Civil Procedure Code (CPC) Revision: Reduction of cost barriers

29 November 2024

Going to court is expensive. In addition to lawyers' fees, court costs (judgment fee, etc.) are also incurred with a few exceptions (namely in some cases in tenancy and labour law).

In principle, the procedural costs are imposed on the losing party. In addition to its own legal costs, it must pay the winning party compensation – as (partial) reimbursement for the latter's legal fees – as well as bear the court costs. If neither party wins outright, the costs are allocated in accordance with the outcome of the court proceedings. The legal costs are calculated according to cantonal tariffs; they can be considerable depending on the amount in dispute.

With the revision of the Swiss Civil Procedure Code (CPC) as of 1 January 2025, two significant adjustments will be made with regard to court costs.

1. Cutting the advance on costs in half

Until now, the CPC has provided that the courts can demand an advance payment from the claimant up to the amount of the estimated court costs. Although this is an optional provision, the courts regularly make full use of it. If the claimant does not make the requested advance payment, the court will not even hear the case. An individual who does not have the required financial means may be exempted from an advance payment in whole or in part (free administration of justice). However, according to the case law of the Swiss Federal Supreme Court, companies and other legal entities are generally not entitled to the free administration of justice unless their only asset is in dispute, their beneficial owners are also without means, and litigation is decisive for their continued existence.

Anyone who does not meet the requirements for the free administration of justice must make – sometimes massive – advances on costs for the judicial review of a claim. The advance payment then remains with the court for the entire duration of the proceedings and deprives the claimant of liquidity.

This financial hurdle will be partially lowered with the revision of the CPC. In principle, the courts can now only request an advance of a maximum of half of the estimated court costs. However, even after the revision, the courts can still ask for an advance on costs in the full amount of the estimated court costs in some proceedings, such as conciliation and appeal proceedings.

2. Collection risk now with the state

Furthermore, the CPC currently stipulates that the court costs are offset against the advance payments made. This means that the court initially uses the advance payment to cover the actual court costs and only repays any portion of the advance payment that exceeds the actual court costs. In return, it orders the party liable for costs to reimburse the other party for the court costs. This means that even if the claimant is completely successful, it will not receive back the advance on court costs that it has paid, or only to the extent of any surplus. Rather, the claimant must seek reimbursement of the actual court costs from the defendant, and thus bear the risk of non-recoverability. This can lead (particularly in the case of the losing defendant's bankruptcy) to a fully wining claimant nevertheless having to bear the court costs.

With the revision, the collection risk is passed on to the state if the claimant (or party making the advance payment) wins. Court costs will now only be offset against the advance payment paid if the party who has made an advance it is liable for costs – for example, if the claim is dismissed. In all other cases – i.e., if the claimant wins – the court reimburses the advance and claims the court costs directly from the party liable for costs. In these constellations the risk that the court costs cannot be recovered is therefore borne by the state.

3. Impact of the revision on already pending proceedings

The adjustments regarding court costs do not apply to proceedings that were already pending prior to 1 January 2025 i.e. the date on which the revision came into force. In such proceedings, the claimant cannot demand the return of half of the advance on costs that it has already paid. Furthermore, if the claimant wins, it will continue to bear the collection risk for the court costs advanced, even if the decision is made after 1 January 2025.

The dispute resolution team of VISCHER will be happy to answer any further questions you may have.

Here you will find the overview of the CPC blog series.

Author: Lukas Holzer