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21 September 2016
The recognition of foreign bankruptcy proceedings in Switzerland is governed by the international bankruptcy law. As some of the applicable recognition requirements have proven to be problematic in practice, the Federal Council intends to modernise the legislation in order to facilitate the recognition of foreign bankruptcy decrees.
Shortcomings of the Existing Bankruptcy Law Due to the territoriality principle, foreign bankruptcy decrees basically have no effect in Switzerland. To access debtor's assets located in Switzerland, it is first necessary for the foreign bankruptcy decree to be recognised. To this end, a request for recognition must be filed in Switzerland. It is necessary that the bankruptcy decree has been issued in the country of residence or domicile of the debtor and that the state in question grants reciprocal rights. The recognition of a foreign bankruptcy decree leads to the implementation of a so-called "auxiliary bankruptcy" in Switzerland, under which preference is given to certain domestic creditors. Main Deficiencies In particular, the current law results in the following problems:
Before the foreign bankruptcy decree is recognised, the foreign bankruptcy trustee is not authorised to raise legal challenges in Switzerland for the return of assets to the bankrupt estate. At the same time foreign decisions on legal challenges will not be recognised in Switzerland. Proposed New Regulations The changes proposed by the Federal Council build on the existing regulations and will facilitate the recognition of foreign bankruptcy decrees. The main points of the proposal are:
Finally, bankruptcy related decisions on legal challenges will also be recognised.
Author: Thomas Weibel
Attorney at Law
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