Swiss Civil Procedure Revision: In-house Counsel Privilege

The need for revision

In Switzerland, independent lawyers enjoy the protection of attorney-client privilege under the Swiss Code of Civil Procedure (ZPO) and thus the right to refuse to cooperate with regard to the release of documents and testimony in civil proceedings (cf. Art. 166 para. 1 lit. b ZPO). Lawyers working within a company were previously exempt from this privilege. This means that a company may have to disclose the legal advice provided by in-house lawyers in the event of court proceedings.

This starting point differs from that in various other countries, especially the USA, Canada and England. While companies in these countries can invoke rights to refuse to participate, companies in Switzerland may have had to disclose their internal legal advice and clarifications in court proceedings. This led to unequal treatment and a locational disadvantage for Switzerland and for Swiss companies, especially in cross-border proceedings.

In order to increase the attractiveness of Switzerland as a business location in an international comparison, the ZPO revision now also introduces rights to refuse to cooperate for internal lawyers who work in the legal service of a company.

The prerequisites

The new right to refuse to cooperate applies to companies that are entered in the commercial register, regardless of whether they are in Switzerland or abroad. The prerequisite is an “in-house legal service”, although it is unclear whether this must be organised as a separate organisational unit. It is also unclear how this is to be handled in group structures with a central legal service or in companies with independent compliance departments. In addition, the legal service must be headed by a person with a Swiss or foreign bar license. The right to refuse to cooperate only extends to activities that are to be regarded as part of the “professional activity of a lawyer”. This requirement is based on the protection of professional secrecy for lawyers and includes activities typical of lawyers, such as representation before courts and authorities, legal advice, negotiations in connection with legal transactions and drafting legal documents.

The Federal Supreme Court recently restricted the term “activities typical of lawyers” (within the framework of attorney-client privilege). Now, for example, activities in the context of an internal investigation are no longer necessarily considered typical activities of a lawyer. Commercial-operational and ancillary activities such as asset and real estate management or activities as a financial intermediary, board of directors or trustee are also not considered typical of lawyers. In cases where lawyer-typical services overlap with ancillary activities, attorney-client privilege – and presumably also in-house counsel privilege – does not apply without restriction. There is an acute need for clarification here through doctrine and case law.

The consequences

If the requirements for the application of the right to refuse to cooperate are met, a company can refuse to hand over documents in civil proceedings (see Art. 167a para. 1 ZPO). In addition, the employees of the legal service of this company can refuse to testify as “third parties” (see Art. 167a para. 2 ZPO).

Although the right to refuse to cooperate applies in principle only to civil proceedings in Switzerland, this will presumably strengthen the position of Swiss companies in foreign (civil) proceedings as well.

Finally, it should be noted that the right to refuse to cooperate only applies in civil proceedings, but not in criminal and administrative proceedings, such as proceedings before the Competition Commission or supervisory authorities such as FINMA.

The existing ambiguities and the resulting cost consequences

There are various points that have not yet been conclusively clarified. These include, in particular, the structural requirements for the “company’s internal legal service“, namely the question of whether it must form a separate unit within the company’s organisation and whether any compliance department is also covered. In addition, it is unclear to what extent the in-house counsel privilege will be applied in the frequent constellations in which activities typical of a lawyer overlap with ancillary activities.

It is desirable that these questions be clarified in court practice as soon as possible. Until then, however, it should be noted that the party who invokes a right to refuse to cooperate, which is disputed, may be subject to costs (cf. Art. 167 para. 4 ZPO).

TALI’s litigation team will be happy to answer any questions you may have about the right of in-house lawyers to refuse to participate, the revision of the Code of Civil Procedure and procedural questions in general.

By Vischer, Switzerland, a Transatlantic Law International Affiliated Firm.

For further information or for any assistance please contact switzerland@transatlanticlaw.com

Disclaimer: Transatlantic Law International Limited is a UK registered limited liability company providing international business and legal solutions through its own resources and the expertise of over 105 affiliated independent law firms in over 95 countries worldwide. This article is for background information only and provided in the context of the applicable law when published and does not constitute legal advice and cannot be relied on as such for any matter. Legal advice may be provided subject to the retention of Transatlantic Law International Limited’s services and its governing terms and conditions of service. Transatlantic Law International Limited, based at 84 Brook Street, London W1K 5EH, United Kingdom, is registered with Companies House, Reg Nr. 361484, with its registered address at 83 Cambridge Street, London SW1V 4PS, United Kingdom.