Is Switzerland opening up for cross-border insolvency?
Traditionally, Switzerland protects itself against the effects of non-Swiss insolvency proceedings. In a recent case regarding Van der Moolen Effecten Specialist B.V, the Swiss Financial Market Supervisory Authority took a different view.
In 2008 Switzerland enacted revised legislation applying to banks and other regulated financial institutions (Federal Law on Banks and Savings Banks, LB) which may substantially facilitate the work of a foreign insolvency administrator of such institutions.
The Eidgenössischen Finanzmarktaufsicht or Swiss Financial Market Supervisory Authority (FINMA), in Bern, is responsible for both commencing and conducting restructuring and insolvency proceedings in relation to individuals and legal entities carrying on business as a bank or as a securities dealer, for which a licence is required. In cases that are determined under these rules, the reciprocity requirement has to be met. Reciprocity (Gegenrecht or Reciprocité) means that the Swiss court examines whether the foreign jurisdiction would, under similar circumstances, also recognise a Swiss insolvency judgment at conditions which are not reasonably less favourable than the conditions that apply in Switzerland for recognition of a foreign insolvency judgment.
In a recent case FINMA gave an order (Verfügung) on 8 November 2011 which relates to the Dutch company Van der Moolen Effecten Specialist B.V. (“VMES”), a company in the group of Van der Moolen N.V., a financial trading house with headquarters in Amsterdam and offices in the United Kingdom, France, Switzerland and Germany, and formerly in the United States. On 22 September 2009 the Amsterdam District Court opened insolvency proceedings towards VDMS. With the approval of the Dutch Supervisory Judge, the liquidators requested to open insolvency proceedings in Switzerland related to VMES’s Swiss Branch, in Zug, which was in insolvency in Switzerland. In these latter proceedings the estate contained a claim for tax returns of over 16 mio Swiss francs.
The interesting part in the order is related to the requirement of reciprocity. FINMA observes that the Netherlands lack rules regarding whether Swiss insolvency proceedings will be recognised in the Netherlands. FINMA then applies a result-oriented (ergebnisorientierten) comparison of both legal systems: would it be possible directly or indirectly to include assets located in the Netherlands in a Swiss insolvency proceedings? Where in this case the liquidators had reached an agreement with the Swiss authorities, that included the possibility of transferring the lager part of the assets in Switzerland to the Dutch estate, FINMA considers that Swiss liquidators could likewise operate in the Netherlands, a legal situation considered by FINMA to be equivalent and sufficient for the purposes of reciprocity.
On the effects of the recognition in Switzerland the decision of FINMA displays that the LB contains coordination provisions between insolvency proceedings pending both in the Netherlands as well as in Switzerland: both proceedings should to the maximum extent (soweit als möglich) be adjusted (abzustimmen), which includes the provision of equal treatment of creditors that were partly refunded abroad and creditors, which are participating in the Swiss proceedings. Furthermore, because all creditors had already filed their claims in one of the proceedings, FINMA explicitly abstains (with an eye on process-economy; zugunsten der verfahrensökonomie) from otherwise applicable rules and acts itself as liquidator.
In the light of Switzerland’s isolated position in international insolvency, this is an interesting development. FINMA even goes one step further: “Dieser Grundsatz ist allgemein auf parallele Insolvenzverfahren in In- und Ausland anzuwenden”, meaning that the principle of cross-border coordination in general should be applied on insolvency proceedings pending in Switzerland and abroad.