International trade and commercial transactions in Switzerland: overview

A Q&A guide to the regulation of international trade and commercial transactions in Switzerland.

The Q&A covers key matters relating to sale of goods contracts, including rules on formation, price and payment, delivery, passing of title and risk, variation and assignment, enforcement and remedies, exclusion of liability, choice of law and jurisdiction, and arbitration. It also provides an overview of the rules governing storage of goods, imports, trade remedies, exports and international trade restrictions.

To compare answers across multiple jurisdictions, visit the international trade and commercial transactions Country Q&A tool.

This Q&A is part of the International Trade and Commercial Transactions Global Guide. For a full list of jurisdictional Q&As visit www.practicallaw.com/internationaltrade-guide.

Contents

Recent trends

1. What are the recent trends affecting the regulation of international trade in your jurisdiction? Is your jurisdiction a member of the World Trade Organization (WTO)?

Recent trends

In recent years, the political and economic environment has been challenging for Switzerland. The following factors have put pressure on the Swiss economy, in particular on its financial and export-oriented industry:

  • The long standing dispute between Swiss banks and the US Government.

  • An extremely strong Swiss franc, which increased even more in January 2015 when the Swiss National Bank gave up defending a minimum exchange rate against the euro.

  • The recent public vote on immigration, which has jeopardised bilateral agreements with the EU (which is by far Switzerland's most important market).

In addition, liberalisation of international trade in agricultural goods remains a disputed political issue. Finally, the general economic weakness of the Eurozone and the continued devaluation of the euro, in particular against the Swiss franc, have increased price competition for exporters. The situation has improved to some extent, but remains difficult to predict.

However, the Swiss economy has proven to be robust to these challenges, with a stable continued growth of GDP that is fuelled in particular by private consumption, and a stable, extremely low unemployment rate (among other things). Switzerland continues to benefit from a traditional mix of strong blue chip corporations, especially in the financial, pharmaceutical and commodity trading industry, and small and medium-sized enterprises in a great variety of trades across the country, which remain successful in the demanding trading environment.

The following is also of interest for Switzerland:

  • The outcome of the negotiations between the European Union (EU) and the US regarding the Transatlantic Trade and Investment Partnership (TTIP).

  • The potential lifting of sanctions against Iran in the wake of the recently successful negotiations regarding Iran's use of nuclear energy. Switzerland has traditionally strong ties with Iran.

In addition, it is anticipated that the relationship with the EU (which remains the most important market for the Swiss economy) will see changes in structure and content, which may require some changes to Swiss domestic regulations.

Trade agreements

Switzerland is a member of the WTO and party to a number of trade agreements. Notably, Switzerland is a member of the European Free Trade Association (EFTA) but, due to a public vote in 1992, has not become a member of the European Economic Area (EEA). Since then, Switzerland and the EU have regulated their political, economic and legal relationships in various bilateral agreements regarding specific areas.

In addition, Switzerland has concluded numerous bilateral trade agreements with countries in all parts of the world. Switzerland is the first European country to have concluded a bilateral trade agreement with China, which entered into force on 1 July 2014.

A list of all bilateral trade agreements is available at: www.seco.admin.ch/themen/00513/00515/01330/04619/index.html?lang=en.

Reform

There is no pending reform that will bring material changes to the legal framework in Switzerland. Debates over the necessity for a comprehensive revision of Swiss contract law have remained academic. If reforms are considered, it is expected that these will be in the context of Switzerland's relationship with the EU or international agreements with other countries.

 

Contracts for the sale of goods

General

2. What is the legal system in your jurisdiction based on (for example, civil law (codified), common law or sharia law)?

The Swiss legal system is based on civil law (codified law). The two main codes relating to private law are the:

  • Swiss Code of Obligations (SCO).

  • Swiss Civil Code (SCC).

Unlike in Germany and Austria, there is no separate commercial code.

Swiss law recognises a general duty to act in good faith (Article 2, SCC). There is a concept of unconscionability (Article 21, SCO). Unconscionability can lead to full or partial invalidity of the contract.

Formation

3. What domestic legislation and international rules apply to a sale of goods contract in your jurisdiction? Are standard international contractual terms commonly used?

Domestic legislation

Sale of goods contracts are governed by the:

  • Swiss Code of Obligations (SCO) (220 Bundesgesetz betreffend die Ergänzung des Schweizerischen Zivilgesetzbuches (Fünfter Teil: Obligationenrecht)).

  • Swiss Civil Code (SCC) (210 Schweizerisches Zivilgesetzbuch).

The SCO is the main source of law for contracts of sales governed by domestic Swiss law. The general part of the SCO contains rules on contract formation and validity applicable to all contracts, including sales contracts. Specific rules on sales contracts are established in Articles 184 to 236 of the SCO. These Articles contain:

  • General rules on sales contracts (Articles 184 to 186, SCO).

  • Specific rules on the sale of movables (Articles 187 to 216, SCO).

  • Specific rules on the sale of real estate (Articles 216 to 221, SCO).

  • Rules on specific types of sales contracts, including auctions and sales by sample (Articles 222 to 236, SCO).

Under Article 237 of the SCO, the provisions on sales contracts also govern barter transactions, with minor modifications regarding breach of warranty (Article 238, SCO).

International rules

Switzerland is a party to the following international conventions:

  • United Nations Convention on Contracts for the International Sale of Goods (CISG) (0.221.211.1 Übereinkommen der Vereinten Nationen über Verträge über den internationalen Warenkauf).

  • Customs Convention on the International Transport of Goods under Cover of TIR Carnets (TIR Convention) (0.631.252.511 Zollabkommen über den internationalen Warentransport mit Carnets TIR and 0.631.252.512 Zollabkommen über den internationalen Warentransport mit Carnets TIR).

  • Convention for the Unification of Certain Rules for International Carriage by Air (Montreal Convention) (0.748.411 Übereinkommen zur Vereinheitlichung bestimmter Vorschriften über die Beförderung im internationalen Luftverkehr).

  • European Convention on the Calculation of Time-Limits 1972 (0.221.122.3 Europäisches Übereinkommen über die Berechnung von Fristen).

  • Hague Convention on the Law Applicable to International Sales of Goods 1955. (0.221.211.4 Übereinkommen betreffend das auf internationale Kaufverträge über bewegliche körperliche Sachen anzuwendende Recht).

  • Budapest Convention on the Contract for the Carriage of Goods by Inland Waterway (CMNI) 2001 (0.221.222.32 Übereinkommen über den Vertrag über die Güterbeförderung in der Binnenschifffahrt (CMNI)).

  • Hague Convention on Civil Procedure 1954 (0.274.12 Übereinkunft betreffend Zivilprozessrecht).

  • Geneva Convention on the Contract for the International Carriage of Goods by Road (CMR) 1956, which entered into force in Switzerland on 28 May 1970 ( 0.741.611 Übereinkommen über den Beförderungsvertrag im internationalen Strassengüterverkehr (CMR)).

  • HCCH Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters 1965 (Hague Service Convention), which entered into force in Switzerland on 1 January 1995 (0.274.131 Übereinkommen über die Zustellung gerichtlicher und aussergerichtlicher Schriftstücke im Ausland in Zivil- oder Handelssachen).

  • Lugano Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters 2007 (New Lugano Convention), which entered into force in Switzerland on 1 January 2011 (0.275.12 Übereinkommen über die gerichtliche Zuständigkeit und die Anerkennung und Vollstreckung von Entscheidungen in Zivil- und Handelssachen).

  • UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention) (0.277.12 Übereinkommen über die Anerkennung und Vollstreckung ausländischer Schiedssprüche).

Switzerland is a contracting state to many international instruments relevant to sales transactions. These include instruments relating to both the actual sales contract (for example, the 1955 Hague Convention and CISG) and performance of such contracts, in particular in relation to transportation of the goods (for example, the CMR and Montreal Convention). Switzerland is also a party to the most important instruments concerning dispute resolution (for example, the EFTA Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters 1988 (Lugano Convention) and New York Convention).

Standard contractual terms

In international contracts, parties frequently use International Chamber of Commerce (ICC) international commercial terms (Incoterms) 2010. Traditionally, "Cost, Insurance and Freight" (CIF) is particularly popular in the dry commodities trade. However, "Free Carrier" (FCA) is of increasing importance in sales of manufactured goods, due to the containerisation of trade.

In domestic settings, the use of Incoterms is rare. However, traditional clauses such as "ab werk" operate similarly to "Ex Works" (EXW) under Incoterms. "Free site" (frei haus), which is also frequently used, is close to Incoterms from the group D.

Parties rarely choose the UNIDROIT Principles of International Commercial Contracts (PICC) as rules of law applicable to their contract. State courts will only recognise such choice under very specific circumstances (see Question 22). In academia, the PICC are used to monitor the development of contract law. In practice, larger companies sometimes use the PICC when drafting clauses in anticipation of contract negotiations to show that their suggestions are in line with international standards.

Uniform Customs and Practice for Documentary Credits (UCP) are commonly used by banks.

 
4. What are the authority/capacity rules for entering contracts, for different commercial entities?

Agency under Swiss law is based on the principle of disclosed agency (Article 32(1), Swiss Code of Obligations (SCO)). Generally, the agent can only bind the principal if the agent has acted in the name of the principal and was duly authorised. A principal can be bound in the case of undisclosed agency if either (Article 32(2), SCO):

  • The third party could assume that it was involved in an agency situation.

  • The third party did not care with whom it was about to enter into a contract.

The authority of the agent to bind the principal can arise directly from a contract between the agent and the principal (for example, a service contract). In other instances, the authority can be granted in a separate contract. According to the prevailing view, the agent's authority to act on behalf on the principal is separate from any underlying contract, must be revoked separately and survives the invalidity of the underlying contract.

In principle, the agent can only bind the principal to the extent that the principal has given the agent authority. However, there are important exceptions to this rule:

  • Where the principal has made the authority known to a third party, the bona fide third party can rely on such communication, regardless of any changes in the authority between the principal and the agent, unless these are also communicated (Article 33(3), SCO).

  • Where the principal has not intervened in the past when the agent acted on its behalf without authority, such conduct can be interpreted as granting implicit authority (or at least tolerating the agent's conduct), creating the appearance of an existing authority on which bona fide third parties can rely.

In commerce, a specific form of power of attorney, known as Prokura, is frequently used (Article 458 et seq., SCO). Prokura is a power of attorney defined by statutory law which protects reliance of third parties against any issues between the principal and the agent. Under Article 459(1) of the SCO, the agent vested with Prokura can bind the principal in all respects relating to the purpose of the business conducted, except for the sale and pledge of real estate (Article 459(2), SCO). There are no formal requirements for granting Prokura in a commercial setting. In a non-commercial setting, it is necessary to register the Prokura in the commercial registry.

Special considerations apply to legal entities. In partnerships, there is a presumption that every partner in charge of managing the partnership's affairs is vested with authority to bind the partnership to the extent that it is in charge of managing such affairs. Where the partner exceeds the extent of its authority, general agency rules may still protect reliance of bona fide third parties, depending on the circumstances of the case.

In professional partnerships, bona fide third parties can rely on every partner being authorised to act alone on behalf of the partnership, unless reflected otherwise in the commercial registry.

In companies limited by shares, the board is authorised to act on behalf of the company and to bind it legally (Article 718(1), SCO). This authority covers all acts relating to the purpose of the company.

In the case of insolvency, the debtor is not in a position to act on behalf of the estate so as to bind creditors. All acts undertaken by the debtor are invalid vis-à-vis the administrator. This means that while the debtor is in a position to enter into contracts on behalf of the estate, these contracts are not enforceable against the estate. Where third parties make payments to the debtor, they are only discharged if such payments are subsequently made to the estate.

 
5. What are the essential requirements to create a legally enforceable contract?

Substantive requirements

Swiss law generally requires offer and acceptance to form a contract. Concepts such as "consideration" (common law) or "cause" (French law) do not exist under Swiss law. Offer and acceptance are considered declarations of will (Willenserklärung) and require an intention to be legally bound.

The content of any declaration is subject to interpretation. Interpretation is first based on a subjective test, but objective interpretation is generally applied through the concept of a reasonable third person in the place of the recipient. Prior conduct can be taken into account (absent an entire agreement clause). The relevance of subsequent conduct is disputed. There is no parol evidence rule under Swiss law.

Offer. The offer must at least identify the subject matter of the contract. In addition, the parties must be identifiable. The goods and their quantity must be determinable. The price can be left open and be determined subsequently either by the parties or a third person. There is no pretium certum principle (that is, the contract is only valid if the price can be determined with a certain degree of certainty) as under French law.

The offer takes effect when it reaches the offeree. The term "reach" means that the declaration must enter the offeree's sphere of control. In the case of e-mails, it is not settled whether it is sufficient for the offer to reach the server where the recipient's e-mail address is hosted, or whether the e-mail must have reached the inbox of the recipient.

The offer becomes binding on the offeror when it reaches the offeree, which means that withdrawal of the offer is only possible if it reaches the offeree before or at the same time as the offer (Article 9, Swiss Code of Obligations (SCO)). A withdrawal will also have effect if the offeree has notice of the withdrawal at the same time as the offer. If the offeree does not intend to be bound by the offer from the time when it reaches the offeree, the offer must make clear that the offeror reserves the right to revoke it at any time. Absent any such indication, the offeree can accept the offer within a reasonable period of time following receipt. Acceptance is only effective when it reaches the offeror. Therefore, the risk relating to the transmission of both offer and acceptance lies with the respective sender.

Acceptance. The acceptance must match the offer. Although the law does not expressly state so, it is the unanimous view that where the acceptance deviates from the offer, it amounts to a rejection of the initial offer and constitutes a counter-offer. Mere silence is not sufficient for acceptance. However, acceptance by conduct is possible. There is an exception to the general principle that silence is not sufficient when one party uses a commercial confirmation. Under a trade usage, where a contract has been concluded orally, or where one party believes that a contract has been concluded orally and confirms in a subsequent writing its understanding of the content of the contract, silence from the counterparty following such writing will be given legal effect. The writing is then presumed to comprehensively set out the terms that the parties have agreed on. One of the effects of this trade usage is that it makes the distinction of initial formation and subsequent modification unnecessary.

Incorporation of standard terms. There are no specific rules on the incorporation of standard terms in codified law. However, there is a general agreement that the usual rules on contract formation (offer and acceptance) also apply to the incorporation of standard terms. The general requirement for the incorporation of the terms is that the user of the standard terms has made the other party sufficiently aware of such terms at the latest at the time of conclusion of the contract. A reference to the standard terms on subsequent invoices, notices of transport or similar documents is not sufficient. There is no general requirement on the other party to enquire about standard terms, but such party may be expected to clarify the situation in certain circumstances. Where electronic communication is used, a link to a general website referring to the terms is not sufficient. Rather, a deep link is required. Standard terms must be downloadable, storable and printable by the other party. According to Swiss Supreme Court, judicial control of standard terms is restricted to their incorporation, and does not include substantive control of their content, except for the application of mandatory law (for example, regarding limits on disclaimers).

However, despite the Swiss Supreme Court's general statement, the control of the incorporation of standard terms generally partly operates as a tool to control the substance of such terms. For example, under the general rule that unusual standard terms do not become part of the contract, the Swiss Supreme Court looks at the significance of any difference between the default rule and the relevant standard terms, as well as to the extent to which the party is disadvantaged by the clause. Incorporation of the clause is more likely to be denied the more the clause deviates from the default rule, and the more the party is disadvantaged by the clause. Applying this standard effectively means controlling the substance of the standard terms in question.

Formal requirements

There is no formal requirement for sales contracts. There is an exception for sales of real estate, which require notarisation. Unlike many other countries, such as the US, the volume of the transaction is irrelevant to the question of form, although in practice contracts are typically concluded in writing. Parties can introduce formal requirements into their contractual relationship and agree that subsequent modifications of the contract must be made in writing, and also agree that such writing requirement can only be waived by the parties in writing (double-barrelled no oral modification clause). If there is no double-barrelled no oral modification clause, the parties can orally and by conduct derogate from the requirement to make modifications in writing.

Contracts concluded in electronic form are enforceable. Where the parties require a written form, the remaining issue concerns the signature of the contract or its modification, as signing is interpreted as handwritten signing under the SCO. There is a special act on electronic signatures, which is largely irrelevant in practice. The conclusion of a contract by fax is also possible

Contract law does not establish limits to evidence to be used in court. The Code of Civil Procedure contains a list of admissible evidence that is fairly broad and in effect covers all practically relevant means of evidence, including digital evidence. Contracts need not be evidenced in writing. There is no parol evidence rule under Swiss law.

There is no language requirement for the validity of a contract, and therefore no requirement to make translations. However, in litigation, the parties must at least provide translation of documents in one of the official languages of Switzerland, as litigation always takes place in an official Swiss language. International contracts are typically concluded in English if the parties are located in different language regions of Switzerland.

Price and payment

6. If price provisions are not agreed by the parties, does local law impose requirements in relation to price (for example, the time, method and place of payment)?

If the contract does not make provision regarding the time for payment, the default rule is that payment is due immediately (Article 75, Swiss Code of Obligations (SCO)).

It is for the parties to decide on the method of payment in their contract. Parties can agree on wire transfer, letter of credit and other means of payment other than cash payment. Where the parties have not agreed on the method of payment, payment must be in the currency agreed upon by the parties (Article 84(1), SCO). Swiss law is still based on the idea of physical cash payments. In practice, deviations from this provision are common.

In international contracts, Article 147 of the Private International Law Act (PILA) determines the laws applicable to payment obligations. If the parties have not agreed on the currency of the price in their contract, the law of the country where payment must be effected determines such currency (Article 147(3), PILA). Once the currency is known, Article 147(1) PILA refers to the law of the country that uses the relevant currency to determine the legal tender.

The place of payment can be determined in the sales contract. Where the contract does not make provision in this regard, Swiss domestic law provides that monetary obligations (including the price and damages) must be made at the place of the obligee (Article 74(2) No. 1, SCO).

Delivery

7. If delivery provisions are not agreed by the parties, does local law impose requirements in relation to delivery (for example, the time, method and place of delivery)?

Swiss law contains provisions on the time and place of delivery that apply by default, if the parties have not made provision in their contract. These provisions are not specific to sales contracts but apply to contracts generally and are established in the general part of the Swiss Code of Obligations (SCO).

Under Article 75 of the SCO, performance is due immediately. This means that the seller must deliver the goods immediately after conclusion of the contract. The interpretation of this requirement is subject to the particular circumstances of the case, in particular where the contract is for the delivery of manufactured (mass) products.

The place of delivery can be determined by the parties. Default rules distinguish between the sale of specific and generic goods (Article 74(2), SCO). The seller must hand over specific goods at the place where they are located at the time of contracting (Article 74(2) No. 2, SCO). The residual rule is that the obligor must make the goods available to the obligee at the obligor's place of business (Article 74(2) No. 3, SCO).

In contrast to Article 53 of the United Nations Convention on Contracts for the International Sale of Goods (CISG), the SCO does not expressly establish the buyer's obligation to take delivery. However, it is undisputed under Swiss law that the buyer is subject to such an obligation. This obligation is considered as a performance-related ancillary obligation and can therefore be enforced through a claim for specific performance.

Passing of title and risk

8. If not agreed by the parties, when does title to the goods pass to the buyer?

The transfer of title is governed by the Swiss Civil Code (SCC). Title to the goods passes when the goods are handed over to the buyer (traditio). The basic case is that the goods are handed over to the buyer or a representative of the buyer.

If a third party is in possession of the goods, the seller can assign its claim for return of the goods to the buyer who becomes the owner of the goods at the time of assignment. Liens and pledges must not be circumvented when using this method of transfer. This can present problems in cases where escrow agents are used as custodians of the goods secured.

 
9. Are retention of title clauses enforceable in your jurisdiction? If so, what are the requirements to create a legally enforceable retention of title clause?

Retention of title clauses are generally allowed under Swiss law. However, to have effects under property law, the retention of title clause must be registered at the buyer's place. This is of particular importance where the buyer relocates within Switzerland between contract formation (and registration of the retention of title clause) and payment of the price. In such a case, the seller must arrange for registration of the clause at the new location of the buyer. Where the retention of title clause is not registered initially, or not registered on relocation of the buyer, the clause has no effect under property law. However, according to the Swiss Supreme Court, such clauses continue to operate as a reservation of the seller's right to avoid the contract, if the buyer is late in payment and has already received the goods while it was obliged to pay before receipt of the goods (Article 214(3), Swiss Code Of Obligations (SCO)).

Swiss law does not recognise the German concept of "prolonged retention of title" (verlängerter Eigentumsvorbehalt), as commingling or mixing the goods end the retention right. Reselling the goods will only end retention of title if the second buyer acquired the goods in good faith. This may be the case if the third party either:

  • Believes that the buyer itself is the owner of the goods.

  • Believes that the buyer is authorised to sell by the actual owner.

In such cases, the buyer is liable for damages to the seller.

 
10. If not agreed by the parties, when does risk in relation to the goods pass to the buyer?

Regarding passing of risk, it is necessary to distinguish between the sale of specific goods and the sale of generic goods.

Where specific goods are sold, risk passes at the time of the conclusion of the contract, unless the circumstances of the particular case dictate otherwise (Article 185(1), Swiss Code of Obligations (SCO)). This approach originates in Roman law where it was known as periculum est emptoris (that is, the risk lies with the buyer). However, the Swiss Supreme Court has adopted an extremely broad interpretation of the "circumstances" in which risk can pass later. Such circumstances will always be assumed to be present where, following the conclusion of the contract, the seller remains in possession of the goods. The doctrine has universally commended the approach of the Swiss Supreme Court. The reason for the original rule is that, initially, it was believed that the then still to be drafted Swiss Civil Code (SCC) would also use the conclusion of the contract as the reference point for title to pass (see Question 8). If the goods then remained with the seller, but risk and title had passed to the buyer, then in the case of loss of or damage to the goods, the buyer would have been vested with a damages claim based on damage to property under tort law. However, as under the SCC passing of title is linked to the handing over of the goods to the buyer (traditio), the buyer would be unprotected for the time between conclusion of the contract and handing over of the goods. The ruling of the Supreme Court explained above has then solved this problem.

Where generic goods are sold, risk passes when the goods have been identified to the contract and handed over (Article 185(2), SCO). Handing over can be to the buyer or to a carrier. The decisive issue is that the goods leave the seller's sphere of control, as by default, money and goods must never be in the same hands.

In international contracts, the parties typically make use of the International Chamber of Commerce (ICC) international commercial terms (Incoterms) 2010. Incoterms make the application of Swiss law default rules practically irrelevant. In domestic settings, commonly used clauses such as "free site" must be interpreted to determine whether these are mere cost allocation rules, or also seek to provide that risk passes at the specific place.

Variation and assignment

11. What are the main ways and formalities to transfer contractual rights?

Assignment is possible under Swiss law. Primary rights and obligations under a sales contract are assignable, unless the parties have agreed that all or some of such obligations cannot be assigned. It is unclear whether remedies based on non-conformity of the goods can be assigned. While it is generally accepted that claims for damages can be assigned, the situation is less clear for the remedies of avoidance of the contract and reduction of the purchase price (which some commentators do not consider assignable). This position is based on the notion that avoidance of the contract and reduction of the price are not claims but rights that modify the contract, which are conceptually not assignable.

 
12. What are the main rules relating to waiver of contractual rights?

Waiver can be effected by an agreement of the parties but also by unilateral declaration of the party waiving the right. Under exceptional circumstances, waiver can also be implied by conduct in accordance with the principle of good faith, if exercising a right in a particular case would amount to an abuse of law.

Enforcement and remedies

13. What are the seller's obligations in relation to the description and quality of the goods?

Under Swiss law, the concepts of express and implied terms do not exist in a manner comparable to English common law. There are non-mandatory default provisions that apply if the parties have not included derogating provisions in their contract. However, a disclaimer of implied terms is not necessary.

With regard to description and quality, absent any other agreement of the parties, the seller must deliver goods of average quality. This is arguably a higher standard than merchantability under US law and closer to the concept of satisfactory quality, as it is not sufficient that the goods pass in the trade without objection.

There is specific legislation applicable to product liability (Produktehaftpflichtgesetz). However, this only applies where the seller is also the manufacturer or the importer of the goods. In addition, product liability legislation only covers situations of personal injury or damage to property. The mere defectiveness of the goods is subject to the usual rules on non-conformity. Where there is personal injury or damage to property, the buyer will typically also have a concurrent claim for damages based on tort law, which exists in parallel to the contractual remedies based on non-conformity. The majority view is that such claims are not subject to the same requirements as contract law claims. In particular, the buyer can bring a tort claim if it has failed to examine the goods and notify the seller of the defects.

 
14. What are the different types and legal status of contractual terms in your jurisdiction?

With the exception of express warranties, Swiss law does not generally recognise specific types of contractual terms. In particular, the concepts of express terms and implied terms are foreign to Swiss law. Almost no provisions applicable to sales contracts are mandatory, but there are default rules that apply if the parties have not agreed otherwise in the contract. There is no need for an express disclaimer to exclude the application of the default rules.

Express warranties are the only case where Swiss law recognises a specific status to contractual clauses. However, this concept is of importance only to the extent that a party will typically not be able to disclaim liability for express warranties.

Otherwise, the remedies available to a party do not depend on the classification of the term as a condition, warranty or intermediate term, as is the case under English common law. In particular, the remedy of avoidance never depends on the classification of the term breached, but is subject to different requirements, depending on the type of breach that has occurred, for example:

  • In the case of delay, as a general rule, the expiration of a notice period (Nachfrist) is required.

  • In the case of non-conformity of the goods, the defect must be of a certain seriousness.

However, the approach under which certain breaches never justify avoidance of the contract (such as breach of warranty under English common law), always justify avoidance (such as breach of condition under English common law), or do so if the breach goes to the root to the contract (for example, in the case of breach of an innominate term under English common law) does not exist under Swiss law.

The remedial system under Swiss law follows the Roman law-based "cause-oriented approach", under which the available remedies depend on the type of impact on the performance of the contract, namely whether there is impossibility, delay or improper performance (see Question 19).

 
15. What are the key rules on privity of contract and third party rights?

The principle of privity of contract applies under Swiss law. However, there are significant exceptions to this rule (for example, assignment (see Question 11)). In addition, the parties can conclude a contract for the benefit of a third party, although this possibility is not expressly established in codified law. Where the parties conclude a contract for the benefit of a beneficiary, it is necessary to distinguish between:

  • Contracts where the third party beneficiary is entitled to receive and claim performance on its own behalf, rather than being limited to a claim for damages.

  • Contracts where the third party beneficiary cannot claim performance on its own behalf but can only claim damages.

The type of contract that the parties have concluded is a matter of interpretation.

The Swiss Supreme Court has not recognised the German concept of contracts with protective effects for third parties. Under German law, this concept is used to fill gaps in tort law. While similar gaps exist under Swiss tort law, these have been remedied through other means.

For group structures, there are two ways by which a parent company can be held liable for its subsidiaries:

  • Liability for induced reliance (Vertrauenshaftung). The Swiss Supreme Court has recognised that where a parent company creates a reasonable reliance on the part of the subsidiary's creditor that the parent company will support its subsidiary, the creditor of the subsidiary can claim directly against the parent company. The details of this rule, which remains extremely vague in its requirements, are subject to a longstanding and heated dispute. Whether courts will affirm liability under this approach in a given case is typically unpredictable, and there remains significant uncertainty.

  • Piercing the corporate veil. This requires a substantial involvement of the parent company in the contractual relationship, making reliance on two separate legal entities abusive.

 
16. What are the rules relating to invalidity, misrepresentation and mistake relating to contracts?

The rules on invalidity, misrepresentation and mistake are established in Articles 29 to 31 of the Swiss Code of Obligations (SCO).

The basic rule is that a contract is invalid if its object is impossible or violates statutory prohibitions (Article 20(1), SCO). Impossibility only relates to initial objective impossibility. Cases of initial subjective and subsequent objective and/or subjective impossibility do not lead to invalidation of the contract, but vitiate the contract subsequently.

There are two forms of unconscionability under Swiss law:

  • Where there is a gross disparity between the respective performances of the parties, which is connected to the exploitation of one party's hardship, inexperience or imprudence, the disadvantaged party can declare that it rejects the contract within one year from its conclusion (Article 21, SCO).

  • Contracts that violate personality rights are invalid; this provision is understood to invalidate contracts that are overly cumbersome for one party (Article 27, Swiss Civil Code (SCC)).

Unlike traditional common law, Swiss law recognises the concept of rescission of a contract based on unilateral mistake. The mistake must be significant in nature (Article 23, SCO). Article 24(1) Nos. 1 to 4 of the SCO sets out four types of mistake that warrant unilateral rescission of the contract. Three of these cases address situations where the mistaken party had formed its intention correctly but the statement made was not intended (Article 24(1), Nos. 1 to 3, SCO). The fourth case addresses a situation where the statement was made as intended but the underlying intention was formed incorrectly (Article 24(1) No. 4, SCO). In all of these four cases, the mistaken party has one year from realising its mistake to declare that it will not keep the contract (Article 31, SCO).

Fraud and duress may also give a right to rescind the contract. Fraud is governed by Article 28 of the SCO and requires that one party deceived the other party. The requirement for wilfulness is interpreted fairly broadly and also encompasses statements for which the party making the declaration did not know whether they were right or wrong. If there is fraud, the resulting mistake does not have to be significant, as is required for rescission based on unilateral mistake. There is no such threshold in cases of fraud. Again, the mistaken party has one year from realising the fraud to declare that it will not keep the contract (Article 31, SCO).

Similar considerations apply in the case of duress, which is addressed in Article 29 of the SCO. There is duress if the victim was threatened with harm to life, honour or property, either of itself or those of close persons (Article 30, SCO). The one-year period to rescind the contract under Article 31 of the SCO applies.

 
17. What are the main performance and discharge rules relating to contracts?

The parties are free at any time to agree on the termination of the contract. There is no need for consideration or other requirements which interfere with the parties' decision.

The remedy system under Swiss law is based on the "cause-oriented approach", which distinguishes three types of disturbance in the performance of the contract, each triggering a different set of remedies (including avoidance of the contract). These three types are:

  • Impossibility.

  • Delay.

  • Improper performance.

In the case of impossibility, the contract is avoided by operation of law. For initial objective impossibility, the contract is invalid by law. For initial subjective and subsequent impossibility, the performance claims of the parties are vitiated by operation of the law. In the case of delay, it will typically be necessary for the obligee to fix an additional period of time for the obligor to perform, before avoidance of the contract is possible. This does not apply where time is of the essence, in commercial sales contracts, or where the obligor has made it clear that it will not perform.

Improper performance in sales contracts means primarily that either:

  • The goods are non-conforming.

  • Third parties have a right to the goods.

In both situations, the buyer is entitled to return the goods against the price. In the case of non-conformity, the defect must be of a certain seriousness. In the case of third-party rights, the buyer must have been fully deprived of possession. For all other obligations improperly performed under a sales contract, the default rules do not provide for a right to avoid the contract, but only for a claim for damages.

Swiss law recognises the general principle of good faith, which includes the parties' obligation to act in good faith and to co-operate.

The principle of pacta sunt servanda (that is, agreements must be kept) dictates that, generally, the obligor must make every effort to perform the contract. Such obligation ends in the case of impossibility. In practice, the relevant question is which economic efforts the obligor must undertake to satisfy the contract. For monetary obligations, the general principle is that there can be no exemption from performance. The same typically applies to non-monetary obligations. However, Swiss law undisputedly recognises the concept of hardship (clausula rebus sic stantibus). Where the economic environment of the contract has changed drastically so as to deprive the contract economically of its basis for at least one party, then the obligor can refuse to perform the contract. However, the threshold for the application of the concept of hardship is very high. Fluctuations of prices or currency must be extreme to justify refusal to perform. Any factor must have been unknown and/or unforeseeable to the parties at the time of contracting.

Swiss law is not built on the concept of "strict liability". Therefore, there is only liability for damages if there is fault on the part of the obligor. In contract law, the obligor bears the burden of proving that it was not at fault with respect to non-performance of the contract. In most cases, the obligor will only be able to prove that in cases of force majeure.

 
18. What are the main remedies and rules for losses and damages for breach of a sale of goods contract?

The distinction of legal and equitable remedies does not exist in Switzerland and the claim for specific performance is not of a special nature but generally available, unless there is a case of impossibility or hardship impairs such claim.

With regard to claims for damages, the rules differ depending on whether the case is about impossibility, delay or non-conformity. The specificities of these types of breach are detailed further in Question 19. This Question only focuses on damages.

If there is an initial objective impossibility and the seller was at fault in causing it, the buyer has a claim for reliance interest damages based on culpa in contrahendo (that is, fault in the process of conclusion of a contract). In all other cases of impossibility, the buyer will have a claim for expectation interest damages, provided that the seller was not at fault in causing the impossibility. In all instances, it is for the seller to prove that it was not at fault.

In the case of delay, the buyer can recover all losses associated with the delay, in particular costs and expenses, but also have recourse for liabilities it may face vis-à-vis its own customers. When the required additional period of time for performance has expired, the buyer has the following options:

  • Claim specific performance and recovery of all damages caused by the delay.

  • Refuse performance and claim expectation interest damages.

  • Declare the contract avoided and recover reliance interest damages.

In commercial contracts, there is a presumption that the buyer will choose the second option. The commercial buyer can then calculate its losses, at its discretion, either on the basis of a substitute transaction or, if it has not entered into such transaction, based on the market price. Conversely, if the buyer is late with payment or for taking the goods, the seller can calculate its losses based on a substitute sale, or, if it has not entered into such sale, based on the market price.

In the case of non-conformity, the buyer has a claim in damages only if it opts to return the goods against the purchase price (actio redhibitoria) (Articles 205(1) and 208, Swiss Code of Obligations (SCO)). Damages cover the costs that the buyer has incurred due to legal proceedings and expenses for the maintenance of the goods due to the defects in the goods. The buyer can recover such costs regardless of any fault by the seller.

The more complex issue concerns recovery of direct and indirect losses. The buyer is entitled to compensation for direct and indirect losses when returning the goods against the price (Article 208(2) and (3), SCO). There is a longstanding dispute concerning the distinction between direct and indirect losses. The practical relevance of this distinction is that recovery of direct losses does not require the seller's fault, whereas recovery of indirect losses is subject to the seller being able to prove that it was not at fault.

The view that the distinction between direct and indirect losses must be made by distinguishing individual types of losses, such as incidental and non-performance loss, is popular among commentators but has not been accepted by the Swiss Supreme Court. In a recent leading case, the Swiss Supreme Court has extensively discussed the approaches advocated and held that the decisive criterion is the length of the chain of causality between the breach of contract and the loss. Under this approach, direct losses are those where there is only one link in the chain of causality between the delivery of defective goods and the loss, whereas every additional link in this chain makes any loss suffered an indirect loss.

In addition, in cases of non-conformity of the goods, the Swiss Supreme Court consistently allows a general damages claim for improper performance based on an application of Article 97(1) of the SCO by analogy. The Swiss Supreme Court, and commentators supporting this practice, subject such damages claim to the same requirements applicable to standard remedies for non-conformity, in particular:

  • The examination and notice requirements apply.

  • The two-year limitation period for remedies based on non-conformity in Article 2010(1) of the SCO is applicable, instead of the ten-year limitation period (Article 127, SCO) that normally applies to a direct application of Article 97(1) in general cases of improper performance.

 
19. What are the buyer's remedies for breach of a sale of goods contract?

Remedies for breach of contract under Swiss law follow the "cause-oriented approach". This means that the set of remedies available to the buyer differs depending on the breach. There are three types of breach relating to the performance of a sales contract:

  • Impossibility.

  • Delay.

  • Improper performance, which includes delivery of non-conforming goods.

Impossibility

If the seller does not deliver because delivery is impossible, the legal consequences depend on the point in time at which delivery of the goods became impossible, and if the seller knew or should have known of the impossibility or even caused it:

  • If delivery had become impossible for objective reasons (for example, loss of the goods) before or at the time of the conclusion of the contract, that contract is invalid by operation of law (Article 20(1), Swiss Code of Obligations (SCO)).

  • If the seller was aware or should have been aware of the initial objective impossibility, it is liable for damages under the concept of culpa in contrahendo (that is, fault in the process of conclusion of a contract).

Although the codified law does not expressly recognises the second claim above, it is well established under case law and recognised by the doctrine. The claim is quasi-contractual, meaning that it partly follows principles of contract law and tort law. The first contract law element is that it is for the seller to prove that it neither caused the initial objective impossibility, nor that it was aware or should have been aware of it at the time of contracting. The second contract law element is that the attribution of third party conduct is based on contract law (Article 101, SCO), not tort law (Article 55, SCO). The Swiss Supreme Court, although criticised by some commentators, consistently applies the limitation periods applicable to tort claims. This means that, instead of the general contract law limitation period of ten years (Article 127, SCO), the claim is subject to a relative period of one year and a cut-off period of ten years (Article 60, SCO).

If delivery of the goods becomes impossible after the conclusion of the contract (for example, because the goods no longer exist or because of a governmental interference before passing of risk), the contract remains valid. However, the buyer's general claim for specific performance is extinguished by operation of law (Article 119, SCO) and any performance rendered by the buyer, in particular payment of the purchase price in advance, must be returned. In any event, the buyer may still be in a position to claim damages. This is the case where the seller cannot show that it was not at fault in causing the impossibility.

Delay

If the seller does not deliver where delivery is possible at the time delivery is due, the case falls within the category of delay. It is necessary to be aware of the general rules on delay in the general part of the SCO, and of the specific provisions on delay for commercial contracts in the specific sales part of the SCO.

For the buyer to exercise its rights under the rules on delay, it must generally:

  • Put the seller on notice (Article 102(1), SCO).

  • Fix an additional reasonable period of time for the seller to perform (Article 107(1) SCO).

The buyer does not need to use two separate communications, as both requirements can be met within the same communication. The test is whether a reasonable third person in the seller's position would have understood the buyer's communication as a notice and that the buyer expects to receive performance within a certain period of time.

Under the general rules on delay, notice is not necessary in the following cases where time was of the essence (Article 102(2), SCO). Likewise, fixing an additional period of time to perform is not necessary where:

  • The seller's conduct shows that fixing an additional period of time would be futile (Article 108 No. 1, SCO).

  • Because of the seller's delay, performance has become useless for the buyer (Article 108 No. 3, SCO).

Once the seller is in delay, the buyer can claim all losses caused by the delay (Article 103(1), SCO). Such losses include in particular additional costs incurred by the buyer due to the delay. The seller can only escape liability if the delay was not its fault (Article 103(2), SCO).

During delay, the seller bears the risk of loss of, or damage to, the goods. Therefore, the seller is liable towards the buyer regardless of whether the loss or damage is due to the fault of the seller (Article 103(1), SCO). The seller can only escape liability if it proves that the same event would have occurred with the same effect, had delivery been made on time to the buyer (Article 103(2), SCO).

Once the additional period of time for the seller to perform has run out, the buyer has three options:

  • Claim specific performance in addition to the recovery of losses caused by the delay (Article 103(1), SCO).

  • Refuse performance and claim expectation interest damages (Article 107(2), SCO). If the buyer chooses this option, it must inform the buyer immediately after expiry of the additional period of time fixed for the seller to perform.

  • Avoid the contract. If the buyer chooses this option, the contract must be unwound (Article 109(1), SCO). According to the Swiss Supreme Court and the majority of the doctrine, unwinding of the contract is a contractual relationship that is not subject to the rules on unjustified enrichment (Article 62, SCO). This distinction has implication with regard to the applicable limitation periods. The buyer is also entitled to recovery of all losses caused by the avoidance of the contract. The unanimous view is that this refers to the recovery of reliance interest damages. This is in line with Swiss law's general approach not to allow avoidance of the contract in addition to recovery of expectation interest damages.

The rules on delay described above generally apply to all sales contracts. However, there are two specific rules for commercial contracts:

  • Where a commercial contract provides for a fixed time of delivery, it is presumed that the buyer will refuse performance and claim expectation interest damages (that is the second option under Article 107(2) of the SCO). The buyer is not required to fix an additional period of time as would be required under Article 107(1) SCO (Article 190(1), SCO). In any case, a notice by the buyer is not required (Article 102(2), SCO). If the buyer still intends to take delivery from the seller, it must immediately notify the seller (Article 190(2), SCO).

  • If the buyer does not intend to claim specific performance, the buyer can calculate its expectation interest on the basis of:

    • a substitute transaction (Article 191(2), SCO); or

    • the market price, if the goods have a market price or a price at trading places (Article 191(3), SCO).

Non-conformity

The SCO regulates non-conformity of the goods in Articles 197 to 210, which provide for the:

  • Seller's liability for non-conformity in general (Articles 197 to 200, and 204, SCO).

  • Buyer's obligation to examine the goods and notify the seller of any defects (Articles 201 to 203, SCO).

  • Buyer's remedies in case of non-conformity (Articles 205 to 209, SCO).

  • Limitation periods applicable to these remedies (Article 210, SCO).

The seller is liable in cases of breach of express warranties and in the case the defect in the goods significantly reduces their use for the buyer (Article 197, SCO). A defect will trigger the buyer's remedies for non-conformity provided that such defect is not negligible (de minimis rule). In sales of livestock, the seller is only liable for breaches of express warranties and if it has defrauded the buyer regarding defects (Article 198, SCO). The seller can exclude its liability for non-conformity of the goods, except for fraud (Article 199, SCO).

The seller is not liable for non-conformities the buyer knew at the time of contracting (Article 200(1), SCO). This does not apply where the sale was based on the understanding that the non-conformity would be removed by the time of delivery. Where the buyer should have been aware of the non-conformities at the time of contracting, the seller is only liable for such non-conformities if the contract contains an express warranty for their absence (Article 200(2), SCO).

Once the buyer has received the goods, it must examine the goods or have them examined, and notify the seller of any defects discovered immediately (Article 201(1),SCO). The term "immediately" is interpreted very restrictively. The buyer only has a few working days to examine and notify. For international sales contracts subject to the United Nations Convention on Contracts for the International Sale of Goods (CISG), the Swiss Supreme Court has expressly stated that the Swiss requirements under Article 201(1) of the SCO are even stricter than those in Germany and Austria. If the defects only become apparent at a later stage, the obligation of the buyer to notify the seller immediately is revived (Article 201(3), SCO). Special rules apply to the sale of livestock (Article 202, SCO).

The consequences of the buyer's failure to examine and notify are drastic. The buyer is deemed to have accepted the goods as they are, and therefore loses all remedies in respect of the defects (Article 201(2), SCO). However, the seller is not protected by the examination and notice requirements if the defects could not have been discovered through usual methods of examination. In addition, the seller remains liable where it has defrauded the buyer with respect to those defects (Article 201(2), SCO).

Unlike in Germany and Austria, where the examination and notification requirements only apply to business transactions, under Swiss law, this requirement also applies to consumer sales.

Swiss law's remedial system is generally based on the Roman law system, as is the case in many civil law jurisdictions. The basic remedies of the buyer are (Article 205, SCO):

  • Reduction of the purchase price (actio quanti minoris).

  • Return of the goods against the price (actio redhibitoria).

If the contract is for fungible goods, the buyer can also claim for the delivery of substitute goods (Article 206, SCO).

Under Article 210(1) of the SCO, the buyer must bring a claim based on non-conformity within two years from delivery, subject to interruption and cessation of the limitation periods under Articles 134 to 138 of the SCO.

The applicable limitation period is five years if the goods are to be integrated into a building (Article 210(2), SCO). This five-year period applies to construction materials (for example, cement), not to goods that are subsequently merely used in the building and connected to the grid and water supply system (such as household appliances), even if they are then affixed to the building. A relative period of one year starting with the buyer's discovery of the defect and a cut-off period of 30 years from the conclusion of the contract apply to the sale of cultural items (Article 210(3), SCO).

The parties can generally shorten or extend the limitation periods above. According to the Swiss Supreme Court and the majority of the doctrine, the limitation periods under Article 210(1) and (2) of the SCO, cannot be extended beyond ten years. The basis for this approach is Article 127 of the SCO, which establishes the general limitation period of ten years for claims arising under the provisions of the general part of the SCO, and which is mandatory (Article 129, SCO). The Swiss Supreme Court allows clauses that shorten these limitation periods provided that they do not disproportionately disadvantage the buyer. Whether this is the case will be determined on a case-by-case basis.

In business-to-consumer transactions, the limitation period cannot be less than two years if the goods are new. For sales of used goods, the limitation period cannot be less than one year (Article 210(4), SCO).

The seller cannot rely on the expiry of the limitation period in cases of fraud (Article 210(6), SCO). The majority view interprets this provision to mean that the seller's liability persists for ten years, as the parties would not be allowed by the Swiss Supreme Court to extend the limitation period beyond ten years.

Third party rights to the goods

Liability of the seller for third party rights to the goods is established in Articles 192 to 196a of the SCO. The seller's liability is based on the Roman law concept of liability for eviction and is also close to the concept of "quiet possession" at common law. Therefore, it is the interference of a third party with the buyer's possession of the goods that triggers liability of the seller, not the existence of the right itself. The right of the third party must have existed at the time of the conclusion of the sales contract (Article 192(1), SCO). If the buyer was aware of the risk of a third party interfering with its possession at the time of contracting, the seller is only liable if it has expressly declared to assume liability (Article 192(2), SCO). Any disclaimer in favour of the seller is invalid if the seller was aware of the right of the third party.

According to the Swiss Supreme Court, if the goods are encumbered with third party industrial or intellectual property rights (such as patents), such encumbrances amount to a defect subject to the rules on non-conformity of the goods in Article 197 et seq. of the SCO (see above, Non-conformity). Therefore, Articles 192 to 196a SCO do not apply to these rights. This position is rather singular from a comparative perspective, as domestic systems usually treat encumbrances by industrial or intellectual property rights in the same way as third party title over the goods. This is also the approach taken by the CISG in its Articles 41 and 42. However, there is little disagreement with the position of the Swiss Supreme Court among commentators.

There is a distinction between cases where:

  • The third party deprives the buyer entirely of possession, where avoidance of the contract is necessary (Article 195, SCO).

  • There is only partial deprivation (Article 196, SCO), where avoidance of the contract is not required.

A buyer that intends to retain the goods can join the seller in the legal proceedings against the third party.

 
20. What are the seller's remedies for non-payment or late payment?

If the seller has fixed a time for payment, then on expiration of such period, it does not need to put the buyer on notice, and delay on the part of the buyer will be triggered automatically. As soon as delay is triggered, the seller is entitled to interest of 5% and recovery of all losses caused by the delay (for example, where the seller took out a loan for refinancing purposes and must pay interest).

If time is not of the essence, the seller must fix an additional period of time for payment. On expiry of that period, the seller can claim payment of the price, avoid the contract and ask for return of the goods, or can claim expectation interest damages. The seller can calculate its expectation interest on the basis of an actual substitute transaction, or based on the market price (Article 215, Swiss Code of Obligations (SCO)).

Specific rules apply if the buyer was obliged to pay in advance or under concurrent exchange of performance. In any of these two cases, if the buyer is in delay of payment, the seller can immediately avoid the contract. However, where the seller has handed the goods over to the buyer before payment, the seller can only avoid the contract based on delay if it has specifically reserved such right in the contract. The Swiss Supreme Court interprets retention of title clauses as implying such reservations, regardless of whether the clause is effective under property law, which requires registration of clauses at the place of the buyer (see Question 9). Failing such registration, the retention of title has no property law effect but will be interpreted as the seller's reservation of the right to avoid the contract based on the buyer's delayed payment.

Exclusion of liability

21. What are the main rules relating to excluding contractual liability? Are exclusion clauses enforceable in your jurisdiction? If so, what are the requirements to create a legally enforceable exclusion clause?

With regard to delay and improper performance cases, a party can limit its liability to cases of gross negligence and intentional acts (Article 100(1), Swiss Code of Obligations (SCO)). In cases of non-conformity of the goods, liability can be limited to cases of fraud (Article 199, SCO), which means that a limitation of liability clause fails where the seller knew of the breach of warranty at the relevant point in time. There remains uncertainty about the effect of limitation or exclusion of liability clauses on the burden of proof. Usually, it is the party relying on the disclaimer that must disprove fault. The majority view in the doctrine is that disclaimers have no effect on that allocation of the burden of proof. The Supreme Court is yet to settle this issue conclusively.

Article 100(3) of the SCO restricts a party's ability to limit or exclude liability if it operates under governmental concession. There is some uncertainty as to which areas of industry are included in this provision. The Swiss Supreme Court consistently holds that the provision applies to banks.

Choice of law

22. Will local courts recognise a choice of foreign law in a sale of goods contract? Are there any mandatory local rules that apply, despite a choice of foreign law?

In international settings, parties can make a choice of foreign law, and exclude even mandatory provisions of Swiss law under the Swiss Private International Law Act (PILA). The parties cannot create an international setting by choosing a foreign law, but potentially by including a choice of foreign jurisdiction. Whether this is admissible remains subject to dispute. Where parties effectively copy the provisions of the foreign law into the contract, mandatory Swiss law remains applicable.

It is necessary to be aware of the difference between foreign law, non-national law and rules of law (such as the UNIDROIT Principles of International Commercial Contracts (PICC)). In an international setting, Swiss courts will respect a choice of law only with regard to the law of a foreign state. They will not respect such choice with regard to non-national law (that is, international laws that have not become part of Swiss law). For example, the United Nations Convention on Contracts for the International Sale of Goods (CISG) is part of domestic Swiss law and can validly be chosen. Otherwise, non-national laws can be chosen but the mandatory provisions of Swiss law remain applicable. Rules of law can only be chosen to the extent that mandatory provisions of domestic Swiss law remain applicable. This also appears to be the case if international arbitration is not conducted under rules that allow for the choice of rules of law (such as the Rules of the International Chamber of Commerce (ICC)), but under the rules established in PILA, which clearly states that the tribunal must apply the "law" chosen by the parties.

Mandatory provisions of Swiss contract law almost exclusively concern the validity of the contract (for example, illegality, immorality, fraud, duress and unconscionability) but also the extent to which parties can limit their liability under the contract.

 
23. If the parties do not make a choice of law, what rules determine the law applicable to a sale of goods contract?

In domestic settings, Swiss law applies.

In international settings, there is a theoretical problem arising from the fact that Switzerland is a party to both the United Nations Convention on Contracts for the International Sale of Goods (CISG) and the Hague Convention on the Law Applicable to International Sales of Goods 1955. The Swiss Private International Law Act (PILA) specifically states that in order to determine the law applicable to an international sales contract, the 1955 Hague Convention is applicable. This raises the question of whether the 1955 Hague Convention or the CISG must be consulted by the court. The issue is highly disputed in doctrine. However, in practice, courts almost never engage in a conflict of law exercise based on the 1955 Hague Convention but will simply apply the CISG if the requirements for its application are met. It is therefore highly likely that, absent a choice of law in an international sales contract, the court will apply the CISG. The state court must examine the applicability of the CISG ex officio. If the requirements of the CISG are not met, courts frequently turn to the 1955 Hague Convention, as is provided under Article 118 of PILA. This Convention typically designates the law of the place of the seller.

Choice of jurisdiction

24. Will local courts recognise a choice of foreign jurisdiction in a sale of goods contract? Are there any mandatory local rules that apply, despite a choice of foreign jurisdiction?

Courts will recognise choice of jurisdiction clauses. However, different writing requirements apply depending on which rules govern the choice of jurisdiction clause in question, that is either:

  • Article 23 of the EFTA Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters 1988 (Lugano Convention).

  • Article 5 of the Private International Law Act (PILA), which applies to all jurisdiction clauses not covered by the Lugano Convention.

Under both sets of rules, the parties must exchange written communications referring to each other and evidencing consent regarding the choice of jurisdiction. It is sufficient to make reference to standard terms and conditions. It is not necessary that the choice of jurisdiction clause is signed by the parties in one single document.

There are differences between the Lugano Convention and PILA where the choice of jurisdiction was made orally by the parties, and one party subsequently confirms in writing the choice of jurisdiction.

 
25. If the parties do not make a choice of jurisdiction, what rules determine the jurisdiction applicable to a sale of goods contract?

In international settings, the applicable rules depend on the locations of the parties. Within Europe, the EFTA Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters 1988 (Lugano Convention) will most likely determine international jurisdiction. The Private International Law Act (PILA) and the Code of Civil Procedure (CCP) supplement the Lugano Convention for determination of the appropriate forum.

In the case of sales contracts, the Lugano Convention provides that jurisdiction is based on the place where the goods have been or should have been delivered under the contract (Article 5 No 1 lit. b). Under Article 2 of the Lugano Convention, Swiss courts will accept jurisdiction if the defendant is located in Switzerland and sued in Switzerland. The PILA then determines which courts within Switzerland are competent to hear the case. In all situations, cantonal law and, in part, the CCP, determine which court and how many judges will hear the case.

Where the Lugano Convention is not applicable, the PILA determines the courts that are competent to hear the case. The rules under the PILA are generally similar to those of the Lugano Convention.

Arbitration

 
26. Are arbitration clauses commonly included in sales of goods contracts in your jurisdiction?

Switzerland is traditionally an important hub for international arbitration. Swiss law is among the most popular choices in commercial contracts, in particular due to its broad recognition of the principle of the autonomy of the parties. In addition, Switzerland is a popular place for arbitration due to the expertise of Swiss lawyers in the field of arbitration and their frequent appearance as arbitrators and counsels in international settings.

Switzerland is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958). Swiss courts are arbitration-friendly and will generally recognise a foreign arbitral award. Set-aside proceedings, which must be brought directly before the Swiss Supreme Court, are rarely successful.

 

Storage of goods

27. How is title to goods in storage protected and evidenced? Are warehouse receipts recognised as documents of title in your jurisdiction?

The custodian of goods in storage takes possession of the goods in favour of the owner. Evidence of title is provided through warehouse receipts, which are recognised as documents of title if they comply with certain requirements (see Question 28). Therefore, goods in storage can be traded through a documentary sale.

 
28. What conditions and formalities must warehouse receipts comply with?

Under Article 482(3) of the Swiss Code of Obligations (SCO), documents of title can be made out to a named person, to order or to bearer. The differences between these types of documents mainly concern the way in which they can be validly transferred:

  • For documents made out to a named person, transfer of the right embodied in the document can be made through an assignment.

  • For documents made out to order, transfer of the right embodied in the document requires endorsement (Indossament).

  • For documents made out to bearer, there is no specific requirement other than that the document must be handed over for transfer to be completed.

Negotiable documents of title issued by a warehouse keeper or carrier must include the following information (Article 1153, SCO):

  • The place and date of issue and the signature of the issuer.

  • The name and address of the issuer.

  • The name and address of the depositor or sender of the goods.

  • An inventory of the stored or despatched goods by description, volume and identification marks.

  • The fees and remuneration payable or paid in advance.

  • Any special agreements between the parties concerning the handling of the goods.

  • The number of duplicates of the document of title.

  • The persons with power of disposal, with indication of names, to order or as bearer.

Bills and certificates issued in respect of stored goods or freight that do not satisfy the formal requirements of documents of title to goods are not recognised as negotiable securities, but are deemed to be mere receipts or other documents of proof (Article 1155(1), SCO).

Warehouse keepers must obtain a governmental licence to be able to produce documents of title (Article 482(1), SCO). Where the warehouse keeper lacks such authorisation, bills and certificates issued are recognised as negotiable securities, provided that they satisfy the statutory formal requirements (Article 1155(2), SCO).

 
29. Are other interests over goods in storage recognised?

While goods in storage are often transferred through documents of title, they can also be transferred "traditionally" (that is, physically through delivery of the goods). In the case the acquirer of the goods is not the holder or acquirer of the documents of title, this raises the question of which interest over the goods in question has priority. A bona fide acquirer of the goods has priority over a bona fide acquirer of a document of title to goods (Article 925, Swiss Civil Code (SCC)).

In addition, goods in storage can be subject to a right of lien. If there are documents of title to goods, the goods can be pledged by pledging the documents (Article 902(1), SCC). If, there is a special warrant in addition to the document of title, pledging the warrant is sufficient to pledge the goods if notice of the pledge, including the amount of the debt and the maturity date, is entered on the document of title (Article 902(2), SCC). However, a bona fide acquirer of the goods still has priority over a bona fide acquirer of a document of title, or a right of lien of a document of title (Article 925, SCC).

 

Imports

Customs authority

30. What is the authority responsible for enforcing customs laws and regulations? Are certain goods subject to specific examination procedures?

The Swiss Federal Customs Administration (FCA)

The authority responsible for enforcing customs laws and regulations is the Swiss Federal Customs Administration (FCA) (Eidgenoessische Zollverwaltung (EZV)) (www.ezv.admin.ch). The FCA is also responsible for levying several consumption taxes such as value added tax, mineral oil tax and tobacco tax. In addition, it is responsible for controlling precious metals, issuance of motorway tax sticker, levying the mileage-related heavy vehicle charge, and other tasks.

Its mandate is to:

  • Contribute to national security by combating illegal activities.

  • Protect the population and environment through border control of goods.

  • Ensure public security.

Additionally, the FCA's mandate includes economic tasks through the protection and verifications of import and export, levy of certain taxes and various other services (for example, statistics).

Applicable law

The Swiss Customs Code (SR 631.0) and its ordinances apply to imports generally. The applicable customs law and ordinances can be found at: www.admin.ch/opc/de/classified-compilation/63.html#63. However, various fields of law are also relevant when importing goods into Switzerland (for example, the Cultural Property Transfer Act (SR. 444.1) and its ordinances).

Additionally, free trade agreements (for example, between Switzerland and the EU (SR 0.632.401)) and international multilateral agreements (for example, the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) (SR 0.453)) may be relevant.

Therefore, it is necessary to ensure that all (possible) relevant national and international laws and ordinances are taken into account when importing goods into Switzerland.

A list of all multilateral and bilateral free trade agreements can be found at: www.ezv.admin.ch/dokumentation/04032/05003/index.html?lang=de.

Examination procedures

The FCA has discretion to investigate and control any goods and persons crossing the Swiss border, or those that are present in Switzerland. This includes powers of personal search and examination (only by professional doctors), and identification of persons. Generally, the FCA has competences similar to those of the police forces (including the power to arrest persons). Certain goods can be subject to specific examination procedures based on the applicable law and the discretion of the FCA, including:

  • Cash and securities.

  • Precious metals.

  • Food.

  • Animals and animal products.

  • Protected species.

  • Cultural properties.

  • Pharmaceuticals.

  • Dual-use goods (usable for civil and military purposes).

  • Arms and ammunition.

See also Question 32.

Administrative and criminal penalties

The FCA can impose fines and criminal penalties based on the Swiss Customs Code (SR 631.0) and the Swiss Administrative Criminal Code (SR 313.0). In addition, administrative and criminal penalties can be imposed under the Swiss Criminal Code (SR 311.0) in certain cases.

Import duties, tariffs and rates

31. What are the main customs import tariffs and duties?

General tariffs and rates

Goods that are imported into Switzerland and goods in transit through Switzerland must be declared to the Federal Customs Administration (FCA) in writing or online. Professional service providers must use the electronic online declaration procedure.

Custom duties are based on the type, material, characteristics, use, and weight of the goods in line with the assessment basis (in general gross weight). The calculation is based primarily on the condition and weight at the time of declaration at customs. The actual gross weight (including transport packaging) can differ from the weight declared in the transport documentation.

Apart from any import duty, goods imported into Switzerland are subject to Swiss value added tax (VAT) (Mehrwertsteuer (MWST)) at the current rate of 8%. A reduced rate applies to certain goods (including foodstuff, books, magazines, and medication) under the applicable Swiss VAT Code. Additional charges apply for certain goods, such as:

  • Incentive fees (for example, incentive fee on volatile organic compounds (VCC)).

  • CO2 tax.

  • Tobacco excise tax.

  • Beer excise tax.

  • Petroleum tax.

The main tool to assess the applicable tariffs and rates is the TARES-TOOL (http://xtares.admin.ch). This tool is intended for direct use as part of customs clearance. It contains substantial information on legal provisions to be observed when clearing goods through customs. However, the application of such provisions is in any case subject to the wording of the acts and ordinances themselves. The tool provides access to a large number of explanatory notes, remarks, circular tariff quotas and lists of tariff headings.

For example, the following goods are subject to the following tariffs (although in each case the applicable tariffs must be assessed with the TARES-TOOL):

  • Computers: CHF0 per 100 kg.

  • Private cars: From CHF12 to CHF15 per 100 kg.

  • Pharmaceuticals: CHF0 per 100 kg.

Preferential tariffs

Switzerland has entered into bilateral and multilateral free trade agreements with various countries which allow imports at reduced tariffs or duty-free. The preferential tariffs are only granted if the goods comply with the rules set out in the relevant free trade agreement (in particular if the origin, as required in the agreement, can be demonstrated).

The most important free trade agreements are the free trade agreements with the EU and the European Free Trade Agreement (EFTA) (that is, Switzerland, Liechtenstein, Norway and Iceland). These also include bilateral agreements with various countries related to agricultural products. In addition, Switzerland has entered into several bilateral free trade agreements with other countries. A detailed list can be found at:www.ezv.admin.ch/dokumentation/04032/05003/index.html?lang=de.

Switzerland grants preferential tariffs in favour of developing countries within the framework of the Generalised System of Preferences (GSP) (duty-free or reduced tariff) for goods originating from developing countries if a proof of origin is submitted. Switzerland grants duty exemption to all developing countries for certain tariffs (except for most of textiles). Switzerland grants duty exemption to least developed countries (LDC) and developing countries that have joined an international debt relief initiative and have not yet eliminated their debt, even if other countries only benefit from a tariff reduction. The relevant list can be found at:www.admin.ch/opc/de/classified-compilation/20061738/index.html#app1.

Non-tariff barriers to imports

32. Are there non-tariff barriers to imports into your jurisdiction?

Certain goods are subject to import restrictions and authorisations that are not related to customs duties (non-customs provisions) and therefore require further authorisations and documentations, or are banned from import. Information regarding such special restrictions and authorisations can be found in the TARES-TOOL (http://xtares.admin.ch).

In particular, the following goods are subject to further import restrictions:

  • Cash and securities.

  • Precious metals and goods containing precious metals.

  • Food and articles of daily use.

  • Animals and animal products.

  • Protected species (animals and plants).

  • Cultural property.

  • Pharmaceuticals.

  • Counterfeits.

  • Arms and ammunition.

  • Goods with both civilian and military application (dual-use goods).

  • Dangerous chemicals and pesticides.

  • Waste.

  • Narcotics and precursor chemicals.

 
33. Can customs decisions and import restrictions be challenged?

Customs administration's decisions can be appealed to the higher district customs directorates (Zollkreisdirektion). Decisions of the customs directorates can be appealed before the general directorate of customs (Oberzolldirektion). The decisions of the general directorate of customs can be challenged before the Federal Administrative Court (Bundesverwaltungsgericht). Generally, the double court instance procedure applies. However, some exceptions may apply.

Decisions relating to the Swiss Administrative Criminal Code (SR 313.0) and the ordinary Swiss Criminal Code (SR 311.0) are subject to other procedural rules based on the applicable law. However, the double court instance procedure generally applies to such proceedings.

 

Trade remedies

Regulatory framework

34. What are the main regulations and authorities responsible for investigating and deciding on trade remedies?

Regulatory framework

Switzerland is a member of the World Trade Organization (WTO) and implements WTO rules in its domestic law.

At the domestic level, various laws regulate trade in a broader sense, including the Penal Code (which regulates bribery in the public sector) and specific laws on intellectual property rights, which have effects on trade.

The two main acts relating to the regulation of trade are the:

ACRC

The ACRC applies to "private or public undertakings that are parties to cartels or to other agreements affecting competition, which exercise market power or which participate in concentration of undertakings" (Article 2(1)). Articles 5 to 8 of the ACRC set out specific conducts that are classified as unlawful. Articles 9 to 11 of the ACRC govern concentration of undertakings.

The ACRC contains provisions on civil procedure with regard to conduct that amounts to unlawful restraint of competition and prevents a person from entering or competing in a market (Articles 12 to 15). Such person can request (Article 12, ACRC):

  • The elimination or discontinuance of the hindrance to competition.

  • Damages and satisfaction in accordance with the Swiss Code of Obligations (SCO).

  • Surrender of profits earned unlawfully, in accordance with the provisions on agency without authority.

To enforce the provisions of the ARCR, courts can (Article 13, ACRC):

  • Declare contracts null and void in whole or in part.

  • Force a party to conclude contracts that are in line with market or industry standards.

For a summary of the administrative procedure established in the ACRC see below, Regulatory authority.

AUC

The AUC sets out a non-exhaustive list of types of conduct that are considered unfair in competition, including:

  • Unfair advertising practices, particularly aggressive selling methods.

  • Breach of certain information duties.

  • Certain forms of distance marketing practices.

  • Dumping prices.

In addition, Article 4 of the AUC addresses bribery in the private sector. Bribery in the public sector is governed by Articles 322ter to 322octies of the Swiss Penal Code.

In addition, the following are considered as unfair competition:

  • Disclosing or using business secrets that have been obtained in an unlawful manner (Article 6, AUC).

  • Breach of applicable labour conditions (Article 7, AUC).

Under Article 8 of the AUC, courts have the authority to review the content of standard terms in business-to-consumer transactions. According to this Article, it is an act of unfair competition to use standard terms that, contrary to good faith, lead to a significant and unjustified imbalance between contractual rights and obligations to the detriment of the consumer.

Articles 9 to 13a of the AUC set out specific provisions on civil litigations and substantive remedies. Market participants that have been affected by an act of unfair competition can bring claims in civil courts to obtain (Article 9, AUC):

  • Injunctive relief, to prohibit an anticipated violation of the AUC.

  • Cessation of an existing violation.

  • A declaratory judgment confirming that an act amounts to a violation of the AUC, if such act continues to affect the claimant.

  • Damages and satisfaction in accordance with the SCO.

  • Disgorgement of profits in accordance with the rules on agency without authority.

In addition, customers affected in their economic position as well as industry associations and organisations of national or regional significance active in the field of consumer protection can appear as claimants (Article 10, AUC). The Swiss Federation can also bring a claim, if required by the public interest.

Articles 16 to 18 of the AUC contain detailed provisions on the communication of prices for goods and services, including the way prices are communicated in advertising.

Regulatory authority

The competent regulatory authorities in the field of competition (including countervailing duties and anti-dumping measures) are the Competition Commission and the Secretariat of the Competition Commission (Articles 18 to 25, ACRC). The Secretariat is the investigatory body and the Competition Commission is the decision-making body.

The Commission is appointed by the Swiss Federal Council and has between 11 and 15 members. The majority of the members must be independent experts. The Commission is independent from other administrative authorities and has the authority to organise itself in the way it deems fit and establish internal rules on its organisation. The Commission is part of the Federal Department of Economic Affairs, Education and Research. The Secretariat is in charge of preparing the Commission's business, conducting investigations and issuing procedural rulings, if necessary. The executive management of the Secretariat is appointed by the Swiss Federal Council, while the remainder of the staff is appointed by the Commission itself.

Investigations and enforcement

 
35. What are the requirements and procedure to start trade remedies investigations?

The Secretariat of the Competition Commission can conduct preliminary investigations ex officio, at the request of undertakings involved or in response to a complaint from third parties (Article 26, Act on Cartels and other Restraints of Competition (ACRC)). If such preliminary investigations (during which the Secretariat does not have access to files) indicate an unlawful restraint of competition, or if such indications arise otherwise, the Secretariat must open an investigation. The Secretariat must also open an investigation if this is requested by the Competition Commission or the Federal Department of Economic Affairs, Education and Research. When the Secretariat opens an investigation, it gives notice of such investigation by way of an official publication that refers to the purpose of the investigation and the relevant parties.

Third parties can participate in investigations. When the Secretariat gives notice of the investigation, the publication also contains an invitation to third parties to come forward within 30 days, if they wish to participate in the investigations. The following persons can participate in investigations:

  • Persons that are hindered from starting or continuing to compete, as a result of a restraint of competition.

  • Industry associations that, under their bye-laws, safeguard the economic interests of their members.

  • Organisations of national or regional significance that are active in the field of consumer protection.

In addition, third parties can also be heard as witnesses during an investigation. Specific rules on co-operation with foreign authorities are set out in Articles 42a and b of the ACRC.

Appeals

 
36. Is there a right of appeal against the authority's decision? What is the applicable procedure?

Decisions of the Competition Commission can be appealed before the Federal Administrative Court (Bundesverwaltungsgericht). The decisions of this Court can then be appealed before the Swiss Federal Supreme Court. Appeals against decisions of the Competition Commission before the Federal Administrative Court are governed by the:

An appeal must be filed within 30 days from the ruling (Article 50, APA). To appeal a decision, the applicant must file the (Article 52, APA):

  • Application.

  • Grounds of appeal, with details of evidence.

  • Signature of the appellant or his agent.

  • Official copy of the contested ruling.

  • Documents cited as evidence, provided that they are in the appellant's possession.

An appeal has suspensive effect.

 

Exports

Regulatory framework

37. What are the main requirements to export goods from your jurisdiction?

The requirements for export are set out in specific legislation, which concerns in particular trading of dual-use goods and war material, and the implementation of international sanctions and embargoes. See Question 38.

The relevant authority in charge of all aspects of export and import is the Swiss State Secretariat for Economic Affairs (SECO) (English website available at: www.seco.admin.ch/index.html?lang=en).

 
38. Are certain categories of goods subject to specific export quotas, restraints or other controls?

Switzerland generally takes a very liberal approach to exports, as its economy is export-oriented to a significant extent. However, certain export restrictions apply.

At the international level, Switzerland is a party to international agreements restricting or prohibiting trade in the fields of nuclear, biological or chemical weapons.

At the domestic level, general export restrictions are established for certain types of goods under the:

In addition, the Swiss Government can implement international sanctions or embargoes through specific ordinances. The legal basis for such restrictions is the Federal Act on the Implementation of International Sanctions, SR 946.231 (Embargo Act) (available in English at: www.admin.ch/opc/en/classified-compilation/20000358/index.html). Based on this Act, the Swiss Government has implemented a number of regulations with regard to certain countries or persons (a list of such persons can be found at: www.seco.admin.ch/themen/00513/00620/00622/index.html?lang=de).

Licences required under the Acts mentioned above must be obtained from the Swiss State Secretariat for Economic Affairs (SECO), following an online procedure (www.elic.admin.ch/elic/ext/?login&language=en). Additionally, the consent of the Federal Council is required where the matter is of fundamental importance to Switzerland. The Acts set out the requirements relating to applications for export licences and the reasons for refusal.

Penalties

 
39. What are the consequences of non-compliance with export regulations?

Violations of the Federal Act on the Control of Dual-Use Goods and of Specific Military Goods lead to criminal penalties in the form of imprisonment and fines. The applicable penalties and their extent depend on the type of violation and the circumstances of the case. In addition, administrative penalties and confiscatory measures may also apply. The same penalties apply to violations of the Federal Act on War Material.

Violations of ordinances implemented by the Swiss government based on the Federal Act on the Implementation of International Sanctions (Embargo Act) may also be subject to imprisonment or fines.

 

International trade restrictions

Trade sanctions

40. Are there specific restrictions on trade with certain jurisdictions?

Trade restrictions are governed by ordinances adopted by the Swiss Federal Council (see Question 41). The restrictions currently in force in Switzerland relate to the following countries and/or groups:

  • Persons and entities linked to Osama bin Laden, Al-Qaida or the Talibans.

  • Iraq.

  • Liberia.

  • Myanmar.

  • Zimbabwe.

  • Ivory Coast.

  • Sudan.

  • Democratic Republic of Congo.

  • Persons related to the attack on Rafik Hariri.

  • Belarus.

  • North Korea.

  • Lebanon.

  • Islamic Republic of Iran.

  • Somalia.

  • Guinea.

  • Eritrea.

  • Libya.

  • Syria.

  • Guinea-Bissau.

  • Central African Republic.

  • Ukraine.

  • Yemen.

Information regarding trade restrictions currently in force are published by the State Secretariat for Economic Affairs (SECO) and can be found at: www.seco.admin.ch/themen/00513/00620/00622/index.html?lang=fr.

The names of individuals, groups and companies that are subject to restrictive measures are listed in the annexes of the relevant ordinances. A search engine is also available on SECO's homepage.

In addition to the measures mentioned above, specific restrictions apply to the trade of rough diamonds as part of the Kimberley Process.

 
41. What is the authority responsible for imposing trade restrictions?

Trade restrictions are based on the Federal Act on the Implementation of International Sanctions (Embargo Act), which operates as a framework law. Actual sanctions and restrictive measures are adopted by the Swiss Federal Council through ordinances. The State Secretariat for Economic Affairs (SECO) is in charge of implementing and monitoring compliance with the measures set out in the Embargo Act and the ordinances. Depending on the nature of the sanctions (for example, financial, travel bans, controls at customs, and so on), the SECO can involve other Federal Departments to assist in the implementation of the measures in question.

As part of its functions, the SECO has the right, among other things, to (Article 4, Embargo Act):

  • Request the disclosure of information and documents.

  • Inspect premises.

  • Seize incriminating material.

  • Seek the assistance of the police or investigating officers of the customs administration.

In addition, there are provisions on administrative assistance within Switzerland (Article 6, Embargo Act). Therefore, the responsible authorities of the Confederation and the cantonal and communal police authorities can disclose data (including particular sensitive data) to each other and to the supervisory authorities (that is, SECO), provided that it is necessary for the implementation of the Embargo Act.

Measures of international administrative and mutual assistance can also be taken, where necessary for the implementation of the Embargo Act. Therefore, the SECO, and all other authorities of the Confederation that are responsible for enforcement, supervision, crime prevention and prosecution can co-operate with relevant foreign authorities and international organisations or bodies, and co-ordinate their investigations (Article 7, Embargo Act). As sensitive data may be provided, administrative and mutual assistance between Swiss and foreign authorities require the fulfilment of certain conditions, including, among others:

  • The existence of a duty of secrecy.

  • Reciprocal legal rights.

  • Enforcement of the sanctions by the foreign country.

 
42. What are the consequences of non-compliance with trade restrictions?

The Embargo Act provides for a number of criminal sanctions and measures that apply to cases of non-compliance with the provisions of such Act or, as the case may be, the provisions of ordinances enacted by the Swiss Federal Council. Criminal investigations based on the Embargo Act are conducted by the Office of the Attorney General of Switzerland.

Any person that breaches any provision of an ordinance of the Swiss Federal Council (provided that such breach is subject to prosecution) may be liable to (Article 9, Embargo Act):

  • A term of imprisonment of up to one year or a fine of up to CHF500,000, for wilful breaches. In serious cases, the penalty is a term of imprisonment of up to five years. A custodial sentence can be combined with a fine of up to CHF1 million.

  • A term of imprisonment of up to three months or a fine of up to CHF100,000, if the offence is committed by negligence.

Any person that breaches the duty to provide information and documents to the competent authority, to grant access to its premises, or any person that makes false or misleading statements, may be liable to (Article 10, Embargo Act):

  • A fine of up to CHF100,000, for offences committed wilfully.

  • A fine of up to CHF40,000 for offences committed by negligence.

Such penalties also apply to anyone breaching otherwise the provisions of the Embargo Act or the provisions of an ordinance of the Swiss Federal Council, provided. However, no other criminal provision applies.

Attempts, aiding and abetting are also liable to prosecution.

If an offence under the Embargo Act also constitutes an offence under the War Material Act, the Control of Goods Act or the Nuclear Energy Act, then the criminal provisions of the act that provides for the most severe penalty apply exclusively. If an offence also constitutes an offence under the Customs Act, the criminal provisions of the Customs Act apply exclusively (Article 11, Embargo Act).

Property and assets that are subject to compulsory measures must be forfeited, regardless of the criminal liability of any person, if their continued lawful use is not guaranteed (Article 13, Embargo Act). In principle, forfeited property and assets, together with any revenues from their sale, become the property of the Swiss Confederation.

 
43. Are businesses subject to specific compliance requirements? What practical steps should a business take to ensure compliance with trade restrictions?

Neither the Embargo Act nor its implementation ordinances provide for any particular compliance requirements. However, given the complexity of the legislation pertaining to international trade restrictions, it is recommended to have a centralised compliance function to co-ordinate and implement compliance measures throughout the company.

The actual degree of compliance that must be observed will depend on the industry, the markets served by the concerned entity and its overall exposure to trade sanctions. For example, the Swiss Bankers Association has published Guidelines for the Management of Country Risk. Within this framework, banks must assess risks arising from countries where they conduct business and therefore respect international sanctions.

To prevent potential violations of applicable trade restrictions, it is also recommended that companies:

  • Adopt a code of conduct.

  • Adopt internal guidelines or directives.

  • Provide appropriate training to staff members.

Contractual mechanisms, such as warranty, termination and choice of law provisions must also be considered to ensure compliance and reduce exposure to international sanctions. However, such contractual mechanisms will not prevent the relevant supervisory authorities from opening an investigation in cases of suspicion of breach of international sanctions.

Swiss financial institutions should bear in mind that the breach of international sanctions may also have adverse consequences under Swiss regulatory laws (in particular regarding the "fit and proper" test), even if the conduct in question does not constitute a breach under Swiss sanction laws. The Swiss Financial Market Supervisory Authority (FINMA) takes the position that a bank must at all times ensure proper business conduct and have an adequate organisation, including regarding risk management. Therefore, according to FINMA, financial institutions must analyse, reduce, and adequately control the legal and reputational risks emanating from foreign laws that also apply to the handling of the sanction regime.

Foreign trade barriers

 
44. What is the procedure for local exporters to complain against foreign trade barriers contrary to the WTO or other trade agreements?

The ultimate responsibility for settling disputes under WTO agreements lies with member governments, through the Dispute Settlement Body.

Since 1995, the Swiss Government has been a party to proceedings before the WTO Dispute Settlement Body in four cases. Switzerland acted as claimant against:

  • India in 1997 (Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products).

  • Australia in 1998 (Anti-Dumping Measures on Imports of Coated Woodfree Paper Sheets).

  • The Slovak Republic in 1998 (Measures Concerning the Importation of Dairy Products and the Transit of Cattle).

  • The US in 2002, as one of eight co-complainants (Definitive Safeguard Measures on Imports of Certain Steel Products).

Three of these cases were settled. To the best of the authors' knowledge, no case has been brought against Switzerland.

There is no publicly available policy or guideline issued by the Swiss Government regarding WTO disputes, which are handled on a case-by-case basis.

 

The regulatory authorities

Federal Customs Administration (FCA)

W www.ezv.admin.ch/index.html?lang=en

Principal responsibilities. The FCA is responsible for enforcing customs laws and regulations

Competition Commission

W www.weko.admin.ch/org/index.html?lang=en

Principal responsibilities. The Competition Commission describes its tasks as including "combating harmful cartels, monitoring dominant companies for signs of anti-competitive conduct, enforcing merger control legislation and preventing the imposition of restraints of competition".



Online resources

Swiss Government

W www.admin.ch/gov/en/start/federal-law/classified-compilation.html

Description. This is the official website of the Swiss Government. It contains the continuously updated official versions of Swiss federal law. Certain acts have been translated into English, although in many cases no English translation is available. The link above provides access to the compilation of acts translated into English. All other federal legislation is accessible through the French, German and Italian versions of the website. English translations have no legal force, as English is not an official language in Switzerland.



Contributor profiles

Dr Pascal Hachem, Associate

Bär & Karrer AG

T +41 58 261 50 00
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Professional qualifications. Attorney at Law, Dr. iur.

Areas of practice. Dispute resolution; general corporate and commercial advice.

Publications

  • Schwenzer/Hachem/Kee, Global Sales and Contract Law, Oxford University Press 2012.

  • Hachem, Agreed Sums Payable upon Breach of an Obligation – Rethinking Penalty and Liquidated Damages Clauses, The Hague 2011.

  • Schlechtriem & Schwenzer, Commentary on the UN-Convention on the International Sale of Goods (CISG), 3rd edition, Oxford University Press 2010.

Dr Andrew Michael Garbarski, Partner

Bär & Karrer AG

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Professional qualifications. Attorney at Law, Dr. iur.

Areas of practice. Litigation; general corporate and commercial; private clients; trusts and estates reorganisation and insolvency; internal investigation and cross-border proceedings; white collar crime.

Languages. French, German, English

Professional associations/memberships. Swiss Bar Association (SAV/FSA); Geneva Bar Association (OdA); Association Genevoise de Droit des Affaires (AGDA).

Publications

  • Lifting of Previously Suspended Sanctions Against Iran, Schott Markus / Garbarski Andrew Michael, Bär & Karrer Briefing August 2015.

  • Le spectre du droit pénal plane-t-il sur le wealth management suisse?, Garbarski Andrew Michael, L'AGEFI, 6th July 2015, p. 2.

  • Commentaire de l'arrêt du Tribunal fédéral 6B_20/2015 du 16 mars 2015, Garbarski Andrew Michael, forumpoenale 4/2015, p. 194 ff.

  • Investing in Switzerland - A Q&A guide to investing in Switzerland., Bahar Rashid / Garbarski Andrew Michael / Jagmetti Luca / Schott Markus / Stocker Raoul / Stoltz Thomas, Practical Law, 2015.

  • Commentaire de l'arrêt du Tribunal fédéral 6B_7/2014 du 21 juillet 2014, Garbarski Andrew Michael / Macaluso Alain, forumpoenale 6/2014, p. 322 ff.

  • Qualité de partie plaignante du créancier cessionnaire des droits de la masse (art. 260 LP) - Commentaire de l'arrêt du Tribunal fédéral 6B_236/2014 du 1er septembre 2014 (destiné à la publication au Recueil officiel des ATF), Garbarski Andrew Michael, GesKR 4/2014, 2014, p. 536 ff.

  • New Developments Regarding Swiss Measures to Prevent the Circumvention of International Ukraine-Related Sanctions, Schott Markus / Garbarski Andrew Michael, Bär & Karrer Briefing 2014.

  • Accord Bernie Ecclestone: une telle issue serait-elle possible en Suisse?, Garbarski Andrew Michael, Le Temps, 4th September 2014 (online version).

  • Switzerland Expands its Measures to Prevent the Circumvention of International Ukraine-Related Sanctions, Schott Markus / Garbarski Andrew Michael, Bär & Karrer Briefing 2014.

  • Le lésé et la partie plaignante en procédure pénale: état des lieux de la jurisprudence récente, Garbarski Andrew Michael, SJ 2013 II, p. 123 ff.

  • Une lettre de Londres, Garbarski Andrew Michael, Plaidoyer 2/2013, p. 23 ff.

  • L'entreprise dans le viseur du droit pénal administrateur: éléments de droit matériel et de procédure, Garbarski Andrew Michael, RPS 2012, p. 409 ff.

  • Qualité de partie plaignante et criminalité économique: quelques questions d'actualité, Garbarski Andrew Michael, RPS 2012, p. 160 ff.

  • La constitution de partie civile de l'actionnaire en procédure pénale: analyse critique de la jurisprudence de la Chambre d'accusation, Garbarski Andrew Michael, La Semaine Judiciaire 2010 II, p. 47 ff.

  • Saisie conservatoire ou séquestre LP d'un aéronef? - Exercice de haute-voltige dans les entrailles du droit aérien, Garbarski Andrew Michael / Lembo Saverio, AJP/PJA 2010, p. 1567 ff.

  • La responsabilité solidaire du réviseur selon le projet de révision du droit de la société anonyme: changement de paradigme?, Garbarski Andrew Michael / Watter Rolf, SZW 4/09, p. 235 ff.

  • La répartition des frais du procès en responsabilité (art. 756 CO) - Examen critique du projet de révision du droit de la société anonyme, Garbarski Andrew Michael / Watter Rolf, GesKR 2009, p. 148 ff.

  • Commentaire de l'article 817 CO, Commentaire romand, CO II, Bâle 2008Buchwalder Christophe / Garbarski Andrew Michael.

  • La responsabilité de l'entreprise et de ses organes dirigeants à l'épreuve du droit pénal administratif, Garbarski Andrew Michael, AJP / PJA 2008, p. 833 ff.

  • La responsabilité civile et pénale des organes dirigeants de sociétés anonymesGarbarski Andrew Michael, in: Peter Forstmoser (ed.), Etudes suisses de droit commercial et de droit des affaires, Volume 246, Genève/Zurich/Bâle 2006.

  • Quelques développements récents à propos de l'action en responsabilité dirigée contre les organes dirigeants de sociétés anonymes - arrêt du Tribunal fédéral 4C.312/2005, Garbarski Andrew Michael, GesKR 2006, p. 208 ff.

Dr Luca Jagmetti, Partner

Bär & Karrer AG

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Professional qualifications. Admitted to all Swiss Courts

Areas of practice. General corporate and commercial; litigation; reorganisation and insolvency; mergers and acquisitions; employment.

Non-professional qualifications. Dr.iur., University of Zurich; LLM, New York University of Law (NYU)

Recent transactions

  • Advising various Swiss logistics and transportation companies.

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  • Supporting a luxury brand owner in setting up a global distribution system.

Languages. German, English, French

Professional associations/memberships. Zurich Bar Association; Swiss Bar Association; AIJA; Deutsch-Schweizerische Juristenvereinigung (DSJV).

Publications

  • Co-author of "Investing in Switzerland – A Q&A guide to investing in Switzerland", Practical Law, 2015.

  • Thesis on "Cash Pooling im Konzern", 2007.

Daniel Bader, Partner

Bär & Karrer AG

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E daniel.bader@baerkarrer.ch
W www.baerkarrer.ch

Professional qualifications. Switzerland, Certified Tax Expert

Areas of practice. Tax; private clients; trusts and estates; mergers and acquisitions; real estate; employment; migration and social security.

Languages. German, English

Professional associations/memberships. Member of the board of directors and Secretary of the Swiss branch of the International Fiscal Association (IFA).

Publications

  • The Swiss-English Succession, Tina Wüstemann, Daniel Bader, Filippo Noseda, Successio No. 3/15.

  • Single Family Offices in Switzerland – tax and legal framework, Daniel Bader, Andreas Bär, Daniel Leu, AJP 7.2015.

  • Tax News: Landmark Judgments regarding the Refund of Swiss Withholding Tax, Robert Danon, Daniel Bader, Bär & Karrer Briefing 2015.


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