Step 1: Determine the applicable legal framework
As a first step, the applicable legal provisions and procedure need to be determined. With the exception of a few ancient bilateral treaties, the recognition of a foreign bankruptcy decree is governed by the Private International Law Act (PILA).
From a Swiss law perspective, a bankruptcy decree is generally understood to be an order issued by a court or other authority with effects typical to bankruptcy such as a restriction on the debtor’s power to dispose of his assets or a forced realization of the debtor’s assets for the benefit of the creditors. Whether or not an order constitutes a recognizable bankruptcy decree should be carefully evaluated prior to filing the application.
Article 166 PILA requires that the foreign bankruptcy decree fulfills the following requirements:
- the order is enforceable in the state where it was issued;
- there are no grounds for refusal under art. 27 PILA; and
- the decision was issued (i) in the debtor’s state of domicile, or (ii) in the state of the debtor’s main interests (COMI), provided the debtor was not domiciled in Switzerland when the foreign proceedings were opened.
Jurisdiction for the recognition lies with the Swiss court where the debtor’s assets are located or at the seat of a branch of the debtor (if any). The recognition of a foreign bankruptcy decree typically takes place in summary proceedings. The first-instance proceedings are usually designed as non-contentious single-party proceedings, meaning that there is no counterparty and no hearing or exchange of written briefs takes place before the first instance judge decides on the application for recognition. The judge however has discretion to grant concerned parties a right to be heard.
Step 2: Prepare the necessary information
The applicant must gather and file the following information and documents to have the foreign decree recognized in Switzerland (assuming that the PILA applies):
- Evidence to establish jurisdiction: If the debtor has a Swiss branch, an excerpt from the commercial register concerning that branch is sufficient. If jurisdiction is established based on assets of the debtor located in Switzerland, evidence for the existence of such assets must be provided (e.g., bank account statements, extract of the land registry, etc).
- Foreign bankruptcy decree: This document constitutes the object of the Swiss recognition proceedings. Either the original or a certified true copy should be filed. The decree should be accompanied by a sworn translation in the language applicable at the seat of recognition.
- Proof of enforceability of foreign bankruptcy decree: The foreign bankruptcy decree must be enforceable, which means that either no legal remedy with suspensive effect must be available in the country of origin or that the time limit to bring such legal remedies must have expired. If the enforceability is apparent from the decree itself, no further evidence is required. If not, a conformation of enforceability by the foreign bankruptcy court or a legal opinion confirming the enforceability of the decree must be provided.
- Confirmation of debtor’s place of residence or COMI: The applicant must submit evidence to prove that the foreign bankruptcy decree has been issued in the state where the debtor resided, has its seat or where debtor has its the center of its main interests (COMI). An extract from the commercial register, a copy of the debtor’s passport or a domicile certificate indicating the address at the time of bankruptcy (together with a translation, if necessary) generally suffices to demonstrate the debtor’s domicile or seat. The COMI is usually the place where the debtor administers its interests. This place must be ascertainable by third parties. Relevant is the COMI of the debtor itself, even if it is part of a group. Group insolvency proceedings are in principle unknown in Switzerland. g., a foreign bankruptcy decree regarding a Swiss subsidiary of a group company which filed for Chapter 11 relief in the US may not be recognized in Switzerland. In such a case, the bankruptcy proceedings relating to the Swiss subsidiary would have to take place in Switzerland.
- Legal opinion on foreign law aspects recommended: In order to demonstrate that the foreign bankruptcy decree is eligible for recognition, it is advisable to submit a legal opinion containing a description of the foreign bankruptcy proceedings and the powers of the foreign bankruptcy administrator. Further, the legal opinion regularly confirms that due process, in particular proper service and the right to be heard, was fully respected.
Step 3: Draft and submit the application
In the application for recognition the applicant usually requests that the court shall (i) recognize the foreign bankruptcy decree, (ii) open ancillary bankruptcy proceedings over the debtor in Switzerland and (iii) entrust the local Swiss state bankruptcy office with the liquidation of the Swiss assets.
The applicant may also apply for interim measures to safeguard the creditors’ rights, e.g., restrictions on property transfer. In addition, the applicant may under certain circumstances request that the requirement of ancillary proceedings is waived and that the foreign bankruptcy administrator is authorized to liquidate the Swiss assets.
The applicant should demonstrate in the application that all formal and material requirements are met. This includes jurisdiction and standing as well as the main requirements laid out above (enforceability, no grounds for refusal and place of issuance).
As regards the first main requirement, enforceability is sufficient. Formal res iudicata is not required. The absence of grounds for refusal mainly concerns compatibility with Swiss public policy. The applicant may refer to a legal opinion and – as is usually the case – point to the fact that there are no circumstances indicating that due process rights have been violated. Finally, as explained, the foreign bankruptcy decree must have been issued either in the state of the debtor’s domicile or seat or COMI. This requirement usually only requires detailed explanations in case of doubt.
The duration of recognition proceedings before the court of first instance usually does not exceed 2-3 weeks. The decision on the recognition will be published either by the court or the bankruptcy office in the Swiss Official Gazette of Commerce and the cantonal official gazette. In addition, the debt collection office, bankruptcy office, land register and the commercial register at the place where the assets are located will be notified.
Persons who are particularly affected by the contested decision and have an interest worthy of protection are entitled to appeal against the first instance recognition decision. Once the recognition decision has become final and binding, the Swiss bankruptcy office takes care of the liquidation proceedings (unless ancillary proceedings are waived and the foreign bankruptcy administrator is authorized to liquidate the Swiss assets).
Get in touch
The Swiss Litigation & Risk Management practice group regularly handles cases involving the recognition of foreign bankruptcy decrees and will be pleased to answer all queries you may have.