On 17 March 2023, the Swiss Parliament approved a revision of the Swiss Civil Procedure Code (CPC) introducing key amendments intended to facilitate the practical application of the CPC and improve access to courts in Switzerland. This includes, among others, the introduction of legal privilege of in-house legal counsel in civil proceedings. Moreover, the revised CPC lays the foundation for cantons to create international commercial courts, where parties can choose English as the language of the proceedings. The revised CPC will likely enter into force on 1 January 2025, provided no popular referendum is lodged.
Legal privilege for in-house legal counsel in civil proceedings
Unlike external legal counsel, at present in-house legal counsel do not enjoy legal privilege in Switzerland. This has led to disadvantages for Swiss companies in proceedings in other jurisdictions, where legal privilege is also granted to in-house legal counsel. The revised CPC will change this. Article 167a of the revised CPC shall introduce a new right of a party to refuse to cooperate, to participate in civil proceedings and to produce documents in connection with the activities with its internal legal department. This right is subject to the following conditions:
- The party concerned is registered as a legal entity in the Swiss Commercial Register or in a comparable foreign register.
- The party’s legal department is headed by a person admitted to the bar in Switzerland or in their country of origin.
- The activity in question would be considered profession-specific if carried out by external legal counsel.
This last condition also applies to external counsel: they may only rely on legal privilege for activities that are specific to the profession as external legal counsel. This excludes, for instance, private, political or social activities, but also predominantly commercial activities such as asset management or investment of money if they are not directly connected to the activities as external legal counsel.
The same right is also granted to companies that are not party to civil proceedings, but merely involved as third parties. Decisions about the invocation of such legal privilege may be challenged by the parties to the proceedings and the affected third party within 30 days pursuant to Article 167a paragraph 3 in connection with Article 319 ff of the revised CPC.
Creation of international commercial courts
At present, the CPC grants cantons a possibility to establish so-called commercial courts, which today exist in the cantons of Zurich, St. Gallen, Bern and Aargau. However, the competence ratione materiae of these commercial courts is specified in statutory law and the parties cannot agree to submit their disputes to the jurisdiction of these commercial courts if the relevant conditions are not fulfilled. Moreover, the proceedings before these commercial courts must be conducted in the official language of the relevant canton pursuant to Article 129 of the CPC as it is in force today.
The revision now introduces the competence of the cantons to create so-called international commercial courts or chambers. This shall allow Switzerland to assert and position itself not only as one of the most sought-after locations for international arbitration, but generally as an international center of adjudication in commercial matters. Thus, pursuant to Article 6 paragraph 4 of the revised CPC, the cantons may declare their commercial courts competent for disputes that fulfill the following conditions:
- The disputes concern the commercial activity of at least one of the parties.
- The value at dispute amounts to at least CHF 100,000.
- The parties agree on the competence of the commercial court.
- At the time the parties agree on the competence of the commercial court, at least one party is domiciled abroad.
A precondition is of course that the parties have validly agreed on the competence ratione lociof the courts of a canton that has created such international commercial court or such competence results from the applicable private international law provisions.
Article 129 paragraph 2 of the revised CPC further grants cantons the possibility to allow proceedings to be conducted in a language other than the official language of the canton. However, this requires that all parties to the proceeding in question request that it be conducted in another language, which may either be another official language of Switzerland or English. No party may waive its right to proceedings conducted in the official language of the canton in advance to the benefit of another official language of Switzerland. Moreover, English may only be used in proceedings in front of the international commercial courts. If the proceedings of the lower court are conducted in English, submissions to the Federal Supreme Court may also be filed in English pursuant to Article 42 paragraph 1-bis of the revised Federal Supreme Court Act.
Use of electronic means of communication in hearings
To date, the CPC does not explicitly allow for the use of electronic means of communication. With the revision of the CPC, a new Article 141a shall be introduced that allows the use of electronic means for the transmission of audio and images in hearings, including the examination of witnesses, the questioning of parties and the taking of expert evidence (see Articles 170a, 187 paragraph 1 and 193 of the revised CPC). However, this requires that all parties to the proceedings consent to the use of such electronic means. Moreover, Article 141b of the revised CPC defines other prerequisites, namely that both audio and image must be transmitted to all participating persons simultaneously and that data protection and data security are ensured. The Federal Council will further specify the technical requirements in an ordinance.
Advances on costs and liquidation of legal costs
Currently, the claimant must pay an advance on costs for the total expected court costs when filing an action, otherwise the court will dismiss the action on formal grounds (see Article 98 of the CPC). Moreover, the court costs will be set off against the advance paid by the claimant even if the respondent is ordered to pay the court costs, placing the risk of collecting the costs from the other party on the claimant (see Article 111 of the CPC).
The revision of the CPC now introduces certain changes to this system aimed at reducing the cost barriers for claimants. Thus, Article 98 of the revised CPC provides that courts, in principle, may only request from the claimant an advance on half of the total expected court costs. However, this rule is subject to several exceptions, for which the court may still request payment of an advance on the total expected court costs, namely in matters subject to the jurisdiction of international commercial courts and in appeal proceedings.
Pursuant to Article 111 of the revised CPC, the court costs will continue to be set off against the advance payments made by the party liable to pay the court costs; however, an advance payment made by the party not liable to pay the court costs will now be repaid and any shortfall will be claimed from the party liable to pay the court costs. Thus, the state now bears the collection risk and not the claimant.