How to make sure that your claim can be enforced in the long run? A creditor may freeze assets that a debtor holds in Switzerland if certain conditions are fulfilled. In practice, there are two situations in which one might consider an attachment of assets: the first is where a creditor has a claim against a debtor without domicile in Switzerland; the second is where a creditor holds an enforceable judgment or award.
It is beyond doubt that the Swiss financial sector continues to play a dominant role in the financial world of today despite the regulatory pressure that it faces. The Swiss jurisdiction, therefore, is relevant for creditors who wish to enforce claims against a debtor who holds bank accounts or other assets in Switzerland. Even though practice shows that it is predominantly bank accounts that are being attached, other assets such as real estate, art works or claims against third parties are equally capable of being attached.
Upon application, the Swiss court at the seat of the bank or at the place where the assets are located will grant an ex parte freezing order to a creditor against a debtor with assets in Switzerland, if the applying creditor demonstrates on a prima facie basis that the following three prerequisites of the Swiss Debt Enforcement and Bankruptcy Act (“DEBA”) are met:
- The creditor seeking a freezing order has a mature and unsecured claim;
- The debtor’s assets are located in Switzerland;
- A legal ground for a freezing order exists.
As already pointed out, the most relevant grounds for a freezing order are:
- The debtor is not resident in Switzerland and the claim itself has sufficient connection with Switzerland or is based on an acknowledgement of debt signed by the debtor (“attachment against a non-Swiss resident”);
- The creditor has an enforceable court decision or arbitral award against the debtor (“enforceable title”).
Attachment against a non-Swiss resident: The mere fact that the assets are located in Switzerland will not suffice to establish a “sufficient connection with Switzerland” in the sense of the DEBA. The requirement of “sufficient connection with Switzerland” very much depends on the specific facts of the case which the Swiss court will review on a case-by-case basis. Swiss courts have confirmed that there was a sufficient connection in cases where the underlying contract was signed or fulfilled in Switzerland, where the underlying contract is governed by Swiss law, where the creditor lives in Switzerland or where the creditor’s claim is linked to a commercial activity in Switzerland.
Enforceable title: In order to rely on the second ground for a freezing order the creditor needs to have an enforceable title. The DEBA makes no distinction between domestic and foreign court decisions or arbitral awards. Provided that they are enforceable (either according to the Lugano Convention, the Swiss Private International Law Act or – in the case of a non-Swiss arbitral award – the New York Convention), all judgments and awards may serve as a ground for an attachment of Swiss assets.
The Swiss court will request the creditor to provide prima facie evidence on the prerequisites of an attachment as outlined above. Because the attachment itself will be granted ex parte, it will, in many instances, take the debtor by surprise. Thanks to this surprise effect and the nature of the attachment, i.e. the fact that it will prevent the debtor from further disposing of the attached assets, the attachment has a great potential for helping the creditor to secure and ultimately satisfy its claim.