Debt Collection in Switzerland

In Switzerland, there is no minimum amount required to start a judicial process. Even so, the costs to carry it out may cause it to be inconvenient. In general, the costs of recovery are likely to be unreasonably high for claims below CHF 10,000, at least if full-fledged litigation would become necessary.

In Switzerland, there is no minimum amount required to start a judicial process. Even so, the costs to carry it out may cause it to be inconvenient. In general, the costs of recovery are likely to be unreasonably high for claims below CHF 10,000, at least if full-fledged litigation would become necessary.

There are several procedures depending on the amount of the claim:

For claims of at least CHF 30,000, the ordinary procedure, in terms of the Swiss Civil Procedure Code ("CPC"), applies. In cantons with a specialized commercial court (currently Zurich, Bern, Aargau, and St.Gallen), the commercial court will act as the sole cantonal instance for claims reaching that threshold. Even in cantons without a commercial court, parties can agree on the adjudication of the dispute by the higher cantonal court if the value in dispute amounts to at least CHF 100,000. Decisions of a commercial or higher cantonal court can be appealed before the Swiss Supreme Court only.

For claims below CHF 30,000, the simplified procedure, in terms of the CPC, applies.

For claims up to CHF 5,000, the conciliation authority, which is in charge of the (mandatory) conciliation proceedings (see question 7), may submit a proposed judgment to the parties of the dispute. Such a proposed judgment is deemed to be accepted and has the effect of a binding decision if none of the parties reject it within 20 days. The rejection is possible without any reasoning.

For claims up to CHF 2,000, the conciliation authority may even render a decision on the merits, if the creditor so requests. The procedure is oral, and the decision of the conciliation authority may be appealed before the higher cantonal court.

There are several procedures depending on the amount of the claim:

For claims of at least CHF 30,000, the ordinary procedure, in terms of the Swiss Civil Procedure Code ("CPC"), applies. In cantons with a specialized commercial court (currently Zurich, Bern, Aargau, and St.Gallen), the commercial court will act as the sole cantonal instance for claims reaching that threshold. Even in cantons without a commercial court, parties can agree on the adjudication of the dispute by the higher cantonal court if the value in dispute amounts to at least CHF 100,000. Decisions of a commercial or higher cantonal court can be appealed before the Swiss Supreme Court only.

For claims below CHF 30,000, the simplified procedure, in terms of the CPC, applies.

For claims up to CHF 5,000, the conciliation authority, which is in charge of the (mandatory) conciliation proceedings (see question 7), may submit a proposed judgment to the parties of the dispute. Such a proposed judgment is deemed to be accepted and has the effect of a binding decision if none of the parties reject it within 20 days. The rejection is possible without any reasoning.

For claims up to CHF 2,000, the conciliation authority may even render a decision on the merits, if the creditor so requests. The procedure is oral, and the decision of the conciliation authority may be appealed before the higher cantonal court.

It is not mandatory, but quite common to send a warning letter prior to the filing of a debt enforcement request, an initiation of conciliation proceedings, or the filing of an action for payment with the competent court.

Warning letters should be sent by registered mail and contain at least 1) the exact amount of the debt, including an accurate calculation of default interest in the case such interest shall also be claimed; 2) a clear deadline until when the debt may be paid; 3) the payment instructions (e.g., bank account information), and 4) an announcement that the creditor will take legal action without further notice if the debt is not paid within the deadline stated in the warning letter.

In case the creditor prefers to refrain from claiming default interests in the warning letter, it is advisable to state explicitly that the creditor reserves the right to claim default interests from the default date in case the debt is not paid within the deadline stated in the warning letter.

In order to emphasize the seriousness of a warning letter, it is helpful to have it sent by a lawyer on behalf of the creditor.

It is finally advisable to send a warning latter only after the creditor has all information and documents (e.g., evidence) required to take legal action, and is also willing to do so. Unsuccessful warning letters that are not followed by further (legal) actions are often counterproductive, and might further encourage non-compliance on the part of the debtor.

In addition, a warning letter might be counterproductive in case there could be a "forum running", i.e. if several courts could be competent to adjudicate the dispute. In such a case, the debtor could decide to file an action for negative declaratory relief in another state, which could make the recovery of the debt more burdensome for the creditor. In case there is a significant risk of "forum running", it is advisable to take legal action without sending a prior warning letter, at least in cases where mandatory conciliation proceedings take place (see question 7). Such conciliation proceedings are generally sufficient to secure the jurisdiction of Swiss courts.

For evidentiary purposes, it is useful if the existence and the terms of a business relationship can be proven by means of a written agreement, validly signed on behalf of both parties by persons who are registered in the commercial or companies register with signatory power for such party.

Ideally, such written agreement should contain an acknowledgment of debt in terms of the Swiss Debt Enforcement and Bankruptcy Act ("DEBA"), i.e., an unconditional undertaking by the debtor to pay a specified amount of money. Acknowledgments of debt do not have to be called as such. Acknowledgments of debt can also be contained in delivery notes, deferral agreements, etc. Synallagmatic contracts (as, e.g., contracts for sale) can qualify as acknowledgments of debt as well, provided the creditor can prove that it has already performed its obligations.

If a sufficient acknowledgment of debt exists, the creditor may benefit from the fast-track procedure under the DEBA instead of having to revert to ordinary or simplified procedures under the CPC. Such fast-track procedures under the DEBA are substantially faster and less costly than ordinary or simplified procedures.

In debt recovery proceedings of any kind (e.g., fast-track procedures under the DEBA or ordinary or simplified procedures under the CPC), a debtor might try to argue that the creditor has not, or has not properly, performed its obligations. In order to reduce the chances of success of such argumentation, it is advisable to set clear deadlines and written form requirements in that regard. For instance, a contract for sale could state that goods are deemed to be accepted if the purchaser has not notified the seller of any defects in writing within a specified period following the delivery of the goods.

As a matter of course, it is not always possible to conclude written agreements. In such a case, any other evidence that documents business relationships can be useful. In principle, Swiss courts prefer written evidence (such as offers, order confirmations, delivery notes, correspondences, etc.) to oral evidence such as witnesses.

In order to reduce or even eliminate the risk of non-payment, the creditor can finally (try to) insist on advance payments, require the debtor to provide collaterals or guarantees, insist on joint and several liability, provide for payment by a letter of credit, etc. Furthermore, it may be helpful to perform a credit check by ordering an extract from the debt enforcement register with regard to a Swiss debtor.

Creditors can commence debt recovery in two different ways: they can either file a debt enforcement request under the DEBA or start with proceedings on the merits by filing an action for payment with the competent court (respectively by initiating arbitration proceedings, if applicable).

With regard to Swiss debtors, it is usually advisable to start by filing a debt enforcement request under the DEBA. For that purpose, the authorities provide a very helpful online tool called EasyGov, with which the creditor can generate a debt enforcement request in a few minutes. Information regarding the debtor can be extracted from the commercial register, and the tool automatically inserts the address of the competent debt enforcement office.

The debt enforcement request must state the amount due in Swiss francs, even if the claim itself is in another currency. Claims in other currencies must be converted into Swiss francs at the exchange rate of the date when the request is filed, e.g., by means of the currency converter fxtop.com.

The debt enforcement request must refer to the document evidencing the claim (e.g., a contract for sale, loan agreement, etc.); the document itself does not need to be submitted. If no such document exists, the debt enforcement request must contain a description of the basis of the claim (including the date when the claim arose), so that the debtor can clearly recognize the claim being enforced.

In case of continuing obligations to make periodic payments, the description must also state the period relating to the claim to be enforced. It is important to note that the filing of a debt enforcement request interrupts limitation periods under Swiss law. Indeed, it is the most common means to make sure that claims do not become time-barred.

Alternatively, a creditor can decide not to commence with a debt enforcement request under the DEBA, but with proceedings on the merits.

In such a case, the creditor will typically initiate debt enforcement proceedings only after having obtained a legally binding judicial decision (i.e., a Swiss or foreign court decision or an arbitral award) that orders the debtor to pay a certain amount of money. This implies that the creditor might be forced to go through two consecutive court proceedings: first proceedings on the merits (i.e., the action for payment) and then fast-track proceedings under the DEBA in order to eliminate opposition by the debtor (see question 7). If proceedings on the merits take place before Swiss courts, such consecutive proceedings can be avoided if the creditor commences with filing a debt enforcement request, and petitions for the elimination of opposition in proceedings on the merits.

Nonetheless, commencing with proceedings on the merits has advantages too. For instance, such an approach will reduce the risk of "forum running" (see question 3), since the filing of a debt enforcement request might cause the debtor to file an action for negative declaratory relief in another jurisdiction.

The scheme provides an overview of various ways of how international debt collection proceedings can be conducted in Switzerland.

In principle, Swiss law does not prescribe a specific form for most kinds of contracts. Exceptions are, e.g., surety agreements and contracts for the sale of real estate. Specific obligations contained in some kinds of contracts or an assignment of claims also require a written form. Having said that, the conclusion of written contracts is advisable for evidentiary reasons anyway, in particular, if contracts are of a certain economical importance.

The initiation of debt enforcement proceedings in Switzerland, i.e., the filing of a debt enforcement request under the DEBA, does not require specific documents (see question 5). Nonetheless, it is highly advantageous for the creditor to possess a written, validly signed acknowledgment of debt issued by the debtor. Such an acknowledgment of debt allows the creditor to make use of the economical fast-track procedure under the DEBA (see question 4).

Likewise, the initiation of proceedings on the merits does not require specific documents. However, it would be difficult for the creditor to overcome the burden of proof if no written documents are available that confirm the existence of the debt to be recovered. Although oral evidence is admissible in ordinary and simplified procedures under the CPC, Swiss courts tend to attach greater importance to written evidence such as written agreements, correspondences, etc. Moreover, initiating summary procedures for clear cases makes no sense if the creditor cannot prove the existence of the debt by means of written documents. In such proceedings, oral evidence is generally inadmissible. 

After having received the debt enforcement request (see question 5), the debt enforcement office will serve an order for payment ("Zahlungsbefehl" / "Commandement de payer" / "Precetto esecutivo") to the debtor.

Upon or within a period of ten days from receipt of the order for payment, the debtor may file an opposition ("Rechtsvorschlag" / "Opposition" / "Opposizione"). The debtor is not required to state any reasons for such opposition.

In case of an opposition, debt enforcement proceedings are halted until the opposition is eliminated by a competent court at the request of the creditor. The proceedings for the elimination of an opposition depend on the basis of the claim:

a) If the claim is based on an acknowledgment of debt signed by the debtor (see question 4), the creditor can proceed with fast-track procedures under the DEBA ("provisorische Rechtsöffnung" / "mainlevée provisoire" / "rigetto provvisorio"). The competent court will eliminate the opposition unless the debtor is able to raise credible objections against the acknowledgment of debt or the claims covered by such acknowledgment of debt. The proceedings are usually written; oral evidence is generally inadmissible. No conciliation proceedings take place.

b) If the claim is based on an enforceable Swiss or foreign judicial decision, court settlement, or an arbitral award, the creditor can proceed with fast-track procedures under the DEBA ("definitive Rechtsöffnung" / "mainlevée definitive" / "rigetto definitive"). The competent court will eliminate the opposition unless the debtor is able to provide documentary proof that the claim has been satisfied, deferred, or become time-barred since the judicial decision or arbitral award has been rendered or the court settlement has been concluded. The proceedings are usually written; oral evidence is generally inadmissible. No conciliation proceedings take place.

c) In all other cases, or if fast-track proceedings under the DEBA have failed, the creditor has to initiate proceedings on the merits, i.e., to file an action for payment in accordance with the CPC (or initiate arbitration, if applicable). In such an action, it is important for the creditor to petition explicitly for the elimination of the opposition in the debt enforcement proceedings if proceedings are conducted before a Swiss court. By contrast, foreign courts and arbitrators cannot eliminate an opposition themselves, so that foreign court and arbitration proceedings will need to be followed by fast-track proceedings under the DEBA in order for the opposition to be eliminated on the basis of the foreign court decision or arbitral award.

Before being able to file an action for payment with a competent Swiss court, the creditor generally has to go through mandatory conciliation proceedings. The initiation of conciliation proceedings is very simple; at this stage, the creditor does not yet have to substantiate and justify its claim. Furthermore, in a European context, the initiation of conciliation proceedings is sufficient to seize a "court" in terms of the Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (better known as "Lugano Convention"). This means that the same claim cannot be brought before the courts of another state by means of an action for negative declaratory relief filed by the debtor.

No separate conciliation proceedings take place in cantons with a specialized commercial court, or if parties agree on the adjudication of the dispute by the higher cantonal court (see question 2), or if the creditor opts for summary procedures for clear cases.

The type of procedure generally depends on the amount due, i.e., whether the claim reaches the threshold of CHF 30,000 (see question 2).

• Ordinary procedures start with the filling of a full-fledged written statement of claim, followed by the filing of a written statement of defense. The further procedural steps depend on the procedural orders of the judge in charge of the matter.
  
• In simplified procedures, the creditor may file a full-fledged statement of claim, including the grounds for the claim, or a simplified statement of claims with, in essence, the petitions and a mere description of the matter in dispute. The continuation of the proceedings depends on whether the creditor has filed a full-fledged or simplified statement of claim.
• Irrespective of the amount due, the creditor can proceed with summary procedures for clear cases in terms of the CPC, provided that 1.) the facts are not contested or can be proven immediately through documents, and 2.) the legal situation is clear. If the court confirms the existence of a claim, the decision has claim preclusive effect ("res judicata"). By contrast, if the court is of the opinion that the requirements for a clear case are not met, it will dismiss the case without prejudice so that the creditor can still initiate ordinary or simplified procedures.

It is important to keep in mind that an action for payment must be denominated in the currency of the claim that shall be enforced. Unlike for a debt enforcement request, it must not be converted into Swiss francs in the petitions.

In case the debtor should not file a timely opposition, or the creditor has successfully eliminated such opposition, the creditor can require the debt enforcement office to proceed with the debt enforcement proceedings ("Fortsetzungsbegehren" / "réquisition de continuer la poursuite" / "domanda di continuazione").

The further course of the debt enforcement proceedings then depends on whether the debtor is registered in the commercial register (→ bankruptcy proceedings) or not (→ attachment of specific assets).

With regard to debtors registered in the commercial register, the creditor will need to file a bankruptcy application against the debtor with the competent court and pay an advance on the costs of the bankruptcy proceedings. In order to avoid these costs, it might be helpful to wait until another creditor files a bankruptcy application. For that purpose, it is helpful to consult the extract from the debt enforcement register regarding the debtor (see question 4); in case numerous creditors have already filed debt enforcement requests, it is likely that another creditor might make the first move and advance the costs of bankruptcy proceedings.

Sequestration orders ("Arrest" / "séquestre" / "sequestro") under the DEBA are the main interim measure available to creditors for debt recovery.

In order to obtain a sequestration order, first, a creditor must credibly show that it has a mature and unsecured claim against the debtor.

Second, the creditor must show that there is a reason for sequestration, as stipulated in the DEBA. For instance, such a reason exists

• if the debtor is not a Swiss resident, but the claim has a sufficient connection with Switzerland or is based on a written acknowledgment of debt in terms of the DEBA (see question 4);
• if the claim is based on an enforceable judicial decision (e.g., a Swiss or foreign court decision or an arbitral award) that orders the debtor to pay a certain amount of money; 
• if the debtor tries to escape from the fulfillment of its obligations by, e.g., concealing assets.

Third, the creditor must show that the debtor disposes of assets in Switzerland. In the context of sequestration proceedings, Swiss courts or debt enforcement offices do not search for assets of a debtor (so-called "fishing expeditions"); it is up to the creditor to sufficiently specify such assets. Furthermore, debtors are also not obliged to provide information about their assets. Although finding assets might be difficult, there are some (often) helpful sources of information. For instance,  the Swiss land register contains information about landowners. The Swissreg database of the Swiss Federal Institute of Intellectual Property contains information about the owners of trademarks, patents, and design rights. Furthermore, correspondence with the debtor or the debtor's website may contain Swiss bank account information (e.g., an IBAN number) of the debtor.

Applications for sequestration orders must be filed with the competent court. Summary procedures apply, which implies that written evidence is required. If all requirements are fulfilled, sequestration is ordered on an ex parte basis, meaning that the debtor does not have a right to be heard before sequestration is ordered.

If the court orders sequestration, it will notify the debt enforcement office. The debt enforcement office will then notify the debtor and third parties (e.g., banks) possessing assets of the debtor. Third parties are prohibited from disposing of assets covered by sequestration. Only after the debtor is informed about the sequestration order, it may file an objection against it with the competent court.

Once sequestration is ordered, the creditor is obliged to file a debt enforcement request or initiate proceedings on the merits (see question 5) within a period of ten days in order to validate the sequestration order. In the absence of a timely validation of a sequestration order, the sequestration will lapse.

Swiss law does not designate specific documents allowing a creditor to write off a claim in the financial books.

Having said that, the debt enforcement or bankruptcy office will issue a loss certificate in case a debt is not settled following an (unsuccessful) attachment of assets or bankruptcy proceedings. Such a loss certificate, which explicitly states the lost amount, can serve as a justification to write off a claim. If bankruptcy proceedings are terminated due to a lack of assets of the debtor, no loss certificate will be issued. Nonetheless, the creditor can, and should, write off such claims.

Alternatively, obtaining a written confirmation by a lawyer who has unsuccessfully tried to recover a debt, or at least analyzed the chances of success of such debt recovery, but came to the conclusion that there is no prospect of success, might be helpful too.