplus, after performance of lega-cies, is distributed to statutory heirs. (C.C. 573).

Suit for Inheritance.—This special action is open to anyone who, as statutory orappointed heir, believes himself to have better right to inheritance or special propertytherein than actual possessor. Action must be based on title of inheritance, not on anyother title. Court takes necessary measures of protection upon request of plaintiff. Limi-tation of such action: (1) against defendant in good faith, one year from time plaintifflearned of defendant’s possession and plaintiff’s own better right; in any case, after tenyears from decedent’s death or opening of will; (2) against defendant in bad faith, always30 years. (C.C. 598-600). Before distribution, action against heir has to be brought bysuit for distribution. See subhead Heirs, catchline Distribution by Heirs, supra. For otherhereditary actions, see topic Wills.

Compulsory Heirship and Legacies.—See topic Wills.

Foreign Executors or Administrators and Foreign Probate.—Recognized underconditions of Arts. 92 and 96 Private International Law Statute.

FIDUCIARIES:

Transfer of property to a fiduciary is recognized. Fiduciary becomes owner of tangibleproperty and creditor of intangible property, and assumes obligation to retransfer totransferor or to transfer to third person under certain conditions. Case Law holds thatfiduciary has status of full owner or full creditor; as a rule, fiduciary property falls intobankruptcy estate of fiduciary. Certain court decisions examine possible exceptions to thisrule.

Transfer of property to fiduciary is also admissible in order to give security to claim.However, if tangible movable property remains with transferor on basis of special legalground (e.g., lease) transfer does not become effective with respect to third persons ifit was intended to harm them or to violate provisions of pledge. (See category Debtorand Creditor, topic Pledges.) (C.C. 717).

See also topics Executors and Administrators, Trusts; category Business Organizations,topic Foundations.

TRUSTS:

Creation of trust ownership in Anglo-American legal conception is not possible underSwiss law, but transfer of ownership or of claim to fiduciary is recognized by Swiss law.

The boards of legal entities are empowered to create foreign trusts as precautionaryprotective measure in case of international conflicts. General meeting must be notified.

See also topic Fiduciaries; category Business Organizations, topic Foundations.

WILLS:

Hague Convention of Oct. 5, 1961 on law applicable to form of last wills appliesgenerally. (Art. 93 Private International Law Statute).

Individual may dispose of such part of property by disposition mortis causa (will orinheritance pact) to extent that law does not obligate individual to leave share of estateto certain statutory heirs (compulsory heirs). (C.C. 481).

Capacity to Make Will.—Testator must be 18 years of age and capable of judgment.(C.C. 467).

Testamentary Dispositions.—Appointed Heirs.—Testator may appoint one or more heirs. Whether disposition means

appointment of heir or legacy depends on will of testator. To leave entire estate orfraction means to appoint heirs. (C.C. 483). To allot net estate or fraction is legacy. Asto statutory heirs, see topic Descent and Distribution; as to distinction between heirs(statutory heirs and/or appointed heirs) and legatees, see topic Executors and Adminis-trators, subhead Succession of Heirs and of Legatees; also see subhead Legacies, infra.

Compulsory Heirs.—Descendants, parents and surviving spouse have interest in de-cedent’s estate not subject to will. This is calculated on basis of share which these heirswould receive if decedent had died intestate. It is: (a) Three-fourths of such share fordescendants, (b) one-half for each parent, (c) one-half for surviving spouse. (C.C. 470-471).

Testator may leave to surviving spouse usufruct in whole of inheritance devolving ontheir common descendants. This is reduced in case surviving spouse remarries. (C.C.473).

Under certain circumstances (such as grave wrongs against testator, officially estab-lished insolvency of heir, etc.) testator may totally or partially disregard compulsoryheirship (disinherison). (C.C. 477-480).

Reversionary Heirs.—Testator may appoint preliminary heir (Vorerbe, grevé, eredegravato) with obligation to deliver inheritance to subsequent heir (Nacherbe, appelé,erede sostituito) upon happening of certain event. Reversionary, subsequent heir cannotbe charged with such duty. Same holds for legacy. (C.C. 488). Nondum conceptus maybe designated as reversionary heir or as reversionary legatee. (C.C. 545). Preliminary heiracquires inheritance like any other appointed heir, subject to being divested thereof byhappening of event provided for, in absence of such provision by death. Competentauthority has to direct establishment of inventory. Preliminary heir has to give securityunless relieved thereof by testator. (C.C. 490-492).

Replacement of Heirs.—Testator may designate in testamentary disposition one ormore persons who shall receive inheritance in lieu of heir who does not acquire it forhaving died earlier, or renounced it (C.C. 487), or for other reasons. Similar dispositionsare possible for replacement of legatee.

Legacies.—See subhead Legacies, infra.Burdens and Conditions.—Testator may impose burdens or conditions to testamentary

dispositions, performance of which can be demanded by anyone interested therein assoon as disposition becomes effective. (C.C. 482).

Above dispositions may also be made in inheritance pact. See subhead InheritancePacts, infra.

Forms of Wills.—Hague Convention of Oct. 5, 1961 applies, except that Swiss maynot make will orally abroad save in extraordinary circumstances. In Switzerland willsmay be made either in publicly authenticated form, in holographic form, or orally(nuncupative wills).

Public Wills.—These are publicly authenticated documents drawn up by officials des-ignated by cantonal law. Document must be read and signed by testator and dated andsigned by authenticating official. Immediately afterwards testator must declare before twoqualifying witnesses in presence of official that testator has read document and that itcontains testator’s will. This declaration must be certified on document by two witnesseswith their signatures, together with their statement that, to their observation, testator waslegally capable. In case testator does not read and sign document, procedure is somewhatdifferent. (C.C. 499-504).

Holographic wills must be written from beginning to end, including year, month, andday of execution in testator’s own handwriting, and signed by testator. (C.C. 505).

Nuncupative (Oral) Wills.—In certain cases of emergency testator may make oral willbefore two qualifying witnesses. Dispositions of testator must at once be written downby one witness with place, year, month and day of execution, be signed by both wit-nesses, and then deposited without delay by both witnesses with judicial authority, withdeclaration that testator, to observation of two witnesses, was legally capable and com-municated to them this to be testator’s last will under special prevailing circumstances.Instead of written record two witnesses may give oral record to judicial authority, withsame declaration. Nuncupative will loses validity 14 days from time it becomes possiblefor testator to use one of other forms of wills. (C.C. 506-508).

Revocation.—Testator may alter or revoke will at any time. Alterations and revoca-tions must be made by new will using one of forms described above. Will may also berevoked by destroying original document. (C.C. 509-510).

Will in which previous will is not expressly revoked replaces previous will to extentthat it does not doubtlessly merely complement it. (C.C. 511).

Testamentary dispositions are not avoided, if, subsequently, due to birth of issue,marriage of testator, legitimation of children or acquisition of compulsory right ofheirship by others, testator’s power to testamentary disposal is restricted; they are,however, subject to reduction. (C.C. 516). See infra, subhead Contest, catchline Suit forReduction.

Revival.—A revoked will may revive by revocation of a subsequent will if suchintention of testator appears from still more recent will expressing such revocation eitherspecifically or by interpretation.

Probate.—Swiss law does not provide for probate proceedings such as known inAmerican practice. Upon decedent’s death all documents appearing to be wills must bedelivered to authority of decedent’s last domicile competent therefor. Within one monthafter delivery, decedent’s will or wills must be ‘‘opened’’ by authority. Copy of entirewill must be communicated to statutory heirs, appointed heirs, and executor with un-limited powers. Other persons interested receive copy to extent it concerns them. Personswith unknown abode are notified by publication. (C.C. 556-558).

Certificate of Inheritance.—If no objections have been filed by statutory heirs or bybeneficiaries of prior disposition mortis causa within one month since communication topersons concerned, authority issues, upon request, certificate of inheritance to heirsappointed under will stating that they are recognized as such heirs, subject to suitscontesting invalidity of will (see subhead Contest, infra), or of inheritance (see topicExecutors and Administrators). (C.C. 559).

ESTATES AND TRUSTS MARTINDALE-HUBBELL LAW DIGEST - 2007



WILLS . . . continuedContest.—Suit for Invalidity.—Legal defects of a disposition mortis causa such as (1) incapacity

of decedent at time when disposition was made, (2) dispositions made under influenceof error, fraud, threats or duress, (3) immoral provisions or conditions, (4) defects ofform, make disposition voidable, not null and void. Suit for invalidity or objection mustbe brought. (C.C. 519-520a).

Statute of limitation for court action: (a) Against defendant in good faith, one yearfrom time plaintiff receives notice of disposition mortis causa and ground of invalidity,and in any event ten years from day of opening of will. (b) Against defendant in badfaith, 30 years. Objections are not subject to any statute of limitation. (C.C. 519-521).Dispositions with defects as to (2) above become valid if decedent does not revoke themwithin one year after decedent has learned of error or of fraud or after influence of duressor threats has ceased. (C.C. 469).

Suit for Reduction.—Compulsory heirs who do not receive the value of their com-pulsory share by a disposition mortis causa may ask for reduction of disposition up topermitted extent by suit for reduction or by objection. Certain dispositions inter vivos,such as liberalities not subject to adjustment (see topic Descent and Distribution, subheadAdvance), and gifts made within five years before decedent’s death, are likewise subjectto reduction. Statute of limitations: one year since heir has learned of violation of rights,in any event ten years to be computed in case of wills from day of opening, in case ofother dispositions (inheritance pact or dispositions inter vivos) from death. If previousdisposition mortis causa becomes valid because later disposition has been declaredinvalid, statute of limitations begins to run from date of invalidation. Objections are notsubject to statute of limitations. (C.C. 522-533).

Suit for Inheritance.—See topic Executors and Administrators.

Legacies.—Person to whom specific property benefit has been bequeathed is not heirbut legatee. Same legal position is held by person to whom usufruct of entire estate orfraction of estate has been bequeathed. (C.C. 484). Legacies may also be made to heirs;allotment of specific piece of property in estate to heir, however, has to be regarded asdirection for distribution (see topic Executors and Administrators) and not as legacy,unless another intention of decedent appears from disposition mortis causa. (C.C. 608,subdivision 3).

Claim.—A legatee has a personal claim against the community of heirs, or against asingle heir or a legatee (sub-legacy) charged with the legacy. If the legacies exceed thevalue of the estate, or if legacy exceeds inheritance or legacy of person charged with itor compulsory inheritance right, reduction can be claimed accordingly. (C.C. 486).

Performance.—Claims of creditors take precedence over legatees. If legacies are per-formed by heirs and if thereafter there are still debts of which heirs had no previousknowledge, heirs are entitled to claim proportionate restitution from legatees, as far asheirs could have claimed reduction of legacies, but only to extent legatees are stillenriched at time when restitution is claimed. (C.C. 564-565).

Lapse.—In case a legatee predeceases decedent, legacy falls to person charged withit, unless another intention of decedent is shown from disposition per mortem. (C.C. 543).

Inheritance Pacts.—A person may undertake towards another person to leave entireestate or fraction of estate or legacy to other person or to third person, with or withoutcompensation in return. Such undertakings do not have character of full obligations.Person bound by pact has, in principle, right to dispose freely inter vivos. However,dispositions mortis causa and gifts incompatible with undertakings in inheritance pactmay be challenged. (C.C. 494). Inheritance pacts by which person foregoes heirship withor without compensation are also admissible. (C.C. 495-497).

Capacity to Make an Inheritance Pact.—Person making inheritance pact must have fulllegal capacity. (C.C. 468).

Form of Execution.—Same as for public wills. Parties have to declare their intentionto official at same time and subscribe document before official and two witnesses. (C.C.512).

Form of Revocation.—Pact may be revoked unilaterally by obligated person in one offorms of will, but only if, after execution of pact, heir or legatee has acted towardsdecedent in way giving ground to disinherit. (C.C. 513, subs. 2 and 3).

Probation.—Law does not provide for ‘‘opening’’ of inheritance pacts.

FAMILYADOPTION:

Adoption in Switzerland is governed by Swiss law unless to serious detriment of childit is not recognized in country of domicile or citizenship of adopting person or spouses.(Art. 77, subs. 2, Private International Law Statute).

Only a single person over 35 or spouses over 35 or whose marriage has lasted for morethan five years may adopt another person who must be at least 16 years younger. (C.C.264a-265). Adoptee, if capable of discernment, must consent and, if a minor or a personwho has been placed under guardianship, parents or guardianship authorities must alsoconsent. (C.C. 265-265d). Without consent of spouse no person can adopt or be adopted.Adoption is granted by competent authority at domicile of adopting person(s). (C.C. 268).Adoptee may take new name. Adoptee becomes adoptor’s child and loses legal rela-tionship to natural parents except to parent with whom adoptor is married. (C.C. 267).Only if adopted person is minor, does adoption by Swiss citizen convey Swiss citizen-ship. (C.C. 267a).

DESERTION:See topic Divorce.

DIVORCE:Swiss courts are competent if both parties have domicile in Switzerland, if defendant

has domicile or plaintiff has had domicile for one year in Switzerland or is Swiss citizen.If they have common foreign citizenship and only one party has domicile in Switzerland,that law applies unless divorce is impossible or highly impracticable under that law, thenSwiss law is applicable. (Arts. 59 and 61, subs. 2, Private International Law Statute).

Grounds for Divorce.—Divorce may be granted (a) on mutual or parallel demand byboth spouses. Unless parties submit agreement on all consequences of divorce, courtregulates consequences; (b) on demand by one spouse after two years (not necessarilylegal) separation; (c) on demand by one spouse before expiry of waiting period ifcontinuation of marital relations cannot be expected due to important reasons not mainlydue to claimant. Federal Supreme Court changed initial practise of setting requirementsfor important reasons excessively high, but they must at least have weight of two yearseparation. (C.C. 111-116).

Procedure.—Is subject to Cantonal law, but following federal requirements: (a) partiesmust be protected from rash or ill-considered action; (b) parties will be heard togetherand individually; (c) after agreement concerning indirect consequences of divorce issubmitted, two month reflection period, then written confirmation by both parties indi-vidually about principle of divorce and consequences, and approval by court; (d) if noagreement, both parties may submit proposals concerning consequences (C.C. 111-112).Either spouse may demand for precautionary measures during divorce procedure, inparticular relating to lodging, maintenance of family, management of matrimonial prop-erty and custody of children. (C.C. 137, 175-179).

Alimony may be allocated to party if it cannot be expected to provide for its ownmaintenance and pension plan. Depends on length of marriage, distribution of tasksduring marriage, age, wealth, income, property, children, education and earning capacity.Alimony can be denied if party grossly violated its obligation to participate in familymaintenance, provoked its own indigence, committed crime against other party or closelyrelated person. Alimonies can be allocated by judgment or agreement. May be raised orreduced due to living costs or subsequent judgment. Law facilitates execution of alimonypayments. (C.C. 125-132).

GUARDIAN AND WARD:

Hague Convention of Oct. 5, 1961 applies generally. (Art. 84 Private International LawStatute).

Children remain, as long as they are minors, under authority of their parents orsurviving parent. (C.C. 296). Parents may not be arbitrarily deprived of parental au-thority. (C.C. 311 et seq.).

During marriage both parents exercise parental power. When parents live separatelyor have been divorced child stands under parental authority of parent to whom custodyhas been awarded, or under guardianship. (C.C. 297). If parents in agreement concerningconsequences of divorce have agreed upon participation in care for child and in main-tenance of child they may submit proposal to guardianship authorities to have jointparental authority. (C.C. 298a).

Parents are, by statute, entrusted with representation of child as against third persons.They have also right and duty to manage all of child’s assets, including bequests. As arule parents are not required to account or to give security for faithful performance oftheir duties in this respect. Guardianship authorities may require parents to periodicallyaccount if regarded as necessary on basis of nature and size of child’s assets and personalcircumstances of parents. (C.C. 318).

Guardians may be appointed officially when necessary and are under supervision ofthe guardianship authorities and must account at least once every two years. If competentand at least 16 years of age, ward is, if possible, consulted during accounting. (C.C. 413).Guardians and guardianship authorities are liable for losses caused willfully or by theirnegligence. If they are unable to pay damages, canton becomes liable. (C.C. 426, 427).As a rule, no bond is required from guardian.

See also category Property, topic Absentees.

HUSBAND AND WIFE:

Applicable law as regards matrimonial property regimes may be chosen by spousesamong law of common (future) domicile and law of either spouse’s citizenship, otherwiselaw of (last) common domicile applies. (Arts. 52-54, Private International Law Statute).

Swiss law provides three systems regulating property rights between spouses: Sharingof acquisitions (Errungenschaftsbeteiligung), community of property (Gütergemein-schaft) and separation of property (Gütertrennung). Sharing of acquisitions applies unlesslaw or marriage property contract provides otherwise. (C.C. 181-184).

Sharing of Acquisitions.—Property earned during marriage, items for solely personaluse and property owned before or inherited after marriage remains separate duringmarriage. Each spouse is responsible for administering his or her own property. Upondissolution of marriage by death of spouse or divorce, personal use items and propertyowned before or inherited after marriage are retained by respective spouse (or, in caseof death, his or her heirs). Gifts made to third parties without consent of other spousewithin last five years and any other gifts made during marriage with intent of reducingother spouse’s share are added to each spouse’s property earned during marriage. Eachspouse (or his or her heirs) receives one-half of all earned property. Other half isattributed to other spouse. (C.C. 196-220).

Community of Property.—Except as permitted to be modified by marital propertycontract, all property brought into marriage and all income earned during marriage isjointly owned by spouses. Only items for solely personal use are considered to belongto each spouse. Community property is administered jointly. Upon dissolution of mar-riage by divorce, each spouse receives items for solely personal use if remaining com-munity property is split in half. Upon dissolution by death of spouse, surviving spouseand heirs of deceased spouse split community property in half. Marital property contractmay determine different dispositions in case of divorce or death. (C.C. 221-246).

Separation of Property.—Each spouse retains and administers his or her property.(C.C. 247-251).

If one spouse does not fulfill duty to provide maintenance to family, court may directspouse’s debtors to make payments to other spouse. (C.C. 177).

Property Arrangements Between Unmarried Persons.—In some cases ordinarypartnership (‘‘société simple’’) may exist. See category Business Organizations, topicPartnerships.

SWITZERLAND LAW DIGEST FAMILY



INFANTS:

Law of habitual residence applies.Person attains majority on completing 18th year.See also topic Guardian and Ward.Head of family is responsible for torts of child in household unless head of family can

prove that care required by circumstances was observed.

MARRIAGE:

The right to marry is protected by Federal Constitution. (Art. 14; C.C. 90-136; Or-dinance of Federal Government concerning Civil Status Matters [Civil Status Ordinance]of Apr. 28, 2004).

Capacity to Marry.—Prerequisites: (1) age of 18 years, (2) power of judgment. Forpersons under guardianship consent by guardian is required. If consent refused byguardian, complaint may be made with cantonal authorities. (C.C. 94).

Impediments to Marriage.—Include (1) relationship (a) by blood or by adoptionbetween parent-child, brother-sister of whole or half blood; (b) between stepparents andstepchildren, even if marriage on which relationship is based has been terminated; (2)existing marriage of one of future spouses, unless proof is furnished of termination offormer marriage. (C.C. 95-96).

Aliens may marry in Switzerland if permitted under Swiss law or either spouse’s lawof citizenship if one has domicile in Switzerland, or marriage is recognized in countryof domicile or citizenship of both, or would be if divorce decreed or recognized inSwitzerland would be recognized. See topic Citizenship. (Art. 43, Private InternationalLaw Statute).

Preparatory Procedure before Marriage Ceremony.—Marriage to be celebrated inSwitzerland requires prior preparatory procedure at Civil Status Offices of Swiss domicileof future bridegroom or bride. If both future spouses are domiciled abroad Civil StatusOffices where marriage ceremony is intended to take place is competent. Future spouseshave to submit request for implementation of preparatory procedure by appearing inperson. If future spouses can prove that appearance in personam is unreasonable, imple-mentation of preparatory procedure is admitted in writing. Future spouses living outsideSwitzerland may file such request with Swiss diplomatic or consular representativeabroad. Spouses have to prove their identity with official documents and declare per-sonally that they comply with prerequisites concerning capacity to marry. Request forpreparatory procedure submitted to directing Civil Status Office must contain documen-tation not older than six months as to domicile, birth, sex, name, parentage of commonchildren, civil status, citizenship, capacity to marry and nonexistence of impediments.Future spouses declare personally to directing Civil Status Official (1) that all statementsmade in request for preparatory procedure and all documentation submitted are updated,complete, accurate and true; (2) that they are not under care of guardian; (3) that theyhave no relationship by blood or by adoption between parent-child nor brother-sister ofwhole or of half blood or stepparent-stepchildren relationship; (4) that they have notconcealed still existing marriage. If preparatory procedure is admitted in writing, futurespouses living outside Switzerland may make this declaration with Swiss diplomatic orconsular representative abroad. (Ordinance of Apr. 28, 2004, 73).

Civil Status Offices examine if (1) its competence is given; (2) request has beensubmitted in due form; (3) requested documentation and declarations have been sub-mitted; (4) both spouses have capacity to marry; (5) no impediments to marry are at hand.If necessary, it initiates further investigations and induces future spouses to take part inthem.

If all prerequisites for marriage are met, Civil Status Offices will communicate tofuture spouses written decision that celebration of marriage may take place. Civil StatusOffices agree upon details of celebration of marriage with future spouses or issues atrequest of future spouses grant of authority entitling future spouses to be married beforeany Civil Status Official in Switzerland. If prerequisites for marriage are not met, CivilStatus Offices will refuse to celebrate marriage or to issue grant of authority entitlingfuture spouses to be married before any Civil Status Official in Switzerland. Celebrationof marriage may take place at earliest ten days and at latest three months after writtendecision that celebration of marriage may take place has been communicated to futurespouses. (C.C. 97-100; Ordinance of Apr. 28, 2004, 62-69).

Marriage Ceremony.—Unless future spouse proves that it is unreasonable for themto go to marriage hall, marriage is celebrated publicly with participation of Civil StatusOfficial at marriage hall in presence of two witnesses of age and capable of judgment.Official asks bridegroom and bride separately whether each is willing to enter intomarriage with other. After affirmative answers official declares that by such mutualconsent marriage is concluded. Immediately afterwards marriage certificate is given tonewlyweds if one spouse is domiciled in Switzerland or is Swiss citizen. Religiousmarriage may optionally take place only after civil law marriage. (C.C. 97, 101-103;Ordinance of Apr. 28, 2004, 70-72).

Reports of Marriages.—After celebration marriage must immediately be entered inMarriage Register at place of official who performed celebration. Marriage of Swisscitizen celebrated abroad is entered in Marriage Register at place of Swiss citizenship.Marriage of Swiss citizen celebrated in Switzerland or abroad must also be entered inFamily Register. See category Documents and Records, topic Records, subhead CivilStatus Register.

Annulment.—Marriage is null and void if one of spouses was either: (1) Alreadymarried at time of celebration of marriage and former marriage has not been dissolvedby divorce or death of partner, (2) experiencing lasting incapacity of judgment, (3) orif spouses are related in prohibited degree (see subhead Impediments to Marriage, clause[1], supra). Action must be brought by competent authority and may be brought byanybody having interest. (C.C. 104-106).

Marriage is voidable by one of spouses: (1) If spouse was incapable of judgment fortransitory reason at time of celebration of marriage; (2) for error, if spouse declaredconsent to marriage but did not want to marry present spouse, or was induced to marriageby error as to qualities of other spouse; (3) for duress. Action lapses after six monthsfrom discovery of ground for avoidance or termination of duress, in any case after five

years after celebration of marriage. Consequences of annulment are same as in divorce.(C.C. 107-110).

NAMES:

Spouses select bride’s or groom’s family name as common family name, passed onto children. Bride can keep former family name as middle name. (C.C. 30, subs. 2, 160).

See also category Business Regulation and Commerce, topic Firm and CorporateName.

FOREIGN TRADE AND COMMERCECUSTOMS:

Customs duties are levied by Confederation. Customs revenue goes to Federal Trea-sury. On average, except for agricultural products, Switzerland levies rather low customsduties. Current Customs Tariff of 1959 is based on international customs nomenclatureof Customs Council. It comprises only specific rates, mainly imposed on gross weight.

Since July 1, 1977 exemption from duties for industrial products exists in traderelations between EU and EFTA countries and, since Feb. 1, 2005 for certain processedagricultural products. It is granted upon application and against presentation of proof ofpreferential origin (Warenverkehrsbescheinigung—Form EUR1). Proof of Origin con-firms sufficient processing of non-originating materials in application of Free TradeAgreement EC-Switzerland or Stockholm Convention.

EFTA and EU have concluded Free Trade Agreements with various Eastern EuropeanCountries. Under auspices of EU all these agreements were interlinked in 1996 byPaneuropean Cumulation, creating European Free Trade Zone. Since 1996, origin ruleshave therefore been harmonized throughout Europe. In meantime, various Eastern Eu-ropean Countries have become members of EU.

Switzerland is party to WTO. Trade relations with countries outside Free Trade Zoneare governed by WTO rules. Switzerland grants GSP (General System of Preferences)to developing countries and on certain agricultural products. In adopting WTO 1994agreement, Switzerland introduced and modified customs procedures (e.g. open customswarehouses and inward processing), facilitating import procedures for certain materialsand processing. Such procedures are subject to authorization by Customs Authorities.

Value Added Tax on Imports (VAT).—See category Taxation, topic Taxes, subheadIndirect Federal Taxes, catchline Value Added Tax (VAT).

EXCHANGE CONTROL:

Exchange Control.—See topic Foreign Investment; category Business Regulation andCommerce, topic Banks and Banking.

Swiss National Bank has power to take measures for protection of Swiss currencyincluding possibility to request banks to keep mandatory reserves and to control emis-sions.

There are no foreign exchange restrictions between U.S. and Switzerland.

FOREIGN EXCHANGE:

See topic Exchange Control.

FOREIGN INVESTMENT:

Flow of new foreign capital and funds into Switzerland or into Swiss currency maybe subjected to specific restrictions and licensing. Investment in Swiss immovablesrequires approval of cantonal authority.

Switzerland is a party to Convention on Settlement of Investment Disputes betweenStates and Nationals of other States concluded in Washington on Mar. 18, 1965.

FOREIGN TRADE REGULATIONS:

Imports and exports are in principle subject to control of Swiss Federal Government,Department of Economics and its subsections. Licenses are presently required for goodsrelating to military and economic defense, dual use products, protection of agricultureand of certain industries, and in connection with foreign trade or foreign exchangeagreements. Particulars concerning these ever changing regulations should be soughtfrom Swiss Consulates.

Switzerland is member of WTO.Switzerland is member of European Free Trade Association (EFTA). Duties on most

imports from EFTA countries were reduced to nil.On July 22, 1972 Switzerland entered into free trade agreement with European Eco-

nomic Community and European Community for Coal and Steel. Import and exportcustoms duties on industrial products have been reduced to nil. In 1999, Switzerland andEU concluded Bilateral Agreements I, which cover seven areas such as elimination oftechnical barriers to trade. Bilateral Agreements II, i.e. agreement on taxation and sav-ings, Schengen/Dublin association agreement, agreement on pensions, and agreement onprocessed agricultural products, were ratified in 2005. Agreement on taxation and savingscame into force on 1 July 2005, agreement on pensions on 31 May 2005, and agreementon processed agricultural products on 30 Mar. 2005. Schengen/Dublin agreement has notyet come into effect, but is expected to soon.

See category Treaties and Conventions, topic Treaties. See also topic Customs.

HEALTHSwiss legislation related to health matters is governed by number of laws and ordi-

nances dealing with requirements for medical professions, medical devices, regulation offood and drugs, use of toxic substances, biotechnology and protection from epidemics.Legislation on health provides for various specific procedures regarding admission tocertain professions, approvals for facilities and for manufacturing and marketing prod-ucts.

FAMILY MARTINDALE-HUBBELL LAW DIGEST - 2007



Swiss Federal Office of Public Health (“Bundesamt für Gesundheit” or “BAG”), SwissAgency for Therapeutic Products (“Schweizerisches Heilmittelinstitut” or “Swissmedic”)as well as various Cantonal administration departments are governing bodies.

BIOTECHNOLOGY:Number of regulations have recently emerged which can be distinguished in human-

related area and non-human-related area. Law on Assisted Reproduction of Dec. 18, 1998aims at protecting human dignity, personality and family against abuse and malpracticeof assisted reproduction techniques. Specifically surrogacy and donations of egg cells orembryos are prohibited. Law on Stem Cells Research dated Dec. 19, 2003 sets forthconditions under which stem cells derived from human embryos can be used for researchpurposes. Other new legislation for human-related biotechnology are to be expected innear future and, among others, refer to genome analysis and research on human embryos.

Law on Genetic Engineering in Non-Human Organisms of Mar. 21, 2003 and numberof related ordinances refer to contained use and release for research or marketing pur-poses of all genetically modified organisms except humans. Beside health protectionissues, also environmental protection issues, labeling, and principles for ensuring co-existence between conventional and genetically modified products are addressed. Swit-zerland is member of Cartagena-Protocol on Biosafety of Jan. 29, 2000.

FOODS, DRUGS, DEVICES AND COSMETICS:Regulation of Drugs and Medical Devices.—Federal Law on Drugs and Medical

Devices of Dec. 15, 2000, and, based thereon, number of ordinances refer to use of drugs,medical devices and related therapies ensuring high quality, safe and effective productsand protecting consumers from deception. Clinical trials need approval of ethic com-mission and notification with Swissmedic. Manufacturing, marketing, export and importfor business reason of drugs are subject to authorization of Swissmedic. For drugs, publicadvertisement as well as advertisement directed towards healthcare professionals aresubject to rigorous restrictions. Manufacturing, marketing, export and import of most ofmedical devices do not require approval. However, such products are subject to stan-dardized conformity assessment procedures and must be verifiably safe and effective inaccordance with Europe-wide harmonized requirements.

Regulation and Control of Food and Other Day-To-Day Products.—Federal Lawon Food and day-to-day products of Oct. 9, 1992, and number of ordinances concerningspecific products or specific manufacturing proceedings form basis of this legislation.Purpose is to ensure food safety and hygienic use of food and to protect consumers ofdeceptive marketing of food products and day-to-day products. Regulations addressmanufacturing, storage, transportation, distribution, sale, labeling, advertisement, impor-tation, transfer and exportation of food, food compounds and additives, bottled water,cosmetics, articles of clothing and articles for children’s use. Competent authority toimplement Federal Law is BAG. In principle, all other measures to ensure effectivegovernance, especially food control measures, fall within competence of cantonal au-thorities. However, in certain areas, e.g. approval of genetically modified food, BAG isexclusively competent.

MEDICAL PROFESSIONALS:

In Switzerland exercise of medical professions is subject to fulfillment of professionalqualification. Qualifications for physicians, dentists, veterinarians and pharmacists arelaid down in several federal ordinances. Exercise of other medical professions is subjectto cantonal legislation. Based on bilateral agreements, most qualifications in field ofmedical and paramedical professions of nationals of Member States of European Com-munity are recognized in Switzerland.

POISONOUS SUBSTANCES:

Swiss Federal Law on Chemicals and six relating ordinances address manufacturing,marketing, use, disposal, import and export of chemicals in comprehensive manner and,among others, comprise pesticides, disinfectants, preservatives for food, feed and timberas well as principles of good laboratory practice. Said Law on Chemicals and its or-dinances correspond to large extent with regulations of European Community.

IMMIGRATIONALIENS:

Conflicts.—International jurisdiction, private international law and recognition andenforcement of foreign decisions, to extent not covered by Lugano Convention Sept. 16,1988 or other international treaties, are governed by Private International Law Statute.It covers also international bankruptcy and international arbitration.

Foreign citizens need residence permit; for gainful activity, also work permit. Easierfor intragroup transferees. Temporary personnel, such as technicians or industrial workersalso need work permits, unless they only come for few days as consultants. Trainees needtemporary permits. No tourist visa is necessary for nationals of many countries; for U.S.citizens, valid passport suffices. All foreigners must register with police after specifiedstay in Switzerland.

Major change for EU and EFTA citizens after coming into force of bilateral treatybetween Switzerland and EC on June 1, 2002. Free movement of persons to be intro-duced in three steps within five years. Immediately equal treatment of EU/EFTA citizensalready residing in Switzerland and right to receive new work permit subject to prece-dence of Swiss nationals and to quotas. Suspension of precedence for Swiss nationalsafter two years, suspension of quota system after five years. Until suspension of quotasystem, annual preference quota for EU/EFTA citizens is 15,000 permits nationwide.Special transitional rules apply for new Eastern European EU Member States. Fornon-EU/EFTA nationals, annual quota is 4,000 permits and requirements for work per-mits are more stringent. Permits are usually granted for one-year period but may berenewed; EU/EFTA citizens have right to renewable five year permit.

Normally, non-EC/EFTA immigrant may not change employer, profession or cantonduring first year. Most work permits are granted by cantons with consent of federal

administration in Berne. Special rules apply to short-term workers, trainees and ‘‘au-pair’’ maids. After uninterrupted ten year residence period, year-round permit may betransformed into permanent residence permit. For citizens of many countries (UK, Ger-many, France, Italy, U.S.), this waiting period is limited to five years based on bilateralagreements. Regulations are very detailed and subject to yearly renewal.

‘‘Central register of foreigners’’ is kept. In exceptional cases, addresses of aliens maybe disclosed to foreign authorities or persons, e.g., if it appears that alien is going intohiding in Switzerland.

Aliens may not vote in federal elections and referenda. Few cantons grant voting rightsto foreigners on cantonal and/or municipality level; others may follow. In foreign elec-tions, aliens may vote by mail if foreign law so provides.

Corporations Owned or Controlled by Aliens.—See categories Business Organi-zations, topic Corporations, subhead Share Corporation, catchline Alien Shareholders;Foreign Trade and Commerce, topic Foreign Investment; Property, topic ImmovableProperty, subhead Acquisition by Nonresidents.

INTELLECTUAL PROPERTYCOPYRIGHT:

Federal Statute in force since July 1, 1993 (Federal Law on Copyright and NeighboringRights of Oct. 9, 1992, Copyright Law). Revision of Copyright Law to improve pro-tection for creative works and productions used on Internet and to include last interna-tional developments in field of copyrights and neighboring rights is currently in process.

Following are protected without registration or possibility of registration: literaryworks and artistic works, including (but not limited to) written works of any kind orpurpose, musical works, acoustical works, works of art (paintings, sculptures, graphicalworks), scientific and technical works such as drawings, maps, models, architecturalworks, works of applied art, visual and audiovisual works, choreographic works, com-puter programs, and further adaptations (including translations) and compilations ofworks. Protection is granted for Swiss and non-Swiss residents.

Published works may be used and copied privately, for teaching and for internal publicadministration use, with notable exception of computer programs for which only backupcopies are permitted. Copyright may be assigned wholly or partly, and is transferred toheirs. Moral right always remains with author, who may prevent distortion of work.

Protection lasts for 70 years after author’s death (50 years for computer programs). Incase of infringements, author has claims for prohibition, for removal of ongoing preju-dice, and for information about origin of unlawful objects; author may further claimdamages. Copyright infringement may be punishable act.

Neighbouring rights of performers, producers of sound recordings and films andbroadcasting organisations are recognized and protected. Such rights encompass exclu-sive right to communicate to public, retransmit, broadcast, copy and issue copies ofperformance or recording. Protection lasts for 50 years from end of calendar year inwhich performance took place, recording or film was made or broadcast was initiallyaired, as case may be.

Semiconductor chips protected against copying under unfair competition rules. Stat-ute for the Protection of Structures of Integrated Circuits of July 1, 1993, grants pro-tection to uncommon three-dimensional structures of integrated circuits. Rarity required.Once registered with Federal Institute of Intellectual Property, protection lasts ten yearsfrom application or first distribution, whichever is earlier. Two years only for structuresnot registered but simply circulated. (art. 9). Producer of structure has exclusive right toreproduce, circulate and exploit. Owner of structure benefits from same civil and criminalremedies against infringement as under Copyright Statute against copyright infringement.

Conventions and Treaties.—Switzerland is party to Revised Berne Convention (ParisRevision 1971), to World Copyright Convention (Paris Revision 1971), to Rome Con-vention of 1961 (Performers etc.), to 1974 Brussels Satellite Convention and to GenevaConvention against unauthorised Duplications of Phonograms of 1971. Switzerland ismember of World Intellectual Property Organization WIPO and World Trade Organiza-tion WTO, and has adopted Agreement on Trade Related Aspects of Intellectual PropertyRights, TRIPS. Switzerland has ratified WIPO Copyright Treaty and WIPO Performancesand Phonograms Treaty (both Geneva, 1996); adoption will be integrated in foreseenrevision of Copyright Law.

Databases.—There is no particular legislation in Switzerland. Databases enjoy pro-tection under Copyright Law and under Federal Law against Unfair Competition.

DOMAIN NAMES:

Federal Ordinance concerning Addressing Resources in the Telecommunications Sec-tor of Oct. 6, 1997 is legal basis for assignment of domain names for country code toplevel domain ‘‘.ch’’. Ordinance provides for registration and administration of domainnames. Ordinance does not contain any material provisions for attribution of domainnames, whenever competent authority can keep some categories of names free of reg-istrations if public interests request so. Foundation “Switch” (http://www.switch.ch) runsregistration service for country code top level domains “ch” (for Switzerland) and “li”(for Liechtenstein). Disputes concerning domain names are governed by applicable civillaw provisions; for domain names registered or renewed after 1 Mar. 2004, Switchdispute resolution proceedings apply as mandatory rules. Domain names also enjoyprotection under legislation against unfair competition.

PATENTS AND INDUSTRIAL DESIGNS:

Patent Act of June 25, 1954, with major revisions in 1976 (introduction of EuropeanConvention) and 1995 (implementation of changes due to TRIPS) and 1999 (imple-mentation to include Supplementary Protection Certificates (SPCS) for herbicides). Re-vision of Patent Act focusing on inventions in field of biotechnology is currently inprocess.

Switzerland has adhered to following treaties: Convention of Nov. 27, 1963 on uni-fication of certain points of substantive law on patents for invention; Patent Cooperation

SWITZERLAND LAW DIGEST INTELLECTUAL PROPERTY



PATENTS AND INDUSTRIAL DESIGNS . . . continuedTreaty of June 19, 1970 (PCT); Convention of Mar. 24, 1971 on international classifi-cation of patents; Convention of Oct. 5, 1973 on grant of European Patents (EuropeanPatent Convention). Patents can therefore be filed with European Patent Office in Mu-nich. Convention with Liechtenstein of Dec. 22, 1978 on patent protection. BudapestTreaty on international recognition of deposit of microorganisms for patent procedures(Revision 1980), UPOV Convention for plant varieties of 1961 as amended in 1972 and1978 and 1991. Patent Law Treaty of 2000. Switzerland is member of World IntellectualProperty Organisation WIPO and World Trade Organisation WTO, and has adoptedAgreement on Trade Related Aspects of Intellectual Property Rights TRIPS.

Grant of Patents.—Patents filed under local law in Switzerland are granted by FederalInstitute of Intellectual Property (abbreviated FIIP), Eidgenössisches Institut für GeistigesEigentum, Einsteinstrasse 2, Berne, for new inventions which may be used for industrialpurposes. No such grant takes place if invention is either: (1) Contrary to public interestor immoral, (2) method of surgery, therapy or diagnostic applied to human or animalbody, (3) subject to official pre-examination and held not to be new (see infra). Speciesof, or procedure to breed, plants or animals, except microbiological procedures, areprotected under Federal Statute of June 1, 1977.

Applications must be filed with FIIP, together with accurate description of inventionand summary thereof, designation of inventor, and registration fee. Applicants residingoutside of Switzerland may file application only through representative residing in Swit-zerland (or in Principality of Liechtenstein). In essence, FIIP examines patent applica-tions in view of formal aspects. No novelty-examination takes place. Grant, alteration orcancellation of patent is registered in Patent Register kept by FIIP, and thereafter pub-lished.

Assignment.—A patent is considered to be industrial property. As such it can betransferred by assignment or inheritance or be subject to a license for use. If in publicinterest, patent may be partly or fully expropriated upon decision of Federal Government.

Licenses.—Patentee may authorize another person to use invention (license).Compulsory license, including determination of its duration and indemnity, may be

granted judicially upon petition: (a) to patentee of patent which cannot be used withoutusing former patent, provided later patent serves entirely different purpose or offerssubstantial technical progress; (b) to any interested person if indicated by public interest,provided patentee has rejected demand of license by petitioner without valid reasons; (c)to any interested person if patent has not been used in Switzerland during three con-secutive years since its registration unless patentee starts to use patent before filingpetition or has valuable reasons for not using it. In last case (c), if needs of Swisseconomy are not satisfied by licenses within two years after grant of first forced license,any interested person may file complaint for judicial cancellation of patent. Such can-cellation, however, does not take place with respect to citizens of countries grantingreciprocity, existence of which is to be established by Federal Government and has beenestablished with respect to U. S. A. on Jan. 28, 1908.

Infringement.—A patent excludes anyone not licensed from industrial use of the in-vention. Violation of patent rights entails indemnification; if intentional it can be subjectto criminal prosecution.

Expiration.—Patents expire (a) after 20 years from date on which application was filed,or (b) if patentee renounces patent in writing, or (c) in case of nonpayment of annualfee upon due date. If payment is effected only during last three of these six monthsadditional fee is due.

Drugs and Pesticides.—Supplementary Protection Certificates (SPCs) are issued formaximum of five years for pharmaceuticals; in 1999, Patent Act was changed to includeSPCs for herbicides (conforming to European Community).

Annulment.—Patents may be annulled by court if (1) there is no new invention forindustrial use, or (2) subject matter cannot be covered by patent, or (3) invention is notsufficiently substantiated in its description in order that it can be carried out by expert,or (4) subject of patent goes beyond application which determined application date, or(5) patentee was not inventor or legal successor or otherwise entitled to patent. Such suitmay be brought by any interested party, but in case of ground (5) only by party allegingtitle to patent, in which instance adjudication of patent instead of annulment may bedemanded.

Industrial Designs.—Revised Federal Statute of Oct. 5, 2001, in force as of July 1,2002. Protection concerns forms, possibly combined with colors, which may serve asmodels for commercial manufacturing of articles. Design protection does not coverprocess of manufacturing, utility or technical effect of article produced by using designor model.

Switzerland is party to Paris Convention for protection of industrial property (Stock-holm Revision of July 14, 1967). Hague Convention for International Deposit of In-dustrial Design and Models (Stockholm Revision 1967); Locarno Convention for theInternational Clarification of Industrial Design (Revision 1979).

Application for design protection must be filed with FIIP by depositing design ormodel and paying fee. Publication of application can upon request be postponed forperiod of maximum 30 months as per date of filing of application, if it is intended tokeep application secret. Applications from persons outside of Switzerland must be madeby authorized representative residing in Switzerland.

Design protection is granted for periods of five years and expires in any case after 25years or by abandonment, or in case of failure to pay fee, six months after due date.

Owner of registered industrial models and designs (as well as copyright and trademarkrights) upon request may be advised by Swiss custom during period of two years ifconsignment of goods to be imported or exported or in custom store appear counterfeitedillegally. Custom authorities may block these goods up to 20 days.

Any interested party may sue for annulment of protection if (1) design or model wasnot new at time of application (it is new if not known to public), or (2) applicant wasnot originator nor legal successor, or (3) misrepresentations were furnished on behalf ofdesign or model deposited in sealed envelope, or (4) it cannot be subject matter of designprotection, or (5) it conflicts with provisions of other federal statutes or treaties, or (6)is immoral.

TRADEMARKS:

Trademarks and Tradenames.—Trademark Act of Aug. 28, 1992 provides protectionfor trademarks of goods, servicemarks, collective marks as in force since Apr. 1, 1993.

Terms, symbols and three dimensional trademarks which distinguish goods and/orservices from other trademarks or designate source thereof can be registered as trademarkwith FIIP. So-called “famous trademarks” are protected in all categories of goods and/orservices provided use of conflicting trademark affects or jeopardizes power of distinctionor exploits reputation of famous trademark.

Collective marks and certification can be registered when accompanied by guidelineindicating common characteristics of goods and/or services to be labeled therewith.Distinctive color-trademarks can be registered. Right to exclude others from using sametrademark is based on date of first application, not first use. Protection of firm namesdepends on registration in Register of Commerce (see category Business Regulation andCommerce, topics Firm and Corporate Name; Register of Commerce).

Application.—Trademarks may be applied for by anybody, whether Swiss or foreign.Upon request, FIIP conducts trademark searches for identical or similar trademarks.

Registration.—Trademark must be deposited with FIIP. Trademark registration is notavailable to: (a) Signs that belong to public domain; (b) shapes which result from natureof goods and shapes of goods or their packaging that are technically necessary; (c)misleading signs; (d) signs contrary to public order, morality or applicable law.

Assignment.—Possible for part or all goods or services of registration even withouttransfer of respective business. Transfer of business entails transfer of trademarks.

Expiration.—Registration of trademark lasts for ten years from date of application.Unless extended, registration will be cancelled six months after its termination. It can beindefinitely extended for subsequent periods of ten years. If registered trademark has notbeen used for five consecutive years, court may cancel registration upon petition of anyinterested party.

Declaration of Origin (reference to geographical origin of goods or services).—Indications of origin must be correct and not misleading. Origin of goods is determinedby place of manufacture or by origin of basic materials and components used. Origin ofservices is determined by (a) registered offices of person providing service; (b) nationalityof persons exercising actual control over business.

Violations.—Illegal use of trademarks, declarations of origin, and commercial dis-tinctions, etc., entails indemnification; if intentional, criminal prosecution is also possible.Mechanism is provided for trademark owner to initiate post-registration opposition pro-ceedings against similar or identical mark for same category of goods or services.Objection must be raised within three months from publication of registration in Gazette.After three months, objecting party may pursue legal remedies.

Conventions and Treaties.—Switzerland is a party to Madrid Convention for theprohibition of false designations of origin on goods (Stockholm Revision 1967), MadridAgreement for international registration of trademarks (Stockholm Revision 1967) andProtocol to Madrid Agreement (Madrid 1989). Treaty of Nice on International Classi-fication of Goods and Services (Geneva 1977, am’d 1979), Paris Convention for Pro-tection of Industrial Property (Stockholm Revision 1967). Trademark Law Treaty(Geneva 1994), Agreement on Trade-Related Aspects of Intellectual Property Rights(TRIPS 1994), Convention Establishing the World Intellectual Property Organization(WIPO 1967).

See also exchange of notes with U.S. of May 14, 1883.See also topics Copyright and Patents and Industrial Designs.

TRADE SECRETS/KNOW-HOW:

Trade secrets and know-how may be protected under general rules of good faith aswell as under specific law rules against unfair competition and under criminal law.Employees must keep secrets which they have learned of during their employment. Thisalso applies to know-how in so far as such know-how regards specific aspects ofemployer’s business; however, employee may freely use personal know-how, e.g. whatemployee learned on job by becoming more skilled. There are no formalities requiredfor protection of trade secrets in Switzerland and time limits on protection vary de-pending solely on holder’s own protective measures.

LEGAL PROFESSIONADVOCATES AND COUNSELORS:

Since June 1, 2002, profession of lawyers representing parties before courts is regu-lated by Federal Statute (Bundesgesetz über die Freizügigkeit der Rechtsanwälte, BFGA).In addition, there are cantonal laws specifying or supplementing federal rules. BFGAprovides for cantonal registers listing lawyers admitted to represent parties before courts.

Generally, lawyers admitted to Swiss bar are called Avocats/Fürsprech(er)/Advokat/Rechtsanwalt/Avvocato. They are university graduates in law (licentiatus juris, doctorjuris or master of law), have had at least one year’s clerkship with court and/or ap-prenticeship in law firm and have taken cantonal bar examination.

Following bar associations will assist foreign attorney seeking local counsel: SwissFederal Bar Association: lic.iur. René Rall, Postfach 8321, 3001 Bern, Fax: 011 41 31313 06 16 (www.swisslawyers.com); Bernischer Anwaltsverband, Véronique Bachmann,Poststrasse 8, 3401 Burgdorf, Fax: 011 41 34 423 11 92 (www.bav-aab.ch); Ordre desAvocats de Genève, 5, rue des Chaudronniers, 1204 Genève, Fax: 011 41 22 781 45 59(www.odage.ch); Luzerner Anwaltsverband, lic.iur. Markus Haas, Winkelriedstrasse 35,6002 Luzern, Fax: 011 41 41 418 81 37 (www.lav.ch); Solothurnischer Anwaltsverband,lic.iur. Urs Studer, Westbahnhofstrasse 2, 4502 Solothurn, Fax: 011 41 32 626 55 19(www.solav.ch); St. Gallischer Anwaltsverband, lic.iur. Matthias Schmid, Vadianstrasse44, 9001 St. Gallen, Fax: 011 41 71 492 03 21 (www.anwaltsverbandsg.ch); Ordine degliAvvocati del Cantone Ticino, Corso San Gottardo 54 c, Casella postale 1649, 6830

INTELLECTUAL PROPERTY MARTINDALE-HUBBELL LAW DIGEST - 2007



ADVOCATES AND COUNSELORS . . . continuedChiasso, Fax: 011 41 91 682 95 62 (www.tiav.ch); Ordre des Avocats Vaudois, Grand-Chêne 8, 1002 Lausanne, Fax: 011 41 21 311 77 49 (www.oav.ch); Zürcher Anwalts-verband, lic.iur. Kurt Zollinger, Bahnhofstrasse 61, P.O. Box 7675, 8023 Zurich, Fax: 01141 1 211 51 82 (www.zav.ch).

Confidentiality obligation extends to names of clients. Pactum de quota litis is inad-missible. Pactum de palmario, however, allowed. Advertising is allowed as long as it isobjective and corresponds to public need for information.

Foreign lawyers may represent their clients freely in negotiation and arbitration inSwitzerland. Attorneys from EU and EFTA countries may be admitted to represent partiesbefore courts if they use their original title of profession. Under certain preconditionsthey can also obtain listing in cantonal register.

MINERAL, WATER AND FISHING RIGHTSMINES AND MINERALS:

They are governed not by federal but by cantonal law. In most cantons, rights con-nected therewith are owned by state.

Concordat of Sept. 24, 1955 between certain cantons regulates granting of oil drillingand exploitation licenses.

MORTGAGESCHATTEL MORTGAGES:

Known in Swiss law only in very limited sense of pledging cattle (special rules fordomestic animals), ships and aircraft by registration. See category Debtor and Creditor,topic Pledges.

MORTGAGES:

Debts may be secured by immovables either as mortgage (Grundpfandverschreibung,Hypothèeque, Ipoteca), or as mortgage note (Schuldbrief, Cédules hypothécaires, Cartellaipotecaria). Third type, land charge certificate (Gült, Lettre de rente, Cartella di rendita),is not used. Mortgage may secure any, even future or contingent, debt. It securespayments due by whoever owns piece of immovables, regardless of any personal ob-ligation on his part. Mortgage notes are negotiable instruments issued to name or tobearer, and may be transferred as such. Mortgage note is collateral security of determinedand unconditional bond.

With certain exceptions, mortgages and mortgage notes become effective upon entryin Land Register (amendment on creation of paperless variant of existing mortgage noteunder discussion). Maximum amount must be stated in Swiss currency. Entries, includingamendments and cancellations, can be made only upon execution of publicly authenti-cated deed. Priority is established according to rank designated in Land Register, notaccording to date of registration. Stipulations to effect that upon cancellation of mortgageor mortgage note prior in rank subsequent mortgages or notes move up in rank arepermitted.

When immovables are sold and buyer acknowledges personal liability for debts se-cured by mortgage or mortgage note on such property, liability of original debtor endsunless creditor objects within one year.

Debts secured by mortgages or mortgage notes are not subject to statute of limitations.If debt is not paid in time, creditor may execute on property, including all accessoriessuch as plant, hotel furniture and rent accrued after execution proceedings, unless ex-pressly stipulated otherwise. Property gives security for principal, interest and expensesfor execution of debt. If there is more than one creditor, proceeds of sale are distributedby rank.

Mortgages and mortgage notes are cancelled upon entry in Land Register or upon totaldestruction of immovables. Cancellation or return of instrument may be requested uponpayment of debt. (C.C. 793-874).

Proposal ready for parliamentary discussion to make (amongst other topics) majoramendment of this part of C.C. which deals with mortgages. Preeminent new featurewould be additional (4th) type of mortgage note with entry in land register only butwithout requirement to have legal instrument issued for vesting these rights.

PROPERTYABSENTEES:

If for reasons of absence a person of age (see category Family, topic Infants) cannotact in urgent matter nor designate representative, or if property is not taken care ofbecause person is continually absent with unknown abode or because of uncertainty asto heirs entitled to inheritance, curator (Beistand, curateur, curatore) is appointed byguardianship authority. (C.C. 392, point 1; 393, points 1 and 3; 548, subsection 1). Seecategory Estates and Trusts, topics Death, Executors and Administrators, subhead OfficialAdministrators of Estate.

Escheat.—Dividends subject to five years statute of limitations. Title to movables lostby abandonment only when coupled with intention to waive title. Estate passes to cantonor municipality of last domicile of intestate decedent only if no grandparents or theirissue survive.

CURTESY:

Unknown in Swiss law.

DEEDS:

See topic Immovable Property; categories Documents and Records, topic Acknowl-edgments and Other Public Authentications; Family, topic Husband and Wife.

DOWER:Unknown in Switzerland.

IMMOVABLE PROPERTY:Swiss law distinguishes between immovables (Grundstuecke, immeubles, fondi), tan-

gible movable things, (bewegliche Sachen or Fahrnis, meubles, beni mobili), and in-tangibles (choses in action [Forderungen or Obligationen, creances or obligations, creditior obbligazioni] negotiable instruments, and immaterial or industrial property rights, e.g.,rights on patents, trademarks).

Since Apr. 1, 2003, animals under property right aspects are no longer movable things.Animals may now be bequeathed and in case of divorce, judge has to decide who familypet follows. For long time already animals have benefited from Federal Statute onProtection of Animals. People may be fined if they torture animals or if they keep theme.g. in stables not fit for their well-being.

Following are immovables: (1) land with all buildings, plants and springs (C.C. 667),(2) independent and lasting rights entered in land register, e.g., specific building leases(right in rem), right to springs, (3) mines, (4) apartment ownership (condominium) (C.C.655). Disposition of immovable made without reservations extends also to tangiblemovables which, according to local usage or intention of owner of immovable arepermanently provided for its management, use or preservation, and brought in any wayinto relationship to immovable for its service (Zugehoer, accessories, accessori [C.C.644-645]). Restricted rights in rem on immovables include: servitudes (C.C. 730-744),usufruct (C.C. 745-771), land charges (C.C. 782-792), mortgages (see category Mort-gages, topic Mortgages).

Acquisition.—Distinction made between underlying legal ground (causa) for acqui-sition of ownership or restricted rights in rem on immovables and acquisition itself.Underlying legal ground gives obligatory right of entry of ownership or of restricted rightin rem into land register; only such entry brings right in rem into existence (principleof entry into land register (C.C. 656, 731, 746, 776, 783-784, 799, 971). Certain ex-ceptions of ipso jure acquisition of ownership or restricted rights in rem on immovables,e.g., in case of heirship, judgment, enforcement. In such cases entry is mere declaratorymeasure, which, however, is condition precedent for disposition of right. For mortgagesprinciple of entry is as rule fully applicable.

Entry in land register pertaining to ownership or to restricted right in rem is only valid,if underlying legal ground is valid (principle of legality or of causality [C.C. 974]).However, acquisition of ownership or of restricted right in rem on immovables byacquirer relying bona fide on entry in land register is protected (principle of public faithof land register [C.C. 973]).

Kind of effect of rights in rem can be given to certain obligatory rights pertaining toimmovables by way of ‘‘annotation’’ in land register (C.C. 959), e.g., to right of firstrefusal, to purchase, to repurchase, ordinary lease, usufructuary lease (C.C. 681, 683;C.O. 216, 261b, 290). Co-owners of immovable have, by virtue of law without entry inland register, right of first refusal against any third person who has acquired share inimmovable. (C.C. 682).

Agreements to convey or encumber immovables to be valid agreements require in mostcases public authentication (C.C. 657, 746, 776, 783, 799; C.O. 216, 243); written formsuffices for certain agreements, e.g., for distribution of estate (including immovables)provided no new rights in rem are thereby created (C.C. 634; see category Estates andTrusts, topic Executors and Administrators), for servitudes (C.C. 732. Amendment underdiscussion on creation of new type of servitude entitling to exclusively use certain roomsin already existing building), for right of first refusal (C.O. 216, subdiv. 3). Recognitionof publicly authenticated acts pertaining to immovables made outside of canton whereimmovable is located is left to laws of canton where immovable is situated. Certaincantons (e.g., Zurich, Berne) recognize only publicly authenticated acts made accordingto their own legislation by authenticating person authorized for district where immovableis located. Power of attorney for execution of publicly authenticated act duly executedat any locality is accepted.

Acquisition by Nonresidents.—Federal Statute on Acquisition of Immovables byNonresidents of Dec. 16, 1983, in force since Jan. 1, 1985, major amendments of Oct.1, 1997, of Dec. 14, 2001, of Mar. 22, 2002, and of Apr. 1, 2005, regulates acquisitionof immovables by nonresident aliens. Foreign individual must have valid work andresidence permit for Switzerland in order to acquire land (persons who have lived inSwitzerland for ten or five years depending on country of citizenship or, according tolatest amendment, are citizens of EU or EFTA [European Free Trade Association] andare residing in Switzerland). But, managers of foreign-controlled firms conducting busi-ness in Switzerland may acquire main residence without license. Main residence may behouse or condominium apartment of up to 3,000 m2. Acquisition of real estate offeringseparate rooms, apartments, or houses to individuals not belonging to household offoreign acquirer is not permitted.

Swiss commercial immovable property, part of permanent business establishment, mayalso be acquired without license. Passive capital investments in Swiss real estate may alsobe executed without approval unless real estate is used for residential purposes. Acqui-sition may include large range of commercial transaction such as building rights, optionrights, rights of first refusal, or leasing contracts with contractual period exceeding tenyears. Mortgaged financing is not subject to certain mortgage limits or other creditconditions. However, certain limits must be observed: residential properties may beacquired together with commercial properties if properties are subject to zoning andbuilding laws aimed at securing and promoting certain residential property levels in cityareas. Acquisition of personal vacation homes, vacation apartments and condominiumsin apartment hotels is prohibited outside certain areas, and subject to quotas distributedyearly among cantons (1,420 permits per year available in 17 cantons in alpine regionof Switzerland with focus on Cantons of Grisons and Valais). Forbidden transactions arevoid. Persons participating in transactions for which no license was obtained can beimprisoned or fined and are barred from ever acquiring Swiss immovables. Competentpublic agency may sue for dissolution of legal entity violating law.

Proposal ready for parliamentary discussion to abolish all restrictions for acquisitionby nonresidents. Cantons, however, will have to launch new legislation for acquisitionof secondary homes before present federal statute disappears.

SWITZERLAND LAW DIGEST PROPERTY



IMMOVABLE PROPERTY . . . continuedRural Land Law.—Special rules provide for restrictions on free sale, acquisition only

by foreigners, price control, inheritance. (Statute, Oct. 4, 1991).

Moratorium on resale within ten years after acquisition applies to agricultural land.

Construction of buildings is subject to regular licensing by local authorities.

Zoning and Planning.—Federal Law of June 22, 1979 limits use of immovableproperty in general and also further construction on borders of rivers and lakes, sites ofspecial beauty or characteristics, etc. Details are or will be laid down by cantonal statutes.Entire territory must be divided into zones, in particular building and nonbuilding zones.Every construction requires permit. Building activities in agriculture zones have beeneased to some extent but mainly for farmers only. Vacation homes in old abandoned ruralbuildings are now permitted under very strict conditions. (am’d as of Sept. 1, 2000).

See also topic Landlord and Tenant; categories Business Regulation and Commerce,topic Frauds, Statute of; Debtor and Creditor, topic Collection of Debts and Bankruptcy,subhead Composition; Documents and Records, topics Acknowledgments and OtherPublic Authentications, Records, subhead Land Register; Mortgages, topic Mortgages.

LANDLORD AND TENANT:

Leasing of apartments and business premises is subject to special Federal and Cantonalregulations and supervision in favor of lessees. Major amendment of basic federal law(C.O. 253-304) was turned down in public vote early 2004. Existing legislation willremain unchanged.

In foreground are protective measures with regard to notice of termination and increaseof rents. Lessee who has contracted new lease or renewed lease may apply thereafterwithin 30 days for reduction of rent. Leases are subject to judicial review on basis ofbuilding and capital cost and comparison with leases for similar properties.

Termination of Lease.—Lessee of residential or business premises may up to 60 daysbefore end of fixed term of lease or within 30 days after having received notice oftermination of indefinite lease apply to court for an extension of lease. Court may granttwo extensions up to three years for residential and up to six years for business premises,if hardship suffered by lessee exceeds importance of interests of lessor. Application forsecond extension must be submitted up to 60 days before end of first extension. Ter-mination is valid only on special official form. On request reasons must be given.‘‘Abusive’’ termination may be declared invalid by conciliation board or court.

PERPETUITIES:

Testator may charge an heir to pass on inheritance to another as a reversionary heir,but cannot impose similar obligation on heir.

Usufruct in favor of legal entity may not continue for more than 100 years. See alsotopic Immovable Property as to building leases.

POWERS OF ATTORNEY:

No special form is as a rule required; one exception is authorization to enter into surety(Buergschaft, cautionnement, fideiussione) on behalf of principal, which needs formprescribed for surety itself. (C.O. 493). Bona fide third person to whom power of attorneyhas been communicated by principal may rely on terms of communication; but repre-sentative may be held responsible by principal according to legal basis of power ofattorney. Power of attorney can be revoked at any time by principal and, unless providedotherwise or implied by nature of business, expires in case of death, declaration ofabsence, loss of capacity or bankruptcy of principal and representative. Powers of at-torney not expiring by death of principal are frequent in Switzerland. (C.O. 32-39).

There are two special kinds of commercial powers of attorney: (1) ‘‘Power of Procu-ration’’ for conduct of enterprise with right to sign ‘‘per procuram, par procuration’’. Suchpower must be entered in Commercial Register, but its existence does not depend on suchentry. Holder of power is deemed to be authorized with respect to bona fide third personsto perform any legal act within purpose of business except sale and charge of immovableproperty, authority for which must be expressly granted. Power of procuration may berestricted to branch of business, or to effect that holder of power has to act together withone or more authorized persons (joint or collective procuration); other restrictions are notvalid against bona fide third persons. (C.O. 458-461). (2) ‘‘Commercial Power’’ forconducting business or special transactions within its purpose, without right to sign ‘‘perprocuram’’. This power cannot be entered in Register of Commerce. Holder of power isauthorized to perform all legal acts which are usually connected with business or carryingout special transactions. Right to sign drafts, loan contracts, or to commence or conductlaw suit requires express authorization. (C.O. 462). Power of procuration and commercialpower does not expire at death or with incapacity of principal. (C.O. 465).

REAL PROPERTY:

See topic Immovable Property.

TAXATIONADMINISTRATION:

Federal Taxation.—Traditionally, direct taxes are levied by cantons and municipali-ties, and indirect taxes by Confederation. But since 1915 (with exception of 1933),Confederation has also been levying direct taxes, and shares proceeds with cantons. Lastamendment to Constitution continuing share of revenue from direct taxes between con-federation and cantons, was approved by popular referendum in 2004. Its temporaryfeatures have been extended to 2020.

ALCOHOL, BEVERAGES AND TOBACCO TAXES:

See topic Special Taxes.

CANTONAL TAXES:Since Jan. 1, 2001, federal statute on harmonization of cantonal taxes is fully effective

and guarantees partial harmonization of federal and cantonal income taxes. See topicsIncome and Property Taxes, Inheritance and Gift Taxes.

CUSTOMS DUTY AND TAX:Other indirect taxes are levied as custom duties (excises) (a) tobacco and tobacco

products, (b) distilled alcohol and beer, (c) on cars and their components, (d) on mineraloil and oil products.

DIRECT FEDERAL TAXES:Direct Federal Tax.—From 1995 onwards new statute applies to legal entities and

individuals. Direct Federal Tax is levied yearly on profit or income. All taxpayers areobliged to file annual combined tax return for federal and cantonal/municipal tax pur-poses. Domestic partnerships are not taxable subjects, but foreign partnerships are. Legalentities are taxed based on yearly profit of current tax period. Tax period is same asbusiness year. Starting Jan. 1, 1998, capital tax has been abolished on federal level, butnot on cantonal/municipal level. From individuals taxes are levied based on currentincome of one year tax period. Generally capital gains are taxed as income or profit onlywhen realized by legal entities or by individuals in course of business. There is no federaltax on capital gains realized on moveable private assets. Immovable property abroad andbusiness enterprises (permanent establishment) operating outside of Switzerland directlyowned by Swiss taxpayers are exempt from tax. Further exemptions are provided forConfederation, cantons and other bodies organized under public law, foreign countriesand their diplomatic and professional consular representatives who are not Swiss citizensand legal entities which pursue public welfare or charitable objectives.

(1) Full tax is levied on: (a) Individuals and legal entities domiciled in Switzerland;(b) individuals involved in gainful activity in Switzerland and sojourning there for morethan 30 days in a row (regardless of temporary interruptions) even if domiciled andtaxable outside of Switzerland; (c) individuals not involved in gainful activity in Swit-zerland, but sojourning there for more than 90 days in a row (regardless of temporaryinterruptions). Persons studying or obtaining treatment in hospitals or similar institutionsin Switzerland are not considered to be resident. Non-Swiss individuals domiciled orsojourning in Switzerland who are not and never were involved in gainful activity theremay be taxed on basis of their living expenses, but such lump sum tax may not be lowerthan regular tax on income of individual derived from Swiss sources and foreign sourceincome for which individual claims exemption or reduction of foreign withholding taxespursuant to double taxation agreements; (2) limited tax is levied on other individuals andcorporate bodies, including foreign partnerships that own immovable property in Swit-zerland, or have claims secured by such immovable property or own Swiss businessorganizations or industrial plants (permanent establishment), and on individuals forremuneration that they receive as members of board of directors of Swiss legal entities.Non-Swiss members of foreign diplomatic and professional consular services, also chari-table institutions, are exempt.

Tax rates are in general progressive. Husband and wife are taxed as a unit. Incomeand property of minors is added to income and property of person who has parentalpower, except income from labor for which minors are taxed themselves. Maximummarginal rates for individuals is 11.5% and applies to income over CHF 843,600 formarried couples living together, and to income over CHF 712,500 for others. Propertyof individuals is not taxed at federal level. For share corporations, limited partnershipswith shares, limited liability partnership corporations and cooperative corporations start-ing Jan. 1, 1998, yearly rate is 8.5% (i.e. effective tax rate of 7.8% as taxes aredeductible). Limited tax ([2] above) is levied only on income (or net profits) taxable inSwitzerland, but, for individuals not domiciled in Switzerland, rates are calculated onbasis of total income, and profits. Foreign partnerships, however, are taxed same way aslegal entities on their Swiss income only. Corporations having participation in othercorporations of at least 20%, or having market value of at least CHF 2,000,000 receivetax reduction pro rata of such participation’s dividend income (participation relief ondividends received). Participation relief is extended to capital gains realized on alimen-tation of at least 20% participation held for at least one year and acquired after Jan. 1,1997. Gains on older participations only qualify for participation relief if they have beenattained after Jan. 1, 2007.

Withholding/Anticipatory Tax.—(Verrechnungssteuer, Impôt anticipé, Imposta pre-ventiva). Confederation levies withholding tax at source on specific income from interest,annuities, dividends (including deemed dividend distributions), profit distributions, etc.,if debtor is resident of Switzerland. Rate is 35%. On life insurance annuities and capitalpayments to residents rate is 8% or 15%. No withholding tax is levied on royalties.Withholding tax must be withheld by payer of taxable benefit and charged to recipientof taxable benefit.

If recipient of taxable benefit is resident of Switzerland withholding tax is creditedagainst cantonal and local taxes and excesses are refunded. In case of dividends to Swisslegal entities holding at least 20% of capital of subsidiary for cash dividends notificationprocedure replaces payment of withholding taxes. For intragroup cross-border dividends,refund procedure has generally been replaced as of Jan. 1, 2005, by reduction at sourceprocedure. Therefore, Swiss withholding taxes on dividends paid to foreign parent com-panies qualifying as legal entities located in treaty country are reduced at source to treatyrate or to rate according to EU Parent Subsidiary Directive.

Further, nonresidents may, under conditions set forth in applicable double taxationtreaties, obtain refunds. See subhead International Double Taxation, catchline Interna-tional Treaties on Double Taxation, Income and Property Taxes, infra.

Regulation effective Jan. 1, 1967 authorizes Federal Tax Administration to requestsecurity to extent of potential withholding tax on liquidation profit of corporation: (a) If80% of share capital is beneficially owned by nonresidents, (b) if assets consist mainlyof assets located abroad or of claims against nonresidents, and (c) if corporation does notdistribute every year adequate part of its net profit as dividends.

Military Exemption Levy (Militärpflichtersatz, Taxe d’exemption du service militaireTassa d’esenzione dal servizio militare).—Every male Swiss citizen between age of 20and 30 who is exempt from military service must pay tax on his income or minimum

PROPERTY MARTINDALE-HUBBELL LAW DIGEST - 2007



DIRECT FEDERAL TAXES . . . continuedhead tax. Rate: tax on income 3% (minimum CHF 200). This tax is reduced accordingto age of taxpayer and time already served in Swiss army.

Social Security and Welfare System Contributions: Old Age and Dependent Sur-vivors Insurance (AHV/IV/EO).—Federal law of Dec. 1946, as amended, applies.Contributions amount to 10.1% of income. Of this, employer bears 50%, payroll de-duction is made for remaining 50%.

Pension Plan: Premiums that employee pays under occupational pension plan arecredited to employee’s individual account. Insurable wages and premiums fluctuate,hence it is not possible to determine end capital in advance. When beneficiary reachesretirement age, accumulated capital is translated into monthly pension according to rulesin statute. Payments are made until death. Benefits are regularly adjusted for inflation.

Lump sum refund of accumulated capital is possible only under stringent circum-stances. For instance, person definitively leaving Switzerland is entitled to refund.

Many corporate employers offer pension plans that set uniform premiums regardlessof gender and age, or provide insurance coverage far beyond statutory minimum. Mini-mum of 50% of premiums must be borne by employer.

Family allowance: Family allowance contributions vary from canton to canton.Unemployment insurance: There is in addition federal unemployment insurance con-

tribution of 2% on salaries up to CHF 106,800 split equally between employee andemployer.

Accident insurance (UV/NBUV): Further, compulsory and federal accident insuranceof employees are borne by employer (on-the-job accidents) and employee (off-the-jobaccidents).

GIFT TAX:See topic Inheritance and Gift Taxes.

INCOME TAX:See topic Income and Property Taxes.

INCOME AND PROPERTY TAXES:Bulk of direct taxes is levied by cantons and municipalities. Tax laws of cantons differ,

but all cantons have system of tax on income and additional tax on property. Corporatebodies pay tax on net profits and on paid-in capital and reserves. As rule, husband andwife and minor descendants living in same household as taxpayer are taxed as unit butshould not be penalized as compared to non-married couples. Exemptions are providedfor small incomes and property, also for dependents. Limited taxes are levied on non-resident individuals or foreign legal entities owning immovable property or doing busi-ness in canton.

Mostly, aggregate direct taxes levied by cantons and municipalities on individualsrepresent heavier burden than federal direct tax. Top rates in city of Zurich are about 30%(canton and city) and 11.5% (federal). To this, contribution to social security which isbetween 10.1 and 13.1% on entire earned income for employed person (borne in equalparts by employee and employer) and about 9.5% for independent labor income must beadded since these premiums are levied on income (without cap) and, presently, onlypremiums paid on first CHF 77,400 actually entail social security benefits. Annual toprates on net worth wherever situated (except immovable property abroad) vary fromcanton to canton from 0.1% to 0.8% per year.

Cantons offer specific statutory privileges to aliens who reside in canton without beingengaged in business.

Cantons levy income tax on salaries of resident aliens with less than specified numberof years of residence in Switzerland in form of source taxes.

Top effective (federal, cantonal and municipal) tax burden on corporations variesbetween 13% and 28% of profits before taxes, e.g., Zurich 21%; Geneva 24%; Zug 16%,Sarnen 13%. In all cantons holding corporations are exempt from cantonal income taxesand subject only to cantonal capital tax at special (lower) rate, between 0.01 per mil and1.8 per mil. Domiciliary, management, and service corporations are treated similarly toholding corporations. Moreover, corporations holding qualifying participations enjoycertain tax reductions. Family foundations created by persons domiciled outside of cantonare in some cantons taxed as holding corporations.

INDIRECT FEDERAL TAXES:See topics Stamp Tax, Value Added Tax, Special Taxes, Customs Duty and Tax.

INHERITANCE AND GIFT TAXES:Are levied by most cantons (not by Zug [inheritance and gift taxes] and Lucerne [gift

tax]). Tax is levied by canton where decedent or donor is domiciled, but assessed againstheirs, beneficiaries or donees, who are jointly liable for its payment. Rates vary withdegree of relationship to decedent or donor, with amounts involved, and sometimes withprivate means of recipients. In many cantons surviving spouse and/or children are exemptfrom tax. In some cantons, rate of taxes levied on transfers to nonrelated personsincreases rapidly (e.g., Zurich 36% at approximately CHF 1,500,000). (Graubuenden,Neuchatel and Solothurn assess tax on entire estate of decedent.)

INHERITANCE TAX:See topic Inheritance and Gift Taxes.

LOCAL GOVERNMENT TAXES:Municipal Taxes.—Municipalities levy taxes mostly as percentage of cantonal tax,

fixed yearly with statutory maximum. They also levy special taxes, mainly on immov-ables, or on capital gains derived from sales of immovables. Current taxes on immov-ables are negligible in comparison with real estate taxes in U.S. In addition, most cantonslevy real estate transfer tax (or land register fee). Taxes on capital gains resulting fromsale of immovables may be as high as 60%, for short-term capital gain.

Tax Agreements.—Cantons are parties to intercantonal treaty (Concordat) for prohi-bition of tax agreements, dated Dec. 10, 1949.

Intercantonal Double Taxation.—Federal Constitution (Art. 127[3]) allows FederalGovernment to pass legislation for purpose of avoiding double taxation of same incomesubject to two or more cantons. To date no statute has been enacted, but Swiss FederalSupreme Court (see category Courts and Legislature, topic Courts), by extensive caselaw, established principles for prevention of double taxation by cantons.

New rules effective Jan. 1, 2001, coordinating and facilitating assessment procedureor direct taxes between cantons.

PROPERTY TAXES:See topic Income and Property Taxes.

SPECIAL TAXES:Special taxes are levied on certain manufactured goods (liquor, tobacco, cigarette

paper), especially on tobacco products and cigarettes manufactured in Switzerland, forfinancing of federal insurance for old age and survivors.

STAMP TAX:Stamp Taxes.—Federal Statute of June 27, 1973 applies, with amendments, effective

Apr. 1, 1998, Apr. 1, 1999, Jan. 1, 2001, July 1, 2004 and Jan. 1, 2006:(1) Issuance stamp tax of 1% on Swiss shares, parts of limited liability corporations

and cooperative corporations, dividend-right certificates, nonvoting shares. Tax is leviedon par value and additional contributions given by shareholders without compensation.Provided that par value and additional contributions given are of market value less thanCHF 1,000,000, no stamp tax is levied. Stamp tax can be reduced to nil in special casessuch as merger, seat transfer of foreign corporation into Switzerland and in case of debtrestructuring. Stamp tax is CHF 3 on dividend-right certificates without nominal valueand 0.12% on bonds for each year of duration, 0.06% on bank depository bonds for eachyear of duration and 0.06% on money market papers on pro rata base up to 360 days.Former stamp taxes on bills of exchange, checks and similar instruments were abolished.

(2) Transfer stamp tax of 1.5 per mil on securities issued by resident and of 3 per milon securities issued by nonresident. This tax is borne one half by each party, if banks,securities brokers, or corporations with more than CHF 10 million balance sheet assetsin taxable securities are involved. Effective Apr. 1, 1999, tax duty extended for foreignsecurities dealers. No half tax on transfer of foreign securities for foreign bank orexchange agent. No tax if Swiss securities dealer acts as intermediary for transfer offoreign bonds if there is one foreign party. Further exceptions apply.

(3) Stamp of 5% on cash premiums for some specific liability insurances and fullcollision coverage of vehicles. Stamp of 2.5% on life insurance premiums.

TREATIES AND AGREEMENTS:International Double Taxation.—Where there is no double tax treaty basic rules of

intercantonal double taxation are applied same way. Foreign immoveable property andincome derived therefrom, as well as permanent establishment situated abroad are there-fore already exempted from Swiss taxation according to internal law.

International Treaties on Double Taxation, Income and Property Taxes.—Swiss Con-federation has concluded treaties for avoidance of double taxation with following coun-tries: (a) Albania, Argentina, Austria, Belarus, Belgium, Bulgaria, Canada, China,Croatia, Czech Republic, Denmark, Ecuador, Estonia, Finland, France, Germany,Hungary, Iceland, Iran, Ireland, Israel, Italy, Kazakhstan, Kuwait, Kyrgyzstan, Latvia,Lithuania, Luxembourg, Macedonia, Moldova, Mongolia, The Netherlands, Norway,Poland, Portugal, Romania, Russia, Serbia and Montenegro (in force from Jan. 1, 2007),Singapore, Slovakia, Slovenia, Spain, Sri Lanka, Sweden, Ukraine, Uzbekistan,Venezuela, Vietnam; (b) regarding income only: with Australia, Egypt, Greece, India,Indonesia, Ivory Coast, Jamaica, Japan, Liechtenstein, Malaysia, Mexico, Morocco, NewZealand, Pakistan, Philippines, Republic of Korea, South Africa, Thailand, Trinidad andTobago, Tunisia, U.K., U.S.

Treaties generally follow pattern of Fiscal Committee of OECD. In treaties withcontinental European countries, country of residence or, in absence of residence, lastingsojourn is place of taxation, except if treaty rules are different. New treaty with U.S. onlyto some extent follows pattern of OECD Model Convention. All treaties provide thatpermanent establishment of enterprise in other country is taxed at place of establishment,with provisions, in some treaties, for apportionment. Immovables are taxed in countryof situs.

Treaties grant relief from double taxation pursuant to withholdings at source by wayof reductions (sometimes refund) or full exemption. Certain treaties provide further forlimited tax credit for non-refunded withholding taxes. Under treaty with U.S., with-holding tax on dividends is reduced to 15%. Dividends of Swiss or American subsidiariesheld by parent to at least 10% are reduced to 5%. Some treaties provide for exchangeof information for correct application of treaty provisions. Treaty with U.S. additionallyprovides for exchange of information for prevention of fraud or the like in relation totaxes which are subject of treaty. New treaty with U.S. adds number of specifications andclarifications with respect to information in tax fraud cases. Upon request of U.S. InternalRevenue Service, Swiss Federal Tax Administration obtains information and also suppliesreport on matters covered by Swiss banking secrecy in same manner as it can in internalSwiss tax fraud matter. Exchange of information and applicable procedure is governedby federal ordinance to Swiss-U.S. double taxation treaty.

Agreement between European Community and Switzerland relating to Savings Di-rective in Art. 15 applies same rules to Switzerland than listed in Parent SubsidiaryDirective and in Interest Royalty Directive for EU Member States. Agreement enteredinto force on July 1, 2005. Changes effected 2003 to EU Directives do not apply toSwitzerland. Agreement foresees introduction of withholding tax on interest paid toresidents of EU Member States in amount of 15% (for three years) then 20% (for threeyears) and thereafter 35%. Alternatively beneficial owners can opt for disclosure ofpayments to their state of residence.

Effective Dec. 31, 1962 decree concerning misuse of Swiss double taxation treatieswas issued as amended Dec. 17, 1998. Swiss legal entities with nonresident beneficiariesmay, as rule, enjoy reduction or refund of foreign taxes at source pursuant to double-taxation treaty only if: (a) 100% of receipts are entered into profit-and-loss statement, (b)

SWITZERLAND LAW DIGEST TAXATION



TREATIES AND AGREEMENTS . . . continuednot more than 50% are used for direct or indirect payments (in widest sense) to non-residents, and (c) 25% are immediately distributed as dividends subject to 35% federalwithholding tax. These criteria may be released for companies carrying out entire tradeor business for publicly listed companies and for holding companies. Under new U.S.treaty Swiss misuse rules no longer apply; new U.S. treaty contains its own limitationon benefits clause.

Under decree of Aug. 22, 1967, Swiss resident taxpayers may under specific conditionsrequest flat tax credit for taxes of foreign treaty countries levied on foreign dividends,interest and royalties.

Inheritance Tax.—Treaties regarding inheritance taxes with Germany, France, Sweden,Austria, The Netherlands, Denmark, Norway, and Finland are based on principle thatstate of last domicile has right to tax, also in regard to securities of corporations ordebtors in another state, situs being of no importance. Immovables are taxable at situs.If, under specific conditions foreign state can levy its own tax, then it will, as rule, grantcredit for Swiss tax.

Treaty with U.S. (1951) regarding inheritance taxes has following main features: Itallows part of ordinary U.S. exemption to estate of Swiss citizen not domiciled in U.S.,and also of alien domiciled in Switzerland. Further, it provides for certain tax credits forU.S. and Swiss taxes in regard to estates of U.S. citizens who were domiciled inSwitzerland.

Treaty with U.K. (1993) regarding inheritance tax has following main features: Stateof last domicile of deceased person may tax estate fully except immovable propertysituated in other state, moveable property of permanent establishment or fixed base inother state and ships and aircraft belonging to enterprise of other state. Shares of U.K.company which form part of estate of person domiciled in Switzerland may be taxed inU.K.

Special Tax Treaties.—Special treaties govern singular cases of taxation: Mainly onenterprises of ships and airlines, with Liechtenstein, Brazil, Lebanon, etc.

VALUE ADDED TAX:

Value Added Tax (VAT).—Effective Jan. 1, 1995, replaced prior wholesale tax ongoods. New VAT Statute became effective Jan. 1, 2001. VAT is levied on supply of goodsand services, own use, importation of goods and acquisition of services for considerationfrom foreign territory. Export of goods and services is exempt. Any person independentlypursuing commercial or professional gainful activities must pay VAT provided its sup-plies of goods and services and own use exceed CHF 75,000 a year. Normal rate: 7.6%.Reduced rate: 3.6% on accommodation services and 2.4% e.g. on supply of food andbeverage, books and other printed matter. Input taxes may—as a rule—be deducted. VATreturn due at end of each quarter. VAT on importation of goods is levied by FederalCustoms Administration, all other VAT by Federal Tax Administration.

TRANSPORTATIONMOTOR VEHICLES:

Switzerland is a party to the International Treaty concerning Motor Vehicles of Apr.24, 1926 and to the Treaty Concerning Temporary Importation of Private Road Vehicles,dated New York, June 4, 1954. Under the latter, motor vehicles of nonresidents andregistered abroad for personal use are free from taxes and levies for sojourns in Swit-zerland. Switzerland and EC have concluded agreement on overland transport on June21, 1999.

Foreigners domiciled abroad but staying temporarily in Switzerland can, under certaincircumstances, obtain Swiss plates for a period up to two years without having to paycustoms duties.

Insurance of motor vehicles for damages to third parties is mandatory. These may sueinsurance company directly, which may claim indemnity from driver or holder underspecific conditions.

SHIPPING:

Federal Statute of Sept. 23, 1953 governs Swiss sea-going vessels and Swiss vesselson foreign inland waterways. Sea-going vessel can only be registered as Swiss ship andfly Swiss flag if owner is Swiss citizen or Swiss partnership or corporation of which allpartners, shareholders, or members are Swiss citizens. Further special requirements inregard to Swiss domicile have to be fulfilled. Switzerland is party to series of interna-tional conventions concerning shipping. The York/Antwerp rules of 1950 apply to generalaverage (Havarie Grosse).

TREATIES AND CONVENTIONSTREATIES:

International Sale of Goods.—United Nations Convention on Contracts for the In-ternational Sale of Goods, in force on Mar. 1, 1992. See category Business Regulationand Commerce, topic Sales and Part V, Selected International Conventions. BrettonWoods—Treaty of Oct. 4, 1991 applies.

Europe.—Switzerland is member of Council of Europe (Strasbourg) and has adheredto certain of its treaties. On Oct. 3, 1974 Switzerland adhered to Convention for Pro-tection of Human Rights and Basic Liberties.

Switzerland is member of European Free Trade Association but not of EU or EEA.However, in 1972, Switzerland entered into free trade agreement with European Eco-nomic Community and European Community for Coal and Steel.

Switzerland joined Lugano Convention on recognition and enforcement of foreignjudicial decisions with Austria, Belgium, Denmark, Finland, France, Germany, Gibraltar,Greece, Iceland, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Swe-den, U.K. All EFTA and European Union members may join.

Switzerland has concluded with most European countries and series of other countriestreaties concerning residence and commerce. It is member of treaty on reciprocal rec-ognition of inspections concerning manufacture of pharmaceutical products dated Oct. 8,1970.

On June 21, 1999, Switzerland and EC signed seven bilateral agreements on FreeMovement of Persons, Air Transport, Land Transport, Technical Barriers to Trade, Re-search, Public Procurement and Agriculture. These agreements have entered into forceon June 1, 2002. Additional bilateral agreements were concluded with EU relating i.a.to extension of Schengen/Dublin acquis and taxation on savings.

United States.—Treaty of Friendship, of Nov. 25, 1850, in force with alterations sinceNov. 8, 1855, confers important rights on citizens of the two countries on basis of equaltreatment of citizens of other country with her own citizens, e.g., right to free acquisition,possession and disposition inter vivos and per mortem of personal property (also of realproperty to extent that it may be held by foreigners) (Arts. I, V); free access to tribunals(Art. I). Treaty exempts citizens of one country from military service (not from militaryexemption taxes) in other country (Art. II); it also contains provisions relating to ju-risdiction and applicable law in inheritance matters (Art. VI), and for consular serviceson basis of ‘‘most favored nation clause’’ (Art. VII).

Treaty of Nov. 11, 1937, regulates liability to military service and military exemptiontaxes of certain persons possessing citizenship of both countries, because born in onecountry of parents of other country. See category Citizenship, topic Citizenship, subheadMultiple Citizenship.

Treaty concerning co-operation in field of peaceful use of atomic energy of Dec. 30,1965 as am’d on Nov. 2, 1973 and treaty between International Atomic Energy Orga-nization, U.S. and Switzerland of Feb. 28, 1972 on measures of control in regard tomaterial and equipment.

Interim Agreement relating to Air Transport Services, of Aug. 3, 1945, as amended.Exchange of notes with U.S., Oct. 13, 1961, as am’d on Jan. 7, 1977, regulates

certification of air-worthiness. Switzerland and U.S. are parties to Convention of Dec. 16,1970 to fight illegal occupation of aircraft.

Under Treaty on Social Security signed on July 18, 1979, two countries grant tocitizens of other country benefits of their federal old age and dependents insurance anddisability insurance.

Treaty of May 25, 1973 on assistance in criminal matters permits also to give assis-tance against organized crime and under certain conditions piercing of Swiss BankSecret. Special statute of Oct. 3, 1975 regulates its application in Switzerland.

Treaty of Extradition, of May 14, 1900, as amended.Hague Convention of Nov. 15, 1965 on Service Abroad in Civil and Commercial

Matters applies (various reservations).Switzerland and U.S. (on Dec. 24, 1980) have adhered to Treaty exempting foreign

public deeds from legalization of Oct. 5, 1961 and U.S. has published list of Authoritiescompetent to apply so-called ‘‘Apostille’’. See International Conventions section.

Memorandum of understanding was signed on May 3, 1980 by United States’ Foodand Drug Administration and Swiss Federal Office for Foreign Economic Affairs todevelop standards or guidelines of good laboratory practices for laboratories conductingnonclinical experiments and to establish national programs of inspection. Switzerland andCanada concluded Mutual Recognition agreement on mutual recognition of good labo-ratory practice entering into force May 1, 1999. Agreements with other countries cur-rently in negotiation.

See also categories Civil Actions and Procedure, topic Judgments; Criminal Law, topicCriminal Law; Dispute Resolution, topic Arbitration and Award; Foreign Trade andCommerce, topic Foreign Trade Regulations; Intellectual Property, topics Copyright,Patents and Industrial Designs, Trademarks; Taxation, topic Taxes, subhead InternationalDouble Taxation.

TAXATION MARTINDALE-HUBBELL LAW DIGEST - 2007

