Recognition of foreign bankruptcies and insolvency actions

Swiss bankruptcy law is based on the principle of territoriality. If foreign courts or authorities decide to open bankruptcy proceedings against a financial institution (bankruptcy decree) or order other insolvency measures, these generally have no direct impact on Swiss territory. They only have legal effect if they are formally recognised by Switzerland. 

If foreign banks, insurance companies or collective investment schemes are affected, FINMA decides on such formal recognition and the resulting legal consequences.

The main prerequisite for recognition is enforceability in the country in which the action was taken or the ruling issued. There must also be no grounds to refuse recognition. These include, in particular, fundamental principles of Swiss procedural law (e.g. the right to be heard).

The recognition of foreign bankruptcy decrees generally entails supplementary bankruptcy proceedings. These concern the Swiss-based assets of the bankrupt foreign entity. This also applies to foreign resolutions. Secured and privileged (i.e. first and second-class) creditors can participate in these proceedings under Swiss law, provided FINMA does not designate an extended group of participants.

As a rule, however, abridged proceedings are used in Switzerland. FINMA can place the Swiss-based assets at the disposal of the foreign administrators and the foreign estate without conducting proceedings in Switzerland. The most important prerequisite for this is that all secured and privileged claims of creditors resident in Switzerland must be treated equally in the foreign insolvency proceedings. In addition, all other claims of creditors resident in Switzerland must receive fair treatment.