Author Archives: Jonas Hertner

Collective Redress in Switzerland and the EU –Where does it stand?

Collective redress has been one of the most debated topics in the field of civil procedure over the last decades in both Switzerland and the European Union. Recently, there have been several new developments: In the European Union, member states are in the process of adopting national laws implementing the EU directive on collective redress, with the deadline for implementation of December 2022 fast approaching. In Switzerland, the Federal Council submitted its proposal for collective redress measures to Parliament in December 2021, where it is currently considered in the legal commissions of both chambers of the Parliament. This article sets out and assesses key points of the Federal Council’s proposal against the background of the collective redress measures in the European Union.

By Thomas Werlen / Konstantin Oppolzer / Jonas Hertner (Reference: CapLaw-2022-16)

LIBOR transition remains fraught with risk

Publication of most LIBOR rates will be discontinued at the end of this year. The effects on financial contracts, which refer to a discontinued LIBOR rate to determine a payment obligation and which have a term that runs beyond discontinuation, are unclear and may depend on the facts surrounding the individual contract. Legislators in key interbank markets have adopted or are in the process of adopting legislation governing LIBOR discontinuation and its legal effect on affected contracts. Switzerland is not adopting such legislation. As a consequence, the situation of parties to affected contracts governed by Swiss law remains unclear, and both sides are exposed to significant (litigation) risk.

By Thomas Werlen / Jonas Hertner / Dusan Ivanovic (Reference: CapLaw-2021-32)

Changes affecting Shareholders’ and Minority’s Rights

One of the main objectives of the corporate law reform was to strengthen shareholders’ rights. And indeed, the reform will, albeit to a limited extent, strengthen the rights of shareholders, and those of minority shareholders’ in particular, in a number of ways. Most notably, certain threshold requirements for the exercise of minority rights are lowered, while in turn a two-thirds majority vote requirement will be introduced for certain important resolutions. Perhaps most notably, information and participation rights for minority shareholders in both listed and non-listed companies are made more accessible and to some extent likely more effective.

By Remo Decurtins / Jonas Hertner (Reference: CapLaw-2020-54)

Update: The Enforcement of Clients’ Rights in the Financial Services Act

The Financial Services Act (FinSA) as it will enter into force on 1 January 2020 contains two elements of an initially broad set of proposals meant to strengthen the enforcement of clients’ rights. First, it specifies the scope of records to be kept regarding a service provider’s relationship with a client and gives the client an unambiguous legal basis to obtain a copy of such records on request. Second, it will require all providers of financial services to be affiliated with an ombuds institution. Parliament ultimately opposed the introduction of new procedural mechanisms such as collective action instruments and changes to the ‘loser pays’ rule, referring to ongoing efforts towards a broader reform of the Civil Procedure Code.

By Thomas Werlen / Jonas Hertner (Reference: CapLaw-2019-54)

The Enforcement of Clients’ Rights in the Financial Services Act

The new Financial Services Act will require all providers of financial services to be affiliated with an ombuds institution. This requirement is the only substantially new element remaining from a broad set of proposals to strengthen the enforcement of clients’ rights. Parliament ultimately opposed the introduction of new procedural mechanisms specifically for the financial services industry, such as collective action instruments and changes to the ‘loser pays’ rule.

By Thomas Werlen / Jonas Hertner (Reference: CapLaw-2018-60)

Cross-Border Transactions in Intermediated Securities: Switzerland Maintains its Lead (Part 2/2)

“The transnational nature of collateral goes beyond the mere (but important) fact that the parties to a swap are often incorporated in different jurisdictions. Collateral may be posted in different currencies, or in the form of government bonds issued by different governments. The collateral is held with intermediaries often incorporated in yet other jurisdictions, with places of business in still other locales. These intermediaries book the collateral in computerized ledgers maintained on servers that may be located elsewhere in the world. And if, as is permitted under the law of some countries, the pledgee (the party that receives the collateral) “repledges” the collateral to yet another party to satisfy its own obligations, which then repledges it again, then lawyers are left to make sense of a constant global movement of collateral in and out of accounts in many jurisdictions in terms of legal rules created to address a far more stationary and localized conception of property and contract rights.”

Annelise Riles, Collateral Knowledge: Legal Reasoning in the Global Financial Markets, p. 43 (University of Chicago Press, 2011)

By Thomas Werlen / Matthias Wühler / Jonas Hertner (Reference: CapLaw-2018-02)

The Enforcement of Clients’ Rights in the Draft Financial Services Act (FinSA) – Update

By Thomas Werlen / Matthias Portmann / Jonas Hertner (Reference: CapLaw-2017-05)

This article is an update of CapLaw-2016-4 in which the Dispatch on the draft Financial Services Act (FinSA) was discussed with a focus on Title 5 aimed to facilitate the enforcement of the rights of clients vis-à-vis Financial Services Providers (FSP). On 4 November 2015, the Swiss Federal Council adopted the Dispatch on the draft FinSA, sending it to parliament for consideration. With regard to the enforcement of rights, the draft proposed three elements: (1) a stricter disclosure obligation of FSP to provide documentation to clients, (2) an obligation of FSP to become affiliated with a certified ombuds body, and (3) new rules governing the allocation of costs in financial market litigation. In comparison with the original bill proposed by the Federal Council, the proposed provisions on the enforcement of rights in the draft FinSA were significantly curtailed after an overwhelmingly negative response from the financial services industry in the consultation proceeding. On 14 December 2016 the draft FinSA was discussed in the Council of States. The Council of States largely followed the draft as proposed by the Federal Council. Most recently, on 25 January 2017, the National Council’s Economic Affairs and Taxation Committee has entered into the debate on the draft FinSA. The Committee will discuss the draft in detail at its meeting on 20/21 February 2017. This will be followed by a debate in the National Council which will likely take place in Spring 2017. The proposed changes by the Council of States related to the enforcement of clients’ rights are discussed below.

U.S. Federal Reserve to Enforce U.S. Bank Resolution Regimes on Cross-Border Financial Contracts, Requiring Counterparties to Relinquish Default Rights

In May 2016, the Board of Governors of the U.S. Federal Reserve System proposed new rules that, if adopted, will constitute a significant shift in the terms of financial contracts such as over-the-counter derivatives, repurchase agreement and securities lending transactions. Under the proposed rules, these qualified financial contracts would have to conform with U.S. special resolution regimes. This would require institutional investors, hedge funds and other market participants to relinquish cross-default rights, including in contracts governed by foreign law, entered into with a foreign party, or for which collateral is held outside the U.S.

The International Swaps and Derivatives Association simultaneously released its ISDA Resolution Stay Jurisdictional Modular Protocol which seeks to allow market participants to comply with the proposed rules in the U.S. and similar rules in other jurisdictions.

In this contribution, we provide a brief overview of these proposals which, if adopted, will significantly affect the terms of many financial transactions.

By Thomas Werlen / Jonas Hertner (Reference: CapLaw-2016-33)

Draft Financial Services Act to Expand Clients’ Enforcement Rights vis-à-vis Financial Services Providers, Leaves Key Questions Unaddressed

While the draft Financial Services Act (FinSA) primarily has a regulatory purpose, it also contains provisions set to effect the private law relationship between providers of financial services and clients. The proposed measures include a claimant-friendly rule regarding the allocation of costs in litigation proceedings, stricter requirements for financial services providers regarding documentation, information and disclosure of documents for the purpose of enforcement of clients’ rights, and a quasi-mandatory ombuds system for all disputes arising out of financial services contracts, including loan contracts, insurance contracts and all normal retail client bank relationships.

By Thomas Werlen / Jonas Hertner (Reference: CapLaw-2016-4)

Global Benchmarks in the Spotlight: An Overview of Investigations into LIBOR and Foreign Exchange Market Manipulations

Worldwide investigations into manipulations of the London Interbank Offered Rate (LIBOR) have resulted in settlements between regulators and banks with fines so far exceeding USD 6 billion in total. After a number of banks have admitted in deals struck with regulators to manipulating LIBOR by misreporting borrowing rates, numerous private claimants have followed suit by pursuing individual and class actions. At the same time, evidence gathered by regulators has spurred further investigations into other financial benchmarks, in particular in the foreign exchange market where purported misconduct is expected to trigger further multibillion-dollar fines and civil litigation.

By Thomas Werlen/Jonas Hertner (Reference: CapLaw-2014-14)