In general, collective actions are not permitted under Swiss law. Under Swiss law, there are other, albeit less powerful, means for a group of plaintiffs to join forces in order to reduce or share the costs of litigation and to increase their negotiation power (see the first six sub-sections below). In only a few limited areas, in particular in certain actions under the Swiss Merger Act, Swiss law provides for redress that comes close to a class action (see the sub-sections on ‘Action under the Mergers Act’ and ‘Collective investment schemes’ below).
Simple joinder of parties
According to article 71 of the Swiss Civil Procedure Code (CPC), two or more persons whose rights and duties result from similar circumstances or legal grounds may jointly appear as plaintiffs.
Hence, within the framework of a simple joinder of parties, claimants may bring proceedings together if they have actions that are essentially based on the same factual and legal basis, so that a joint assessment of the case is warranted in order to avoid contradictory judgments.
In the simple joinder of parties, each party files the claim in its own name and is entitled to the right to be heard. The claimants are individually identified, there is no representative litigation. Any party may withdraw its claim at any time or enter a settlement with the respondent, without consent of the other joint litigants. There is no opt-in: third parties may not join the simple joinder of parties on their own initiative, rather the consent of all parties to the proceedings is necessary.
Besides the similarity of the claims, the procedural prerequisite for a simple joinder of parties is the availability of a court that has international, geographical and subject-matter jurisdiction over all claimants. In most cases, the court at the seat or residence of the respondent has jurisdiction over all claimants. Many advantages attributed to the collective action can also be achieved with a simple joinder of parties. In particular, the court and party costs for each party involved will be reduced. The value of the dispute is increased and, as a result, the profitability as well as the negotiating power for the claimants. For the respondent, the possibility of an overall settlement and thus the final settling of a matter may be beneficial. Finally, the joint claim avoids the risk of conflicting judgments.
When considering the filing of a claim by simple joinder of parties, the impact on cost and compensation should be carefully examined by each claimant. As a general rule, if the claim is unsuccessful, Swiss courts will hold the claimant jointly liable for all court costs and the party compensation (see article 106(3) of the CPC). This may pose a considerable risk for a claimant with a deep pocket, and might deter such claimant from joining forces with other claimants.
Contrary to a class action, the simple joinder of parties is of limited use in case of scattered and relatively low-value damage suffered by many claimants. In such cases, it will be hardly possible to join forces with all affected parties prior to the filing of the claim, and the opt-in option does not exist. In addition, the risk of being jointly liable for the entire court fee and party compensation can be particularly discouraging in such situation where each single party suffered only limited damage.
Consolidation of claims
The seized court may order the consolidation of separate claims that have the same or a similar factual and legal basis. This consolidation can be ordered at the request of a party or on the court’s own initiative, in order to simplify the procedure (article 125 of the CPC). Such consolidation can be particularly helpful for a court flooded with a multitude of identical cases.
Furthermore, where factually connected cases are pending before different courts, the court subsequently seized may transfer the case to the court seized first if that court agrees to take it over (article 127 of the CPC).
The test case, also referred to as bellwether trial or model suit, is based on an agreement between the claimants and the respondent, according to which out of numerous cases - sharing the same or similar facts and questions of law - only one case, typical of all claims raised, is tried. The outcome of certain defined issues of such test case shall then be binding for all other cases. The plea of limitation is waived for the duration of the test case. Parties to the test case are only the claimant selected for the trial and the defendant; the other claimants are parties to the agreement only.
A recent example is the compensation claims that were raised by numerous land owners against the owner of the Zurich airport due to the high noise pollution. The parties agreed that a crucial question for the entitlement to damage compensation - namely the year until which the subsequent increase of noise came as a surprise - was to be examined in a test case. The Federal Supreme Court ruled in 2008 that the development was foreseeable from 1961 onward.
Such a test procedure necessarily requires the defendant to agree on the conduct of a bellwether trial. Even if this condition is met, there remains some uncertainty as the judgment in the test case is binding on the other cases only as a result of the private agreement concluded between the parties, yet not on a statutory basis (no res judicata). For this reason, the defendant in such cases has often been a particular trustworthy party, such as the state of Switzerland or one of its cantons.
Assignment of claims
Subject to a contractual provision to the contrary, Swiss law permits the transfer of monetary claims to a third party by way of assignment, without consent of the debtor.
Accordingly, instead of a joinder of parties, the claimants might also assign their claims to one party (eg, to a consumer organisation or an ad hoc association founded for such purpose). Subsequently, the assignee files the claim in its own name.
Ad hoc association
Where many parties with concurring interests are present, in spite of the unavailability of class actions, there is often a need for a common platform for cooperation. Sometimes, the cooperation is informal, but quite often also in a legal structure (association).
Such a common approach is interesting for several reasons. Knowledge can be shared both with regard to the facts as well as the legal procedure. A joint approach can also reduce costs. In addition, a common organisation increases the amount in dispute and improves the negotiating power. And usually, such approach also attracts the attention of the public and the media, which often increases the pressure on the other side (reputation problem).
Finally, as mentioned above, the creditors might assign their claims to the ad hoc association that subsequently files an action in its own name.
A quite recent example in Switzerland, which gained much attention from the media, was a platform for investors in Lehman papers, a group of people who had lost money with capital-protected papers issued by Lehman Brothers, papers that had been actively marketed by Swiss banks.
A representative action is a lawsuit lodged by a third party (eg, a consumer organisation) in its own name for a group of plaintiffs. In principle, Swiss law does not provide for the possibility of representative actions. Rather, a third party might only file an action with regard to claims actually assigned to it (see above).
The most important exception to this rule is the association suit in case of violation of personality rights. Article 28 of the Swiss Civil Code protects against all unauthorised interference with personal integrity, including the freedom to develop economically. According to article 89 of the CPC, associations and other organisations of national or regional importance that are authorised by their statutes to protect the interests of certain groups of individuals (which need not be members of the association) may bring an action in their own name for a violation of the personality of the members of such groups of individuals.
In such association suit, the court may be requested to prohibit an imminent violation, to put an end to an ongoing violation or to establish the unlawful character of a violation if the latter continues to have a disturbing effect. Hence, association suits related to the violation of personality rights are limited to the avoidance of such violation and the issuance of declaratory reliefs. In contrast, damage claims can be filed only by the individuals who incurred such damage.
A further barrier imposed by the legislator is the requirement that the association must have, at least, regional significance. This precludes the establishment of an ad hoc association in order to file an association suit.
Further to cases of violation of personality rights, specific legal provisions of Swiss law allow representative actions by associations also with respect to unfair competition cases and certain complaints about unequal treatment of men and women.
Also in such cases, the associations’ suits are limited to the avoidance of a violation and the issuance of declaratory reliefs, while monetary claims must be levied by the individuals themselves.
Action under the Mergers Act
Under article 105 of the Swiss Mergers Act, a minority shareholder can claim damage compensation if he or she is disadvantaged in a mergers and acquisitions transaction. The judgment in such an action applies not only to the minority shareholder who has filed the action, but to all shareholders in a similar position, regardless of whether they have participated in the litigation. And even if the minority shareholder loses the case, as a rule, the costs of the court proceedings shall be borne by the acquiring company. This relieves the claimant from the risk of having to pay substantial court fees and attorney’s fees to the acquiring corporation.
As arises from the above, with his or her claim, the claimant acts as a representative of the other minority shareholders. This procedure already comes very close to a class action.
Collective investment schemes
For claims related to collective investment schemes, the court at the registered office of the licence holder has exclusive jurisdiction. Under article 86(1) of the Federal Act on Collective Investment Schemes, investors into an open-ended collective investment scheme who intend to pursue a claim for damages - for example, against the fund management - in favour of the investment scheme may request the court to appoint a representative for all investors.
The representative has the same rights as the individual investors and may file a damage claim in favour of the collective investment scheme. Once the representative has filed an action, the investors may no longer exercise their individual right to file such claim. Unless the court decides otherwise, the expenses incurred by the representative shall be paid by the investment fund, irrelevant of the outcome of the case.
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