The debt collection procedure in Switzerland
I. Preliminary remarks
Under Swiss law, the enforcement procedure to recover debts of money is governed by the Swiss Federal Act on Debt Enforcement and Bankruptcy (DEBA) [Loi fédérale sur la poursuite pour dettes et la faillite, LP] of 11 April 1889 (SR 281.1).
The enforcement of any other claim is governed by title 10 of the Swiss Civil Procedure Code (CPC) [Code de procédure civile fédéral, CPC] of 19 December 2008 (SR 272).
The procedure is the same everywhere in Switzerland but the language may vary according to the Canton.
The procedure for recovering debts of money under Swiss law is unusual in that forced execution is possible based simply on claims from the alleged creditor, without the need to present documentary evidence.
Consequently, the alleged creditor does not need to be in possession of any specific title (civil judgment, arbitration award, administrative decision or acknowledgement of debt, either signed by the debtor or resulting from a notarized deed) to begin a debt collection procedure.
Conversely, even with incontestable documentary evidence, the creditor has to go through the preliminary step of the debt recovery process, because the only enforceable title available to seize the assets or have the debtor declared bankrupt is an enforceable summons to pay [commandement de payer en force]. No other document is acceptable (except in special cases).
Consequently, the debtor can immediately freeze the process instituted by the creditor by filing an objection to the summons to pay [opposition au commandement de payer]. The creditor will then have to lift the objection [lever l’opposition] in order to be able to continue the process.
Forced execution is a state function, similar on certain levels to police activities.
The Swiss system for allocating competence for forced execution is very complicated.
In general, debt collection falls to specialised administrative authorities, which are the debt collection and bankruptcy authorities in each Canton – the Debt Collection Office [Office des poursuites] and the Bankruptcy Office [Office des faillites]. Appeals against decisions by these authorities can be submitted to the supervisory authority [autorité de surveillance] (art. 17 DEBA).
However, in certain cases, forced execution is enforced not by the administrative authorities but by the civil courts.
In this respect, it is important to distinguish between three different situations:
- A judge sometimes replaces the administrative authorities because the decision to be made is highly important and has weighty consequences for the parties. A civil judge pronounces a decision rather than a judgement, and acts as an enforcement body. This is the case, for example, for the declaration of bankruptcy. Here, the judge’s jurisdiction is mandatory (based on Swiss national law) and cannot be altered or modified by the parties.
- The Swiss judge can be tasked with settling procedural issues. Here, the matter is submitted to the Swiss judge because one party has opposed the continuation of the enforcement by raising an issue. Certain judgments are pure procedural enforcement law matters (for example the definitive lifting of the objection [mainlevée définitive]) and others relate to substantive enforcement law issues (for example the provisional lifting of the objection [mainlevée provisoire]). The judge’s jurisdiction here is also mandatory and founded in Swiss national law, subject to international agreements to the contrary (for example the Lugano Convention of 30 September 2007, SR 0.275.12).
- Finally, the judge is also called on to settle proceedings on the merits. These issues do not relate to the law on forced execution, but are simply raised as part of an ongoing procedure to settle a substantive law dispute. Due to the uncertainty caused, the enforcement cannot continue until the matter is settled. This is a normal procedure under standard law. The most common cases are the action for recognition of debt [action en reconnaissance de dette] (art. 79 DEBA) and the action for discharge from debt [action en libération de dette] (art. 83 DEBA). Here the judge’s competence is determined based on the will of the contracting parties (choice of court clause for instance) as well as the international and national law applicable to the dispute.
These distinctions are sometimes complicated, and have consequences on the place of jurisdiction and enforcement [fors] and the effect of decisions.
Therefore, procedures relating only to substantive law (proceedings on the merits) must be brought before the place of jurisdiction [for ordinaire] provided for under ordinary law. For example, if the parties have agreed on an arbitration clause, the Swiss state judge will not have jurisdiction to decide whether the debt is valid on the merits. The arbitration decision will have the authority of res judicata, and will be binding on the judge and the Swiss administrative enforcement authorities.
However, procedures which raise issues relating to forced execution law must be brought in the place of enforcement [for de la poursuite] provided for by mandatory Swiss law. Consequently, an arbitration court could not rule on a request for a definitive lifting of the objection [mainlevée définitive] or a provisional lifting of the objection [mainlevée provisoire] even if there was an arbitration clause in the contract. These decisions will be final and binding on the current enforcement procedure only.
The standard way of instituting a debt collection process is via the preliminary procedure [procédure préalable].
This is the phase of the procedure situated between the debt collection request [réquisition de poursuite] (art. 67 DEBA) and the request for continuation [réquisition de continuer la poursuite] (art. 88 DEBA).
This phase is governed by two main principles, and it is important to note that the Debt Collection Office [Office des poursuites] carries out the enforcement actions – the creditor can neither carry them out nor serve notice of them:
- The burden of initiative: The procedure does not move forward automatically. Action from the creditor is required at each stage. At the initial stage, this action is simply a declaration of intention addressed to the Debt Collection Office [Office des poursuites].
- The burden of reaction: The debtor can block the procedure by raising an objection [opposition]. This is also limited to a simple declaration of intention which will require the creditor to demonstrate the validity of the claim to the state judge or the arbitration court. If no action is taken by the debtor, the procedure continues automatically.
Before describing the stages of the procedure in detail, three important elements must be considered:
Firstly, the debt collection procedure is almost always started in the debtor’s place of domicile/registered office. This is what is referred to as the place of enforcement [for de la poursuite] (art. 46ss DEBA). As mentioned before, this place of enforcement should be distinguished from the place of jurisdiction [for judiciaire] which determines the judge’s competence for the material judicial decisions. Consequently, special attention should be paid to this point and to determining exactly what action must be instituted and where.
Secondly, it is essential that the creditor with its domicile or seat abroad should elect domicile at the office of a professional representative with offices in Switzerland. Failing election of domicile in Switzerland, the processes are deemed notified to the headquarters of the Debt Collection Office [Offices des poursuites] which may have consequences on time bars. Each process in the procedure must be commenced within a precise time limit otherwise the procedure is cancelled.
Finally, it is for the creditor taking action to advance the costs generated by the procedure. The fees for the procedure are set by the Fees Ordinance of the Swiss Federal Act on Debt Enforcement and Bankruptcy (FODEBA) [Ordonnance sur les émoluments perçus en application de la loi fédérale sur la poursuite pour dettes et la faillite, OELP] of 23 September 1996 (SR 281.35).
The fee for drafting a summons to pay [commandement de payer] depends on the value of the debt. For example, the fee is CHF90 for debts between CHF10,000 and CHF100,000 and CHF190 for debts between CHF100,001 and CHF1,000,000 (art. 16 FODEBA).
As regards proceedings to dismiss a debtor’s objection [procédure de mainlevée de l’opposition], the fees to be advanced are between CHF50 and CHF300 for a claim with a value of CHF1,000 to CHF10,000; CHF60 and CHF500 for a claim with a value of CHF10,001 to CHF100,000; CHF70 and CHF1,000 for a claim with a value of CHF100,001 to CHF10,00,000 and CHF120 and CHF2,000 for a claim above this value (art. 48 FODEBA).
The fees advanced by the creditor enforcing the debt are added to the debt. The creditor will be reimbursed for them when the monies collected are distributed.
The debt collection procedure is instituted when a debt collection request [réquisition de poursuite] is submitted (generally as a form sent by the creditor) to the Debt Collection Office [Office des poursuites] located at the place of enforcement [for de la poursuite] (art. 46ss DEBA).
This debt collection request [réquisition de poursuite] must include certain information such as the debtor’s name and address, the value of and reason for the debt, and the interest due. The value of the debt must be given in Swiss Francs even if it is actually expressed in a foreign currency (art. 67 al. 1 ch. 3 DEBA).
It is important to note that the Debt Collection Office [Office des poursuites] will not examine the validity of the debt alleged by the creditor, only the state judge or an arbitration court has this prerogative.
Sending a debt collection request [réquisition de poursuite] has a dual effect:
- It obliges the Debt Collection Office [Office des poursuites] to record the debt in the Debt Collection Register [Registre des poursuites] (art. 8 DEBA). If the debtor is declared insolvent (for example, if several debts are being recovered against him/her), the creditor will be informed immediately and will become a party to the liquidation procedure (art. 233 DEBA).
- In this case, the time bar for the debt is interrupted (art. 135 CO of the Swiss Code of Obligations (CO) [Code des obligations suisse, CO] of 30th of March 1911 (SR 220)). Once the inscription has been interrupted, each new enforcement action taken by the Debt Collection Office [Office des poursuites] or the parties renews the interruption (art. 138 al. 2 CO; ATF 81 II 135).
Sending a debt collection request [réquisition de poursuite] does not constitute an illegal attack on the debtor’s personal rights because it is justified by the law and in the creditor’s overriding interest (art. 28 of the Swiss Civil Code (CC) [Code civil suisse, CC] of 10 December 1907, SR 210). Abuse of law by the creditor is limited primarily to cases where the aim of the enforcement is to ruin the debtor’s good reputation and where the debt is obviously unfounded.
The Debt Collection Office [Office des poursuites] will then notify a summons to pay [commandement de payer] to the debtor summoning him/her to pay the sum indicated in the request within 20 days (art. 69 DEBA).
The time limit for notifying the summons to pay [commandement de payer] varies according to the Canton, but is usually one or two months.
In general, procedures on the merits are carried out in parallel with the initial stages of the debt recovery procedure so that the creditor does not have to wait for notice of the summons to pay [commandement de payer] to be served following the judgement confirming the existence of the debt.
The debtor has then three possibilities: either he/she pays the full amount due with interest within the time limit and the procedure is suspended and then struck off the records at the creditor’s request; or he/she does nothing and the creditor will be able to submit a request for continuation [réquisition de continuer la poursuite] after a waiting period of 20 days (art. 88 DEBA); or finally the debtor files an objection notice [opposition au commandement de payer] within 10 days of the notification.
The fact that the debtor does not file an objection does not mean that he/she accepts the debt.
If the debtor files an objection notice [opposition au commandement de payer] (there is no specific format for this, no reason need be given, and the objection may be partial or complete), the creditor is required to obtain a court order stating that the debtor owes the debt [mainlevée de l’opposition].
If the creditor does not institute proceedings to dismiss the debtor’s objection [mainlevée de l’opposition] within one year of notice of the summons to pay [commandement de payer] being served, the enforcement will lapse (art. 88 DEBA).
The creditor can lift the opposition through three different legal channels:
- If the creditor benefits from a definitive Swiss or foreign ruling or a final arbitration award on the merits, he may file a request for a definitive lifting of the objection [mainlevée définitive] at the place of enforcement [for de la poursuite] (art. 80 DEBA). This procedure is simple, rapid and allows the debt collection procedure to be continued within a very short time. The debtor’s objections are, in fact, very limited. If the judgement or the arbitration award was rendered abroad, a preliminary exequatur procedure may be necessary for the judgement to be enforceable in Switzerland.
- If the creditor has a recognition of debt, he may file an application to the Swiss Court to obtain a judgment lifting the objection (without assessing the merits of the claim) [mainlevée provisoire] from the judge of the place of enforcement [for de la poursuite] (art. 82 DEBA).
This is also a simplified procedure and the debtor’s objections are limited. The chances of success are more uncertain than in the case of a definitive lifting of the objection [mainlevée definitive] since they depend on the documents presented and the judge’s appreciation.
The notion of recognition of debt is not specifically defined in the law. It may consist of one formal document or of a combination of several documents. Case law has defined a recognition of debt as a declaration of intent or an acknowledgement signed by the debtor, to pay a certain amount determinable and payable without any restrictions. In particular, it has been held that a bank statement constitutes a recognition of debt.
Generally, a bilateral contract (contract of sale, rental contract, employment contract, mandate, etc.) can be considered as a recognition of debt under certain conditions. Therefore a contract signed by the debtor and indicating the amount due by the latter can serve as a basis to request a provisional mainlevée [mainlevée provisoire], if the creditor can present documents in proof (i) that it has fulfilled its obligations stemming from the contract, (ii) that the sum owed by the debtor is payable, and (iii) that any conditions precedent affecting the contract have been realized. Certain types of contracts require additional conditions.
The judgement is not a judgement on the merits regarding the existence of the debt and the exception of res judicata does not apply. Consequently, the judge’s decision to lift the objection does not deny the parties the right to bring the dispute back to court before the ordinary judge (art. 83 al. 2 DEBA).
If the “mainlevée provisoire” is granted, the debtor must, within 20 days, institute action for discharge from debt [action en libération de dette] at the place of enforcement [for de la poursuite] or the place of jurisdiction [for judiciaire].
There is thus a reversal in the burden of proof. It is now up to the debtor to take the lead and prove that the debt does not exist. The action for discharge from debt [action en libération de dette] can be brought before an arbitration court, if the parties have signed an arbitration clause.
If no action for discharge from debt [action en libération de dette] is taken within the prescribed time period, the provisional lifting of the objection [mainlevée provisoire] becomes final (art. 83 DEBA), meaning that the creditor can submit a request for continuation [requête en continuation de la poursuite] (art. 88 DEBA).
If the judge discharges the debtor from the debt, the enforcement procedure stops and it becomes impossible to bring any further procedure for the same debt (res judicata).
If the judge rejects the debtor’s request, the creditor can submit a request for continuation [requête en continuation de la poursuite] (art. 88 LP) and the judgement is considered as a definitive lifting of the objection [mainlevée définitive].
- Finally, if the creditor has no titles [mainlevée définitive ou provisoire], he must sue on the merits by filing an action for recognition of debt [action en reconnaissance de dette] before the judge of the place of jurisdiction [for judiciaire]. The ordinary procedure is applicable. If the debt falls under a special jurisdiction (labour court, leases and rents tribunal, admiralty jurisdiction or arbitration tribunal), the action must be brought before this jurisdiction. When the ruling has been rendered, it then needs to be recognised in Switzerland (exequatur procedure) and a request needs to be filed for a definitive lifting of the objection [mainlevée définitive] at the place of enforcement [for de la poursuite]. Normally just one application is made to request both the “mainlevée definitive” and the exequatur procedure.
After the creditor has dismissed the debtor’s objection [mainlevée de l’opposition], the debt collection procedure only continues if the creditor submits a request for continuation [réquisition de continuer la poursuite].
To summarize, the creditor may request the Debt Collection Office to continue the debt collection procedure when:
- The debtor has not filed an objection notice [opposition au commandement de payer];
- The creditor has definitively lifted of the objection [mainlevée définitive] (channel 1);
- The creditor has obtained the “mainlevée provisoire” and the debtor has not filed an action for discharge from debt [action en libération de dette] (channel 2);
- The debtor’s request for discharge from debt [action en libération de dette] has been dismissed (channel 2);
- The creditor has successfully filed an action for recognition of debt [action en reconnaissance de dette] (channel 3).
The creditor can once again convert a debt expressed in a foreign currency into Swiss currency, thereby adjusting the exchange rate.
The request for continuation [réquisition de continuer la poursuite] forces the Debt Collection Office [Office des poursuites] to send a notice of compulsory liquidation [commination de faillite] (art 159DEBA) or a seizure notice [avis de saisie] to the debtor (art. 90 DEBA).
The request for continuation [réquisition de continuer la poursuite] concludes the preliminary procedure and serves as preparation for bankruptcy or seizure depending on whether the debtor is registered at the Trade Register (art. 39 ss DEBA) or not.
The compulsory liquidation notice [commination de faillite] informs the debtor that if he does not pay within a final time limit of 20 days, the creditor shall be able to request that the company be declared bankrupt.
When the company is put into compulsory liquidation, the habitual rules of law on bankruptcy/compulsory liquidation apply.
As outlined above, Swiss law on forced execution is unusual in that anyone can enforce a debt without any official authority or court being required to verify the debt in advance.
It does happen in rare cases that a person brings a malicious, petty or obviously abusive debt enforcement request, with the sole aim of having a non-existent debt recorded on the Debt Collection Register so that it becomes public knowledge and the debtor’s financial reputation is severely damaged.
In addition, even if a summons to pay [commandement de payer] lapses because the relevant time period has passed, the enforcement remains on the Register for five years. The same applies when a summons to pay [commandement de payer] has been resolved (and so the document is marked “paid”), unless the creditor revokes the enforcement.
Abusive enforcement can give rise to a criminal complaint for coercion under article 181 of the Swiss Criminal Code.
As part of the 16 December 2016 amendment to article 8a of the DEBA (FF 2016 8631, in French), the legislator also created a new instrument which will enable victims of unjustified enforcement actions to object to these becoming public knowledge, i.e. prevent them from appearing on Debt Collection Register extracts.
Under this amendment, if the debtor so requests within three months of the summons to pay [commandement de payer] being served, Debt Collection Offices [Offices des poursuites] must not make available to third parties information about debt enforcement proceedings, unless the creditor proves, within the twenty-day period granted by the Debt Collection Office [Office des poursuites], that a procedure to lift the objection [levée de l’opposition au commandement de payer] has been initiated in a timely manner (provisional or definitive lifting of the objection [mainlevée provisoire ou définitive] or action for recognition of debt [action en reconnaissance de dette]). Naturally, the debtor must already have filed a full objection to notice [opposition au commandement de payer]. To prove that a procedure to lift the objection has been initiated, the creditor can supply proof of posting or the acknowledgement of receipt of the request to lift the objection; in certain cantons, an invoice is acceptable (originals or copies of these documents).
When subsequently proof is supplied by the creditor that a request is pending, or that the debt enforcement is being continued, the information once again becomes available to third parties.
It should be noted that if the debtor’s request concerns an enforcement action that began more than five years previously, and therefore no longer appears in the Register, the relevant Debt Collection Office [Offices des poursuites] will not pursue the matter, because there is no interest to be protected.
This new provision became law on 1 January 2019.
- Under Swiss law, the creditor does not need any documentary evidence or specific title (judgement, etc.) to institute a debt recovery procedure. However, such evidence will be required if the debtor files an objection notice [opposition au commandement de payer].
- The debt recovery procedure is independent of any substantive proceedings on the merits. Indeed, if the debtor files an objection [opposition] the procedure is suspended until a material decision has been rendered by the competent court in the place of jurisdiction [for judiciaire], which may be an arbitration court, for example.
- A creditor can serve notice of a debt collection request [réquisition de poursuite] to safeguard his or her rights. When this document is sent, the time bar for the debt is interrupted and the creditor is informed immediately if the debtor is declared bankrupt. Moreover, if the debtor is uncooperative, once this document has been sent the objection can be definitively lifted [mainlevée définitive] as soon as the final judgement on the merits is received, rather than the creditor having to wait several months for notice of the demand for payment [commandement de payer] to be served, running a risk that the debtor could cause his financial situation to deteriorate or conceal possessions.
- Except in cases of abuse of law, sending a debt collection request [réquisition de poursuite] does not constitute an illegal infringement of the debtor’s personal rights because it is expressly authorised by the law.
For any further information, please do not hesitate to contact us. Mr. Lorenzo CROCE has worked for the Commercial Chamber of the Geneva Court of First Instance, he has an extensive practice in this field.