Costs Rules and Principles in Swiss Proceedings

By January 3, 2023 No Comments
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When initiating legal proceedings, claimants must advance the court fees. Where the claim is of monetary nature, these fees, that are measured by an official tariff, can be considerable. If the costs are not deposited, the court will not deal with the claim (however without res judicata effect).

What is more, claimants from jurisdictions who do not have a bi- or multilateral Treaty on mutual legal assistance in place with Switzerland may, in addition, have to deposit a security for the defendant’s legal fees. Certain claimants, such as claimants who are in bankruptcy or still owe legal fees from previous proceedings, may have to deposit security irrespective of the existence, or non-existence, of a mutual legal assistance Treaty. The security, again, is measured by an official tariff.

As a general rule, the indemnity for legal fees, and thus also the security for costs, is higher than the court fee.

Likewise, a party requesting certain evidentiary measures (such as, e.g., an expert opinion) must advance the costs. This need not necessarily be a burden that is exclusively on a claimant. As a matter of fact, more often than not both parties must advance costs for the taking of evidence.

That said, both the advance payment and the security are not forfeited. They are merely aimed at eliminating the court’s, and the counterparty’s del credere riskThey are, in other words, entirely without prejudice as regards the subsequent costs decision.

The key exception to the rule that claimants must advance and deposit costs is legal aid. A claimant who is not able to finance a litigation can be exempted from having to deposit both court fee and security. In a commercial context, legal aid is, however, the exception and not the rule. In addition, third party funding is another source of financing of commercial disputes.

When deciding on the merits, the court normally also decides on the costs. The key principle here is that the loser pays all the costs, i.e., the court fees, the counterparty’s legal fees, and its own legal fees. Where both parties prevail to some extent, the costs are distributed accordingly. In exceptional cases, the court can deviate from these rules and distribute the costs in its discretion. Also, it may impose costs on parties who create unnecessary costs, even where such parties prevail.

As a result, a claimant who prevails will have an additional claim for the court fees against its counterparty. There is, by contrast, no refund from the court.

In appeal proceedings, the same rules apply mutatis mutandis.

The general rules and principles on cost decisions in Swiss-based arbitration are, roughly speaking, the same. The key difference is the fact that the duty to advance the tribunal’s costs is not merely on the claimant. Instead, both parties must advance half of the arbitral tribunal’s fees and administrative costs. This is due to the fact that, other than in State court proceedings, arbitration is invariably based on a previous agreement between the parties. Where a defendant chooses not to advance half of the tribunal’s costs, the claimant can choose between advancing the entire costs – and thereby upholding the arbitration clause – or else to sue before State courts due to the lapse of the arbitration agreement. That choice must be made based on a number of considerations, such as, e.g., overall costs, duration of the proceedings, availability of injunctive relief, enforceability of the judgment or award, etc.

All that said, legal costs for Swiss proceedings are very competitive when compared with legal fees in other jurisdictions. This also has to do with the fact that there is no discovery and – due to the fact that Swiss proceedings are front-loaded – no lengthy trial or two-layer system of legal representation in court.