A Guide to Switzerland

The information contained in this publication is given by way of general reference only and is not to be relied upon. No responsibility will be accepted by the authors or publishers for any inaccuracy or omission or statement which might prove to be misleading. You are advised to seek your own professional advice before proceeding to invest or do business in Switzerland.


A. Map
B. Geography
C. Population and Languages
D. Time Zone

A. Political System
B. Legal System
C. Economic System
D. Court System
E. Financial System
F. Culture


A. Acquisition of Real Estate by Foreigners
B. Residence and Work Permit Regulations




A. Patents
B. Trademarks
C. Copyrights






A. Direct Taxes
B. Indirect Taxes



A. International Conventions
B. Bilateral Treaties with the U.S.

A. Arbitration Practice


A. Map

B. Geography

The local American Chamber of Commerce calls Switzerland "the most European country." That description may partly be justified by the fact that Switzerland is situated right in the center of Europe, bordering and influenced by Germany, Austria, Italy, and France (as well as the Principality of Liechtenstein).

Switzerland is small, it covers only 41,293 square kilometers (some 16,000 square miles). This is about the size of the Netherlands and half the size of Austria. About one-fourth of Switzerland's surface consists of lakes, glaciers, and high mountains. The climate is temperate; the climate north of the Alps is influenced largely by conditions over the Atlantic ocean and the North sea. The average temperature is 9øC (48.2øF). The hottest month is July (18øC/64.4øF); the coldest month is January (0øC/32øF). South of the Alps, there is some influence from the Mediterranean Sea and the average temperature is 12øC (53.6øF). In the hottest month, July, the average is about 21øC (69.8øF). In the coldest month, January, it is 2øC (35.6øF).

The major population centers are Zurich (842,000 inhabitants), Basel (362,000), Geneva (386,000), Bern, the federal capital (300,000), and Lausanne (264,000). They all lie north of the Alps. South of the Alps, the major city is Lugano, with about 100,000 inhabitants.

Switzerland has excellent public transportation between and also within all major towns, with trains to the more important cities leaving every hour or even every half hour.

Regular non-stop Swissair flights connect Zurich and Geneva with New York, Boston (and on to Philadelphia), Chicago, Los Angeles and Atlanta. U.S. carriers flying to Switzerland are American Airlines, TWA and Pan American. Switzerland has three international airports: Zurich, Geneva and Basel. From one of these three international airports, a traveller can get to all European political, economic, and cultural centers within less than two hours. Smaller airports near Bern and Lugano and St. Moritz provide for further national and international flight connections.

C. Population and Languages

The total population is 6,722,900 (including some 16% or 1 million foreigners), or an average of 163 inhabitants per square kilo square miles).

The two main religions are Roman Catholicism (48%) and Protestantism (44%).

The languages spoken in Switzerland are those of its neighbors. According to the 1980 census, German (65%) is spoken in the central, northern, and eastern parts of the country; French (18%) in the west and southwest; Italian (10%) in the valleys south of the Alps, and Rhaeto-romanic (1%) in the Grisons. Six percent (6%) of the resident population have other native tongues. Most people speak or understand at least one other language in addition to their own, and knowledge of English is common.

D. Time Zone

Switzerland is on central European time (Greenwich mean time plus one hour or U.S. eastern standard time plus six hours). It changes to summer time on the same day as its neighbors.


A. Political System

Switzerland is celebrating its seventh centennial in 1991. In 1291, a relatively loose confederation of small cantons was established as the "Everlasting League." It grew in size over the centuries and was in 1848 transformed into a federal state composed of twenty-six cantons and half-cantons in which there are more than 3,000 communities. Each canton has its own constitution and laws. The federal constitution, enacted 1848 and revised 1874, was influenced by the American Constitution. Embodied in the constitution are the principles of freedom of trade and industry, religion, press, petition and association, the right to private property, as well as Switzerland's unique institution of direct democracy.

The people elect the Federal Parliament every four years and exercise power through referendums and initiatives. The Federal Parliament consists of the National Council (Nationalrat, conseil national) modeled on the U.S. House of Representatives, and the Council of States (St„nderat, conseil des Etats), modeled on the U.S. Senate. The National Council consists of 200 representatives of the people and the Council of States consists of two representatives from every canton (one only from so-called half-cantons). In both chambers, the conservative parties have a majority.

The Federal Council is the major governing body, consisting of seven persons. They are elected by the Federal Parliament and are consensus candidates acceptable to most sides. Each federal councilor heads a ministerial department. The Swiss presidency rotates each year among the seven. This is a significant departure from the American system of a strong presidency. The Swiss president has little more than representational duties. The Federal Council's collegial system is probably unique in the world and contributes to Switzerland's stability. In the Council sit ministers from all the leading political parties. Although they may hold differing views, the ministers are expected to publicly support any decision taken by the group.

B. Legal System

Under the Swiss Constitution, the power to enact laws is shared by the Confederation and the twenty-six sovereign cantons. Swiss federal law is formally enacted by the Federal Parliament. After enactment by the two Councils, a law can be submitted to a popular vote if a petition with sufficient signatures is presented. A referendum can be mandated by a petition signed by 50,000 people. To pass the voting, a simple majority of the votes is sufficient.

.Amendments to the federal constitution must be submitted to a general vote; they are ratified by a majority of both the voters and the cantons. On occasion, an amendment is approved by a majority of the voters but rejected by a majority of the cantons.

One hundred thousand people can demand, by means of an initiative, that a proposal to delete or change a provision of the federal constitution, or to insert a new one, be presented to the Swiss people and the cantons. While only a few of these initiatives are eventually accepted by the people and cantons, they often prompt a milder counter-proposal by the Federal Parliament which has a better chance of being accepted.

Under the federal constitution, the lawmaking power lies with the cantons, unless a specific provision grants this power to the Confederation. Areas of federal control include matters of national interest such as defense and foreign affairs, monetary policy, and rail and postal services. Even if the Confederation is empowered to enact the law, it often restricts itself to the general principles and leaves it to the cantons to pass detailed regulations for implementation. Swiss cantonal law is the law enacted at the cantonal, intercantonal, or community level.

Swiss law is primarily statutory law. Constitutional provisions, however, take precedence over ordinary statutes and administrative regulations. Such statutory law can be found in the federal and cantonal compilations of the laws. The federal laws are amassed in the Systematic Collection of Federal Law.

Court decisions are not binding on other courts. Although interpretations of the law by the Swiss Federal Tribunal -- Switzerland's Supreme Court -- and by one of the cantonal appellate courts are generally followed, intentional deviation from such case law is not infrequent and sometimes prompts the higher courts to revise their positions.

Law affecting the private sector or private law lies within the lawmaking competence of the Confederation and encompasses primarily civil law and the law of obligations. Civil law, which encompasses the law of persons (natural and juridical), family law (including husband-wife and parent-child relationships), and estate and property law (moveable and immoveable property), was codified in 1907 at the federal level by the Swiss Civil Code. The law of obligations encompasses the law of contracts, unjust enrichment (quasi contracts), torts, partnerships, corporations and negotiable instruments. It was codified in the Federal Code of Obligations in 1881, passed in 1911, and materially amended in 1936. The law relating to corporations is presently being revised. These laws are issued in German, French and Italian, but unofficial English translations are available.

While the Confederation has the exclusive power to enact legislation in the area of private law, law affecting the public sector can be enacted by the Confederation, the cantons, or the communities. An important part of the public law (besides taxation) is the law organizing the various courts and setting the rules of legal procedure.

C. Economic System

Switzerland has practically no natural resources. It is not a self-sufficient agricultural country. Two-thirds of the surface is more or less unproductive land (stones, mountains, meadows, forests, lakes). Nevertheless, surveys regularly put Switzerland at the top of the lif the industrialized world's richest nations per capita. From virtually nothing, the Swiss have built their strong economy on high-quality processing of imported semi-finished products, which they then export, and on a service sector noted for its banks, insurance companies, and tourism. According to a recent survey of the BERI-Institute, Switzerland ranks second (after Singapore) in terms of work productivity (the U.S. being ninth). Strikes and unemployment are almost unknown to Switzerland. On the Fortune 500's new global list of the biggest industrial corporations, Switzerland is on the Top Ten Countries list with a total of 10 corporations. To name two of those, Swiss based Nestle is the largest food company in the world and Basel based Ciba-Geigy heads the list of important international chemical combines. Nevertheless, small- and medium-sized companies are the economy's backbone. Ninety-seven percent (97%) of all non-agricultural businesses employ less than 50 people and 2.5% employ between 50 and 500. This diversity contributes to the country's economic stability.

Normally, Switzerland has a high trade deficit. This is, however, of little concern to the country because it also maintains a consistently high surplus on current account, caused by substantial investment earnings abroad, financial services, and tourism.

Primary imports are energy, food, raw materials, semi-finished products and capital goods. Primary exports are machinery and metal goods (45%), chemicals (21%) and textiles/ clothing (7%). Well-known products are watches high-tech machinery as looms and benches, and chocolate as well. Switzerland's most important trading partners are Germany, France, Italy, and the United States. See also Section VI below.

D. Court System

Each canton and half-canton has its own code of civil procedure. These vary greatly from one canton to another. However, some basic rules of civil procedure are applicable in all cantons. As a rule, each canton's procedural code provides for two court levels, courts of first instance and courts of appeal. The courts of appeal may review questions of law and fact. Most cantonal codes of civil procedure also provide for a court of cassation which can cancel judgements issued by lower courts based on the violation of procedural principles. .Some civil procedure laws exclude certain matters from the general jurisdiction and provide special courts for commercial, lease and labor conflicts.

First instance court judges are often laymen without any juridical background. Petty cases and some specific cases are often heard and decided by a single judge.

Switzerland has only one federal court, located in Lausanne, the primary function of which is to provide for the uniform application of federal law throughout the country.

E. Financial System

The Swiss unit of currency is the Swiss franc (Franken, franc, franco) which is divided into 100 cents (Rappen, centimes, centesimi). The symbol most commonly used is Fr. or SFr. The Swiss franc is freely convertible into any other currency at the prevailing market rate. At the end of 1989, the exchange rate to the U.S. dollar was where it had started at the beginning of the year, about 1.55 francs to the dollar. Presently (at the end of 1990), the rate is markedly below 1.50 francs to the dollar.

F. Culture

As may be expected from the "most European country", the culture of Switzerland is strongly influenced by the surrounding countries, particularly Germany, France, and Italy. This adds diversity to an already rich cultural scene, rich because of the long history of Switzerland, the absence of any destruction during the World Wars, and the wealth of today's population. Hence, the lawyer travelling to Switzerland and interested in culture will have no difficulty finding plenty of things to see and experience, from the Bodmeriana antique book collection in Geneva and the Thyssen exhibition in Lugano to hundreds of medieval castles and folklore activities in all parts of Switzerland, not to name the June Festival of Music in Zurich or the yearly art exhibition in Basel, etc.


Foreigners are free to make direct capital investments in Switzerland. Switzerland does not have an "alien investments act", and there is no review, application, official approval procedure, or registration for foreign capital investments except with regard to investments in Swiss real estate (see below). All foreign investment and the income (in whatever form) therefrom can be freely repatriated; no guarantee against inconvertibility is available or required.

Switzerland has, in principle, a laissez-faire policy, allowing the free flow of investments both in and out. The strong demand for Swiss currency has abated, so the restrictive measures affecting non-residents have been relaxed. However, monetary measures may be introduced, withdrawn, or reintroduced in accordance with the requirements of general economic conditions or policy; it is therefore, at all times, advisable to obtain up-to-date information before decisions or transactions are implemented.

The Swiss laissez-faire or policy of non-interference also excludes the promotion of investments by the federal government. Because of the high level of autonomy which cantons and communities enjoy, the promotion of industry and trade is, to a large extent, within the jurisdiction of the cantons and their respective communities. The federal government encourages infrastructure projects -- tourist amenities, communications, and training facilities -- by granting long-term loans interest free or at preferential interest rates. Federal assistance is aimed at completing the financing required and does not generally exceed 25% of the total project cost. The federal government further encourages the hotel business by granting or guaranteeing loans. In certain cases, it may even assume part of the interest cost. Small- and medium-sized industrial or craft companies situated in mountain regions may also obtain government guarantees. Because of the decline in certain traditional industries, the federal government also offers incentives to promote new activities. These incentives take the form of loans for up to ten years for up to 33% of project costs, and sometimes interest subsidies. Tax reliefs may also be given.

Most cantons have their own offices for development of investment and trade and there is some healthy competition among them. To attract new investment, almost all the cantons are prepared to make real estate available for commercial or industrial purposes (either centrally or through the individual communities), and in many cases also make credit available to finance new projects. This is true, in particular, in some of the agricultural cantons such as Fribourg, Graubunden (Grisons), Luzern (Lucerne), Schwyz, Unterwalden, Uri, Valais, and Vaud, which offer rent-free land for the erection of new factories for a limited period or make public land available at low prices. Sometimes, these cantons even waive work permit restrictions if this will help to make a particular incentive package deal more attractive. A few communities have established industrial zones in order to encourage new enterprises. Many of the cantonal authorities grant incentives in the form of tax holidays of up to ten years and other reliefs to new enterprises. The cantons also grant special tax privileges to holding, domiciliary and other types of special companies. These privileges are important as they make Switzerland a favorable tax location without the disadvantages of being a pure tax haven. A few cantons offer cheaper energy, and others maintain "free zones" (see chapter V). Most offer training cost subsidies or have highly skilled work forces. Even the more remote mountain cantons usually have good transportation and communication facilities.


There are two sensitive areas for foreign investors: the work and residence permit required for foreigners in Switzerland and the permit required for the acquisition of real estate in Switzerland by foreigners.

A. Acquisition of Real Estate by Foreigners

The acquisition of real estate by foreign individuals or companies requires a permit under the so-called "Lex Friedrich." No restrictions apply to acquisitions within the close family, through succession by legal heirs and in a few other cases. A permit will, in principle, be granted if the property is to be used for any of the following purposes:

(i) as a permanent place of operation for the buyer's commercial or manufacturing enterprise or any other business which is run on commercial lines or for the buyer's profession;
(ii) as an investment in the course of the business activities of foreign or predominantly foreign-owned insurance institutions that are permitted to do business in Switzerland, provided that the generally accepted investment principles are being met and also provided that the value of all the buyer's properties does not exceed the amount to be transferred to the reserve fund, given that the supervising authority for insurance considers that amount as technically appropriate for the business done in Switzerland;
(iii)for the welfare of the personnel of permanent establishments in Switzerland or exclusively for non-profit purposes if the buyer does not have to pay the direct federal taxes on the property; and
(iv) as a pledge for claims held by foreign or predominantly foreign-owned banks or insurance institutions authorized to do business in Switzerland in connection with enforcement proceedings, with the stipulation that the property be sold two years after its acquisition.

The acquisition of real estate by foreign individuals or companies without a permit is void and payments already made may be reclaimed. Persons taking part in a transaction for which no permit has been obtained may be criminally prosecuted and are subject to imprisonment or fines.

B. Residence and Work Permit Regulations

A foreigner who wishes to stay in Switzerland needs a permit. To avoid excessive immigration of foreigners, the number of first-time temporary residence permits as well as of seasonal permits is limited by annual maximum quotas allotted to each of the cantons as cantonal quotas. For particular cases, there is a special federal quota (called the BIGA quota) as a kind of reserve. Except for the holders of permanent residence permits, the stay in Switzerland is limited in time and can be subject to conditions.

Unlike the majority of other countries, Switzerland has not introduced the requirement of a special work permit apart from the temporary residence permit. Accordingly, the Swiss permit comprises the permit to stay in Switzerland and at the same time authorizes the foreigner to exercise certain types of gainful activity.

Within the scope of the applicable law and the international treaties concluded by Switzerland, it is up to the authorities to grant and extend permits at their discretion. A right to a permit exists only when the law so provides. In making decisions, the authorities have to take into account the requirements of national policy, the receptive capacity of the country, the situation in the economic and labor markets, the requirements of education, science and research, the human and social aspects, as well as the relations of the foreigner with Switzerland.

There is no limit to the number of permanent residence permits issued and to the conversion of seasonal permits into temporary residence permits. Work permits for spouses of B-work permit holders are also not subject to the quota system for permits.

The residence permit for year-round residence (called a "B-Permit") is initially issued for the duration of one year and has to be extended every year. Normally, extension is a routine matter. It always clearly specifies the purpose for which it is issued (e.g., employment as EDP specialist at Bank X). The permit is only valid for the issuing canton and for the purpose issued. Accordingly, every change of employment, profession and canton must be approved by the competent authorities. As a rule, permission to make such changes is rarely granted during the first twelve months of residence. A new job must not be taken up before the change is approved.

Foreigners who come to Switzerland because they are members of management, qualified specialists or continuing their education may receive a permit of limited duration of six to twelve months for this purpose. Such permits can be extended only under very exceptional circumstances.

Foreigners wishing to work in Switzerland for a period not exceeding four months in a calendar year may apply for a "120-Day Permit." This permit, which does not fall under the quota system, enables the foreigner to take up short-term employment in Switzerland for a specific and limited purpose (e.g., setting up a Swiss subsidiary of a foreign company, managing and/or supervising a Swiss subsidiary from abroad, or fulfilling other special assignments in Switzerland). The "120-Day Permit" allows the permit holder to stay and/or work in Switzerland within a one-year period either four months in a row or for 120 days spread over the whole calendar year. A system of rotation, whereby several "120-Day-Permit" holders replace each other throughout the year is not permitted.

Foreign workers living in the border zone of a country neighboring Switzerland may receive a "Border Permit" for work in a defined Swiss border zone. The holder of such a permit must return daily to his home abroad. To apply for the Border Permit the worker must have lived in the border zone of the neighboring country for at least six months.

Residence permits for seasonal workers (called "A-Permits") are issued for periods not exceeding nine months per year, and only for seasonal activities in seasonal enterprises. The permit may only be extended in exceptional cases clearly specified in the law. A seasonal worker must reside abroad at least three months within every given one-year period. Permits for seasonal workers may, under certain conditions and after a certain number of years, be converted into year-round residence permits.

Non-working foreigners, such as students, health resort guests and pensioners older than 60 years of age, may receive a residence permit if the conditions of such a permit are met. The foreigner acquiring such a permit cannot be gainfully employed. Non-working foreigner permits are not subject to a quota.

The permanent residence permit (called a "C-Permit") can usually be applied for after ten years of continued residence in Switzerland. Switzerland has concluded residence treaties with 31 states. Some of these treaties provide a right to a permanent residence permit after a period of five years of continued residence (e.g., France and Great Britain, but not the United States). The holder of a permanent residence permit may, without the need for prior approval, engage in any self-employed or employed activity in the issuing canton except certain professions for which Swiss citizenship is required. Permission to change cantons, however, is still required. C-permit holders are for all practical purposes legally treated like Swiss citizens, with the main exceptions being the right to vote and the duty to perform military service.

When a foreigner leaves Switzerland for more than six months, he generally loses his permanent residence permit, but the competent cantonal authority can allow him to stay abroad for up to two years.

Work permit application procedures vary from canton to canton. Cantonal procedure substantially governs applications for permits from the federal quota as well.

Applications are made by the prospective employer and are usually filed with the competent cantonal labor office. The cantonal labor market authorities and/or the Federal Office for Industry and Labor ("BIGA") decide whether or not the prerequisites for the use of a cantonal or federal permit are fulfilled, and whether or not the present economic and labor market conditions allow the employment of a foreign worker. As a result of this examination, the labor market authorities issue a preliminary decision which is binding on the cantonal alien police. The alien police may, however, in spite of a positive preliminary decision by the competent labor office, refuse the issuance of a work permit for reasons other than economic or labor market considerations (e.g., criminal record).

Applications for work permits should be filed well in advance of the date on which the person would like to take up residence. All supporting documents, facts, figures and arguments showing the positive impact on the economy to be expected from the issuance of a work permit should be included.

At the minimum, it is advisable to file the following with the competent cantonal labor office:

  • official application form (obtained from the competent labor office);

  • a detailed description of the employers' business;

  • a detailed description of the position to be filled;

  • a detailed description of the special qualifications of the person with regard to the position; and

  • "curriculum vitae" of the person for whom a work permit is applied.


In Switzerland the import of goods normally exceeds the export, just as the export of services has always exceeded the import of services. The United States occupies fourth place in the ranking of countries exporting to Switzerland, after West Germany (33.5% in 1989), France (10.9%) and Italy (10.2%), ahead of Great Britain and Japan. More than 71% of all Swiss imports are from the EC.

Switzerland is a member of the European Free Trade Association (EFTA) but has very close economic relations with the members of the European Community (EC) and the United States. Since August 1, 1966, Switzerland has been a party to the General Agreement on Tariffs and Trade (GATT). It, therefore, basically grants most favored nation status to other GATT members and treats foreign and Swiss nationals equally in the application of customs law.

Goods imported into Switzerland are, as a general rule, subject to customs duties. The goods have to be accompanied by a customs declaration which is examined before the goods are cleared and released upon payment of the customs duty. The basis for calculating the amount of customs duty is weight: the gross weight of the imported goods is multiplied by the applicable tariff. The customs tariff is based on the classification of goods stated in the Customs Tariff Act, which is in compliance with the International Treaty on a Harmonized System for the Description and Codification of Goods. The tariffs are stated in Swiss francs per one hundred kilogram gross weight of the classified good and indicate separate rates for normal imports and for imports originating from EC or EFTA countries. The Federal Customs Administration has issued a three-volume loose-leaf publication which contains rulings and interpretations of the Customs Tariff Act, the so-called "Notes explicatives du tarif, 1986."

Goods originating in EC or EFTA member states are cleared under the preferential treatment applied to the European free trade zone.

The import of agricultural products is restricted in various ways including import prohibitions, import monopolies, import quotas, seasonal import quotas for fruits and vegetables, obligations of the importer to buy certain quantities of domestic products of the same kind, increased import duties, and special fees on the allocation of import quotas.

The foreign exporter must file a customs declaration -- and is liable to customs duties -- if he transports the goods across the border or has effected the import of the goods into Switzerland. If the importer has assumed responsibility for filing the customs declaration, or if the goods are transported for his account, he becomes jointly and severally liable with the exporter for the payment of the customs duty.

As a general rule, traffic across the Swiss customs border is restricted to certain streets, harbors, and airports which the Federal Customs Administration (Oberzolldirektion) lists publicly. Office hours are limited to regular business hours.

All goods which cross the customs border have to be presented to the competent customs authorities. Special rules for the presentation of goods to the customs authorities apply when the goods are transported by railway, ship, airplane, or postal delivery.

The bills of lading, the original forms of declaration and similar transportation documents, as well as official certificates on the quality and condition of the goods, and all accompanying documents issued by the exporter must be presented together with the customs declaration. Goods imported by road must be declared within twenty-four hours after the goods have been presented to the customs authority at the border. If the goods are to be cleared inside the country, the customs declaration must be completed within six days after the goods have come under customs control. For goods imported by train or ship, different time limits apply. If the declaration is not completed on time, the customs authority will either return the goods across the border or store them in a customs warehouse and charge the costs to the person(s) liable to pay the customs duty.

Goods which have passed customs clearance may be subsequently subject to other controls by cantonal or federal authorities. Food and drugs are often subject to further scrutiny.

Of course, false declaration of origin, abuse of registered trademarks, and non-compliance with the obligation to indicate specific data on packages (e.g., for purposes of consumer protection) are unlawful and may have legal consequences even if the goods passed customs clearance.

If imported goods are to be re-exported or to be forwarded to another customs office or a customs warehouse, an accompanying customs-warrant may be attached to them against payment or securities for the customs duty calculated at the highest tariff. By presenting the customs-warrant and the goods in their unchanged status under seal, this accompanying customs-warrant may be canceled again. If such cancellation does not take place within the time limit given, the customs duty secured becomes due.

The importation of alcoholic beverages and tobacco is subject to a special excise tax. For alcoholic beverages, the federal government has a monopoly on import rights, which it grants to private importers for a monopoly fee. The excise tax is charged in addition to the customs duty.

Goods which are imported solely for the purpose of processing or repair and which are re-exported thereafter (called inward processing) are exempt from duties. When processing and repair are combined, special permission is to be obtained from the Federal Customs Administration for exemption from duties.

For outward processing, that is, export of goods from Switzerland to another country followed by re-importation after the goods have been processed or repaired, permission for reduction of, or exemption from, duties can be obtained from the Federal Customs Administration. If, however, it can be proved that the foreign processor is exclusively capable of completing the repair needed or if the processing transfer is governed by a corresponding treaty provision, the customs office may grant duty exemptions without regard to economic aspects.

The Federal Finance and Customs Department may grant permission to store imported goods without paying customs duties if the goods are to be re-exported or their destination is not yet defined. Securities may be requested before granting such permission.

Bonded warehouses are considered "foreign territory" for purposes of the customs law but they are under the control of the customs authorities. Thus, as far as intellectual property law is concerned, for example, goods stored in a bonded warehouse are under Swiss jurisdiction.

A turnover tax is levied on imported goods. The legislative policy behind this tax is equal treatment of local and foreign sellers. A turnover tax is levied on domestic transactions when the goods are sold from the retailer or wholesaler to the end-user; the same tax is, therefore, levied on imports. It amounts to 9.3% of the goods' value for wholesalers and 6.2% for retailers. The person liable to pay import duties is also liable for the payment of the import turnover tax, which is assessed by the customs authorities under rules analogous to those of the customs procedure. The import turnover tax is also to be paid on duty-free goods. If, however, the importer is a wholesaler or if goods are imported only in a negligible amount, this tax is not levied.

A foreign, e.g., U.S. exporter does not need an official agent to clear goods imported into Switzerland. Presentation of the relevant documents and payment of customs duty and import turnover tax may be handled by any person; however, a knowledgeable forwarding agent certainly helps to speed up importation formalities. In this connection, it may be worth mentioning that Switzerland is the home country of some of the world's largest freight forwarders, such as:

- Danzas AG, Basel (BS) - Kuehne & Nagel, Pfäffikon (SZ) - Panalpina AG, Basel (BS)

For certain sensitive items, a U.S. license application for export of commodities to Switzerland must be accompanied by a Swiss Blue Import Certificate. This is required regardless of the value of the commodities. Exemptions from this requirement include shipments to government agencies and temporary exports for exhibition, demonstration or testing purposes.


The United States ranks as the third most important Swiss export market, following West Germany (20.9% in 1988) and France (9.4%), and narrowly edging out Italy (8.3%). Capital goods, with a share of 37.1% in 1988, continue to be at the forefront as the main category of products exported from Switzerland to the United States. Consumer goods, at 32.6%, and raw materials and semi-manufactured goods, with 30.3%, follow closely behind. In 1988, metal products, machinery and related products made up approximately two-thirds of the Swiss exports to the U.S. Percentages were especially high for machinery, at 30.4%, and watches, at 12.6%. Exports of chemical products also expanded to one-fifth of the total.

Exports are subject to control at the Federal Council Department of Economics. Licenses are required primarily only for goods relating to the military, protection at agriculture and certain industries. Swiss Consulates can provide specific details.

Exports of services and products contribute almost 50% to the revenue of the Swiss population and are, therefore, of paramount importance. In spite of this, there are hardly any government incentives available to Swiss exporters. One that does exist is a federal fund to cover, i.e., guarantee, export risks. More specifically potential losses or late payments will be partially covered by that federal guarantee if they are caused by foreign exchange difficulties, liquidity problems of foreign states or foreign governmental restrictions and similar reasons. Not covered are losses caused by an exporter who violated his contract, or due to illiquidity of a private customer of the exporter, or due to loss or damage to the exported good which could have been insured.

Further conditions of the coverage are:

- The exporter must be a firm registered in Switzerland;
- The exported goods must be 70 to 90% of Swiss origin;
- At least 15% of the price has to be paid by the time of delivery;
- The import and currency regulations of the country of destination have to be observed;
- The exporter has to do everything necessary to avoid the losses; and
- The insurance premium must have been paid.

The funding of the export risk guarantee is shared between the federal Government and the exporters. The exporter has to pay a premium calculated in percentage of the value of the exported good. These percentages vary according to the risk involved and the chosen degree of coverage. The maximum premium should normally not exceed 8% of the transaction value.


In this area, as throughout Swiss contract law, the parties to a contract are, unless contravening public policy and apart from a few binding statutory provisions, entirely free to set the scope of their respective rights and obligations. A contract between a supplier and a distributor or representative may be written or oral. The parties are also free to agree on a forum where action arising under the contract has to be brought. They can also agree on arbitration to be conducted at a place of their choice.

The representative (who does not purchase and sell for his own account and risk but who merely promotes sales by the supplier, sometimes called an "agent") is, by means of an express provision of the Code of Obligations, entitled to compensation in the event of termination without cause if he has substantially increased the number of customers of his supplier. In such a case, the court may award the representative compensation based on the representative's average income over the last five years. The right to such compensation cannot be excluded contractually.

Under the present state of the law, a distributor (i.e., one who purchases from the supplier to resell for his own account in a defined territory), whether non-exclusive or exclusive, is not entitled to compensation in the event of termination. This has been criticized and it is possible that at some time in the future, the Swiss Federal Tribunal may decide that at least an exclusive distributor is entitled to compensation in the event of termination under the same conditions as a terminated representative. In this connection, it must be noted that distributor and franchise agreements, unlike representative or agency agreements, are not mentioned and regulated in the Code of Obligations. The judge thereby refers to other contractual relationship which are either regulated in the Code of Obligations, such as the agency contract (mentioned above) or other types of agreements, which are not codified but better known, such as the license agreement.

Unlike the competition law of other countries, Swiss cartel law does not restrict the freedom of the distributor and the supplier to agree on their respective rights and obligations.


A. Patents

Switzerland has signed the Paris Convention for the protection of industrial property as amended in The Hague (1925), London (1934), Lisbon (1958), and Stockholm (1967). Switzerland has also signed the Patent Cooperation Treaty of 1970, the International Patent Classification Agreement of 1971, the European Patent Convention of 1973 and the Budapest Treaty on recognition of deposition of micro-organisms of 1977.

Patents may be registered irrespective of the nationality of the applicant, although when applying for a patent, a non-resident must appoint a resident representative empowered to act on his behalf. It is advisable to apply through a patent agent or attorney,law,legal services,information,asset management,private bank,trust services,swiss bank,swiss trustee,real estates,directory">rney.

Patent protection in Switzerland may be obtained through an application either with the Federal Office for Intellectual Property for a domestic patent or with the European Patent Office for a European patent.

Patent applications are necessary for either new patents or additions to existing patents. Industrial models and designs can also be protected.

A patent is granted for the standard period of twenty years from the date of the application, provided the annuities are paid. Patents cannot be renewed thereafter.

Patent licenses can be granted. A patent may be licensed compulsorily by a judge upon petition of a third party if it is not used for three years.

B. Trademarks

Switzerland is a party to all major trademark conventions including the Madrid Conventions. Trademarks may be registered even by a person or company not engaged in business activities in Switzerland, provided that the registrant's country of origin grants reciprocity to Swiss nationals.

Application for trademark registration has to be made to the Federal Office for Intellectual Property. A trademark is granted for a period of twenty years but unlike patent grants, it can be renewed for additional periods of twenty years.

Trademark licenses may be granted. If a registered trademark has not been used for three years, a judge, upon request of a third party, may cancel the registration.

The first user of a distinctive name or mark is entitled to its registration. If the trademark consists of the firm's own name, only the registration of the firm in the Commercial Register is required. In other cases application must be made to the Federal Office for Intellectual Property. Service marks may not as yet be registered in Switzerland, but a draft trademark law presented to parliament proposes such possibility.

C. Copyrights

Switzerland is a signatory to the Bern Convention of 1908, as amended in Berlin, Rome, Brussels, and Stockholm.

Switzerland has also signed the Universal Copyright Convention of Geneva of 1952. Declarations of reciprocity were exchanged between Switzerland and the U.S. in 1924.

No formal registration is required or possible to obtain copyright protection. The protection of authors' works ceases fifty years after death.

Although there is no precedent yet, the prevailing opinion is that computer software may be protected, and the revised draft of the current copyright law lists computer programs as copyright objects.


Swiss law does not distinguish between Swiss-owned and foreign-owned business entities. There are, in principle, neither registration nor local agent requirements.

Investments by foreigners may be made through the purchase of stock or assets of an existing company, by establishing a branch or subsidiary, or also by entering into a joint venture or partnership with a Swiss company. It cannot be said that one form is generally preferred over another.

The forms of Swiss business entities are:

  • Sole proprietorship (Einzelfirma, raison de commerce);

  • Corporation (Aktiengesellschaft, Société Anonyme);

  • Limited Liability Company (Gesellschaft mit beschraenkter Haftung => GmbH,
    Société avec Responsabilité Limitée => Sarl);

  • Partnership limited by shares (Kommanditaktiengesellschaft,
    Société en commandite);

  • Unlimited Partnership (Kollektivgesellschaft, Société en nom collectif).

The corporation, the limited liability company, and the partnership limited by shares have a separate legal personality independent of the management or the shareholders. The corporation is by far the most common form of legal organization in Switzerland (see Section XII below).

All companies must, as a rule, be entered into the Register of Commerce. Entry into this register has, in some cases, a constitutive effect. An Aktiengesellschaft, for instance, comes into legal existence only upon its registration. The purpose of such registration is to make public all Swiss companies and the Swiss branches of foreign companies engaged in business in Switzerland, and to prove information about their legal status. The entry is comprised of the name of the company, its domicile, capitalization, nominal value of the shares, members of the board of directors, officers, signing powers, etc. The Register of Commerce is open to the public. In addition, most entries are published in summarized form in the Swiss Journal of Commerce.


Swiss law does not prohibit foreign corporations from acquiring local companies. Foreign corporations can also acquire all of the assets of local companies. Notwithstanding the foregoing, two limitations (apart from the acquisition of real estate as mentioned in chapter IV. A, above) have to be mentioned.

The acquisition of a substantial part (i.e., a controlling influence) of a Swiss bank requires a license from the Swiss Banking Commission. Such license is subject to the following conditions:

  • The country of residence of the foreign bank or the foreign controlling corporate or individual shareholder has to grant reciprocity;

  • The chosen name of the foreign controlled Swiss bank shall in no way indicate or suggest that the bank is Swiss controlled; and

  • The Swiss National Bank must confirm having received from the bank the necessary undertaking that it will adhere to the credit and monetary policy of Switzerland.

A Swiss bank is deemed to be foreign-controlled within the meaning of the Banking Act if foreigners own a direct or indirect interest exceeding 50% of the share capital or the voting rights of the bank or if they own a controlling interest in some other manner. The term foreigner includes individual persons who are neither Swiss nationals nor have the permit to permanently reside in Switzerland as well as corporate persons and partnerships incorporated abroad or, if incorporated in Switzerland, controlled by foreign individuals.

The other limitation which has to be mentioned stems from the fact that many Swiss corporations have issued registered shares. This possibility, permitted by the Code of Obligations, makes it possible to more or less freely restrict share ownership and to give authority and discretion to the board of directors to accept or reject applications of new shareholders for registration. Since only holders of shares that are actually registered in the stockregister are recognized, the board of directors may virtually control registered share ownership if the board of directors is given the necessary authority by the corporate articles. Over the years, this mechanism has been used to protect Swiss corporations from acquisition by foreigners. Originally, however, during and after the war, it was used to prove, particularly to the U.S. government, that a particular Swiss corporation was not "enemy held".

Switzerland also has antitrust laws, but they are by far not as stringent as those of the major European countries or of the EC. In particular, they do not contain any absolute figures or limitations, but rather refer to the aggregate effect ("on balance") of monopolies and restrictive trade practices.


The branch office of a foreign company must be registered in the canton in which it is located in the same way as the branch office of a Swiss firm. An authorized representative residing in Switzerland must be appointed.

A branch office must use the same company name as that of its head office, but must make it clear in its name that it is only a branch office.

As far as registration is concerned, there is no difference between a trading and a non-trading branch office. A branch office does not have to publish its annual financial statement. However, due to the fact that a branch office always constitutes a permanent establishment for direct tax purposes, the foreign company is required to disclose certain financial information with respect to its branch office to the Swiss tax authorities.

Under the Swiss-American income tax treaty of 1951, an American enterprise doing business in Switzerland may be subject to taxation by Switzerland on such industrial and commercial profits allocable to its permanent establishment in Switzerland. Attributed to the branch office are the profits which it might be expected to earn if it were an independent enterprise engaged in the same or similar activities under the same or similar conditions and dealing at arm's length with the American headquarters.

In the determination of the taxable income of the branch office, all expenses which are reasonably applicable to it may be deducted, including executive and general administrative expenses. In practice, the branch office will either be taxed on the basis of its own profit and loss account, if applicable, or on the basis of a deemed net profit which represents a certain percentage of its annual running expenses (e.g., 10%). There is no withholding tax on the transfer of branch profits to the foreign company's headquarters.


The Aktiengesellschaft is a legal entity with a firm name of its own and whose capital is divided into shares. The shareholders have no liability for the company's debts beyond their capital subscriptions. No governmental certificate or permit is needed for its formation or for the issue of shares. The company may perform any lawful activity, enter into contracts, transact business, and sue or be sued in its own name.

The share capital must be a minimum of SFr. 50,000 of which at least SFr. 20,000 or 20%, whichever is greater, must be paid in cash or in kind at the time of incorporation. Contributions in kind must be clearly defined in the corporate statutes.

The par value of each share must be at least SFr. 100 and may be issued in either registered or bearer form. The capital structure of an Aktiengesellschaft is not limited to one class of stock. It may have a combination of bearer and registered shares, preferred shares and shares of different par values but with equal voting rights. Bearer shares and shares with preferential voting rights must be fully paid in when issued. Shares only partly paid in must be in registered form but may be converted into bearer shares when fully paid.

At least three founders are necessary who subscribe the entire share capital and who adopt the articles of incorporation, representing in one integrated document the incorporation data and the statutes. The founders may be natural persons or legal entities acting through representatives. Neither Swiss nationality nor residence is required.

The articles of incorporation must be drawn up in the form of a notarial deed and must contain:

(i) the name and domicile of the company;
(ii) the purpose of the company (a brief listing of the main activities is sufficient. The company may perform all business activities incidental to its purpose clause. The ultra vires doctrine is of very limited significance for Swiss companies. The case-by-case enumeration of business activity or of legal acts the company may perform is, therefore, unnecessary);
(iii)the amount of the share capital and the par value of individual shares, type of shares, and (when appropriate) the number of registered and bearer shares;
(iv) the value of capital contributions in kind, if any, the consideration in shares given in exchange and the name of the contributor;
(v) any special benefits received by the founders;
(vi) the number of shares required to be deposited by each member of the board of directors as security;
(vii)the bodies which are to manage and to audit the company and the manner in which the company is to be represented;
(viii) method of giving notice of the general meeting of the shareholders and a description of the shareholders' voting rights; and
(ix) the manner in which the company publishes its official notices.

Clauses regulating the following matters are only valid if they appear in the articles of incorporation:

(i) deviations from the normal legal provisions concerning changes of the articles of incorporation, particularly with respect to expansion or restriction of the purpose of the company, increases or reductions in the capital stock and changes of the normal legal provisions concerning a merger;
(ii) clauses concerning the sharing of the board of directors in the net profits of the company;
(iii)payment of interest out of capital stock during construction periods;
(iv) limitation of the duration of the company;
(v) fixing of the amount to be paid in on shares if higher than the legal minimum;
(vi) rules concerning penalties in case the subscribed capital is not paid in within the stated time;
(vii)the possibility to convert registered shares into bearer shares and vice-versa;
(viii) the prohibition of, or restrictions on the transfer of registered shares;
(ix) clauses concerning the issue of preferred shares, profit sharing certificates and founders' shares;
(x) restrictions on voting rights and the rights of a stockholder to appoint a proxy, as well as restrictions on the issue of voting shares;
(xi) clauses whereby the general meeting of stockholders may pass certain resolutions only with a qualified majority in addition to the cases provided for by law;
(xii)the power of the board of directors to delegate its authority to individual members of the board or to third persons; and
(xiii) clauses concerning the organization, rights and duties of the auditors, if such rules exceed the requirements established by law.

Subsequent to the subscription of the shares and the adoption of the articles of incorporation, the company must be registered in the Register of Commerce of the canton of its domicile. The company comes into legal existence only upon such registration.

The company is registered under a firm name. It may be a coined name, an abbreviation, orthe family name of a shareholder. If the family name is used, it must include the words Aktiengesellschaft or societ‚ anonyme or their abbreviations AG or SA. Designations of objects without additions are not allowed. The use of national or territorial designations is also not permitted unless specifically approved. The principle of authenticity demands that everything contained in the firm name must accord with the facts. The principle of discernibility requires that the firm name of a new company be clearly discernible from those firms already in existence in Switzerland. Once the name of a company has been approved and entered in the Register of Commerce, it cannot be used by any other company.

An ordinary general meeting of the shareholders must be held annually within six months after the close of the financial year of the company. The shareholders' meeting is the supreme authority of the company. It has the following specific powers: to amend the statutes, to appoint and remove directors and auditors, to approve the balance sheet, the profit and loss statement as well as the business report to be presented by the board of directors, to discharge the directors for their conduct of the company's business, to determine the allocation of the net profit and, in particular, to declare dividends.

Extraordinary shareholders' meetings must be held at the request of the directors, auditors or shareholders representing at least 10% of the share capital.

The board of directors is elected by and is directly responsible to the shareholders. Directors are legally responsible for the proper conduct of the business of the company, in accordance with the statutes with the law. The directors must be shareholders and are required to deposit with the company the number of (qualifying) shares stipulated in the statutes (at least one) as security for the proper performance of their duties.

The board of directors may participate in the day-to-day management of the company, or it may delegate such duties to one of its members (the managing director) or to third parties (managers) and confine itself to a supervisory role. In any case, they are responsible for the annual profit and loss statement as well as the annual accounts. Managers of an "Aktiengesellschaft" are comparable to the officers of a U.S. corporation. There are no nationality requirements with respect to managers. They are appointed and removed by the board of directors which also determines the scope of their authorities.

At least one director is required, but there is no maximum limit. The board of directors must consist of a majority of Swiss citizens residing in Switzerland. In case of a one-man board, the sole director must also meet these requirements.

Legal entities or partnerships cannot become directors although their representatives are eligible.

Statutory auditors are appointed by the shareholders' meeting. Professional qualifications are not mandatory for an auditor. Although he may be a shareholder, the auditor may not be a director or an employee of the company.

Independent accountants are mandatory for companies that have a share capital of SFr. 5,000,000 or more, or have bonds or debentures outstanding, or invite the public to entrust money to them. The independent accountant is appointed by the board of directors; if the statutory auditors meet the requirement of an independent accountant, they can act in this capacity and are normally appointed. The independent accountants must render a detailed report to the board of directors, and the statutory auditors on the results of their examination; this report is not available to the shareholders.


Currency matters are normally delegated by the federal government to the Swiss National Bank. The Swiss franc is freely convertible into any other currency.


A. Direct Taxes

As a result of Switzerland's confederate structure, direct taxes are levied simultaneously by three different authorities, viz. the federal government, the cantons, and the communities. While the Swiss federal tax laws apply throughout Switzerland, cantonal tax laws governing the taxes of the cantons and communities are only valid within their respective territories. This reflects the territorial concept to which Switzerland adheres in its taxation policy, including that of international taxation (unless varied by treaty).

The federal, as well as the cantonal tax laws are administered by the cantonal tax administrations. The federal authorities exercise a supervisory function and may reject a cantonal decision so far as the federal tax is concerned.

Federal tax is uniform throughout the country. The federal income tax rates are usually lower than the cantonal rates which vary from canton to canton. Subject to tax are corporations and similar business entities organized in Switzerland, as well as entities incorporated abroad doing business through a branch or other permanent establishment in Switzerland (see Section XI). The federal income tax rate on net profits of corporations is based on the ratio between taxable income and equity, starting at 3.63% and rising to a maximum of 9.8% of the taxable income, which maximum is arrived at if the income is more than 23.15% of the equity.

The federal capital tax rate for corporations is 0.0825%. Taxable capital is considered the shareholders' equity as shown in the books (paid-in capital, legal reserves and other retained earnings) and those "silent" reserves that have been taxed as income.

Swiss resident individuals are liable to the federal direct tax on their worldwide income. Non-resident individuals deriving Swiss-source business income through a permanent establishment or fixed place of business in Switzerland are taxed on such income. The applicable tax rates vary depending on the income level. As from January 1, l991, the maximum rate of 11.5% will apply to taxable income of at least SFr. 501,700 for single taxpayers and of at least SFr. 595,200 for married taxpayers.

Each of the twenty-six cantons has its own tax law for direct taxation and more or less different rules for determining the taxable income or net wealth of individuals as well as corporate taxable income or capital. The local tax rates vary widely. The communities generally levy their tax as a percentage of the taxes imposed by the cantons in which they are located. Each community is, within certain limits of the cantonal law, free to set its tax multiplier.

B. Indirect Taxes

The main indirect taxes in Switzerland are the tax on turnover of goods (which might soon be replaced by a value-added tax), the stamp duties on securities, and the anticipatory tax (withholding tax) on corporate profit distributions and interest payments from Swiss bank accounts and bonds. All these indirect taxes are within the exclusive competence of the federal government.

Subject to the turnover tax are domestic deliveries of goods by wholesalers and imports. The tax is levied on net sales proceeds at the rate of 6.2% for deliveries to end-users and 9.3% for deliveries to retailers.

A stamp duty is levied on the issuance of corporate shares and other contributions to corporate capital at the rate of 3% of the net amount received by the corporation. Stamp duties are also levied on the turnover of Swiss and foreign securities at the rate of 0.15% and 0.3%, respectively, if a Swiss securities broker is involved as a party or intermediary to the transaction.

The anticipatory tax must be withheld at source by the debtor of the taxable dividend or interest payment and be submitted to the federal tax administration. The tax rate is 35%. Recipients who are residents of Switzerland are entitled to a full refund of the anticipatory tax provided they duly report the full dividend or interest as income. Non-resident (individual or corporate) recipients may only claim a tax refund to the extent provided for by an applicable Swiss international double taxation treaty.


In comparison with other European countries, Switzerland regulates relatively few areas of the contractual relationship between employers and employees. The result is a system of labor law which is readily comprehensible and generally more favorable to the employer than the labor law in many other jurisdictions.

Generally, no specific form is required for a contract of employment. The contract of employment has to be in writing only where it relates to certain particular categories of employees, e.g., apprentices, travelling salesmen and workers employed at home, or where other particular circumstances exist, e.g., the contract provides for overtime other than as determined by law. Non-competition agreements need also to be in writing.

With certain exceptions, the maximum working hours for industrial, technical and office workers and other white-collar employees (including shop personnel) are 45 hours a week. For other workers, the maximum hours are 50 hours a week. The maximum weekly working hours may be exceeded under certain exceptional circumstances in accordance with prescribed limitations on hours and pay for overtime. Certain rules apply only to women. Exceptions are permitted only under very specific circumstances.

Generally, regular day time work must not begin before 5:00 a.m. in the summer or 6:00 a.m. in the winter and must not continue beyond 8:00 p.m. Minimum breaks or rest times are also provided for by the law. Other than in exceptional circumstances, work at night and on Sundays is not permitted.

Persons not subject to the foregoing restrictions include, among others, managerial employees and employees active in scientific or independent artistic pursuits.

Employers must give employees one day off every week, usually Sunday. Other arrangements for days off may be made with the employee's consent. Further, employers must give employees at least four weeks annual vacation. For employees under the age of twenty, the minimum is five weeks annual vacation. A minimum of two weeks annual vacation must be taken by the employee at one time. While the employment relation lasts, mandatory vacation time must not be replaced by monetary compensation.

There are no paternity rights granted by Swiss law in relation to employment. Swiss law does, however, recognize differences between the types of labor which men and women are able to perform, and recognizes the special cases of pregnant women, those in childbirth and nursing mothers. For example, a pregnant woman or nursing mother may not be required to do work which is a hardship for her. Except with her consent, a pregnant woman may not work beyond normal working hours. She may take time off or discontinue work upon giving notice of her wish to do so and without regard to the regular minimum periods of notice. In addition, an employer is prohibited from giving notice of termination to a pregnant employee up to sixteen weeks after the birth of her child. Any such notice given within this period is void. A woman is not permitted to work during the eight week period after the birth of her child. If she wishes, however, this period may be reduced to six weeks provided her doctor confirms that she is able to return to work. A nursing mother may only begin work, with her consent, eight weeks after the birth of her child. An employer must give a nursing mother the necessary free time to nurse her child while at work. In order to ensure proper rest before and after childbirth, Swiss law also requires that the time allocated for a female employee's vacation must not be shortened if she was not present at work for a total of up to two months due to pregnancy and childbirth. A woman unable to work because of pregnancy and childbirth is entitled to compensation for a limited period if she has been employed for more than three months. The limited period is generally three weeks at full pay during the first year of service. After that it increases proportionately in accordance with the length of employment and other special circumstances. More compensation may be agreed upon between the parties, or may be determined by a standard provision contract or a collective bargaining agreement.

An employee and employer may enter into a non-competition agreement which requires the employee to refrain from engaging in any competitive activity after termination of the employment relationship, in particular neither to operate a business for his own account which competes with the employer's business, nor to work for or participate in such a business. However, the prohibition against competition is only binding if the employment relationship gives the employee access to customer information or to manufacturing or business secrets and if the use of such knowledge could significantly damage the employer. The prohibition must be reasonably limited in terms of place, time, and subject in order to preclude an unreasonable impairment of the employee's economic prospects. It may exceed three years only under special circumstances.

If an employment contract has no specific term, either the employee or the employer may give notice of termination. Legal notice periods are of one to three months depending on the length of the employment relationship.

At any time during a probationary period, either the employee or the employer may give notice of termination with a notice period of seven days.

The employer may not give notice of termination in any of the following four situations:

  • during compulsory military or civil defense service, women's military service or Red Cross service, and if such service continues for more than twelve days, during the four weeks before the beginning and the four weeks after the end of such service;

  • in case of full or part-time absence from work due to illness or accident, as long as the employee is not at fault for such illness or accident, in the first year of employment during thirty, from the second to the fifth year of employment during ninety and from the sixth year of employment during 180 days of such absence;

  • during pregnancy and sixteen weeks after employee has given birth; or

  • during a foreign relief service in which an employee serves with the consent of the employer and which has been ordered by the competent federal authorities

An employer or employee may terminate the contract of employment without notice when he has "cause." A party is considered to have cause when the circumstances are such that the party can no longer be expected to continue the employment relationship with loyalty and trust. Whether or not cause exists is a decision made largely at the judge's discretion.

An employee with twenty or more years of service and at least 50 years of age is entitled to receive from the employer special compensation on his termination. The amount of the special compensation may be determined by written agreement, by the terms of a standard provision contract, or by a collective bargaining agreement; but the amount may not be less than the compensation which the employee would receive for two months work. If the amount of the special compensation is not determined, a judge must determine the amount, taking into consideration all the circumstances; but the amount may not be more than the compensation which the employee would receive for eight months work. The special compensation need not be paid to the extent that the employee receives a payment from a social insurance institution, which is the result of the employer's prior contribution to that institution. Similarly, the employer is not required to pay any special compensation if he guarantees the employee's required future social insurance payments or if he arranges to have a third party provide such a guarantee.


Once an insolvent company has been declared bankrupt by the court, the bankruptcy office draws up an inventory and publishes the bankruptcy. It orders all creditors and debtors to file their claims and debts. The estate is administrated by the bankruptcy office, which may be replaced by one or more persons elected by the creditors. The creditors may also elect a committee of creditors to supervise the administrators and to authorize them to take certain important measures. For such elections and other urgent matters, meetings of creditors are held. The administrators must establish a schedule of creditors. Thereafter, a second creditors meeting passes on all matters, including realization of assets by public auction or private sale. After distribution of the proceeds, the bankruptcy court receives a final accounting and declares the bankruptcy closed. Every creditor receives a "certificate of loss" for the unpaid balance of his claim.

The bankruptcy court may order summary proceedings if the assets found do not warrant the expenses of ordinary proceedings. The bankruptcy office then proceeds to the liquidation without the participation of the creditors. Any creditor can demand ordinary proceedings by advancing the costs.

If no assets are found, the bankruptcy court also orders the bankruptcy closed, but no "certificate of loss" is issued. During a two year period thereafter, any creditor can institute execution of seizure against the debtor.

Composition is also known in Swiss law. Basically, there are three types of it: stay of payment during a certain time period; payment of a percentage on all non-privileged debts; and abandonment of all or part of the debtor's assets to creditors. Composition is possible for any debtor, even after execution proceedings have started. Except in cases of a bankruptcy already declared, the debtor must apply for a stay of payment with the "composition authority", submitting a statement of assets and liabilities and a draft composition plan. If the authority grants the composition, a commissioner is appointed. The debtor can, under supervision of the commissioner, dispose of his property but not sell or encumber it. If the composition liquidation is confirmed, a creditors' meeting elects the liquidators and a committee of creditors to supervise the liquidators. The realization of the assets and the distribution of the proceeds to the creditors is similar to bankruptcy proceedings.

Special regulations apply to banks, hotels, farms and some other businesses.

Under chapter 11 of the Private International Law Statute, a foreign bankruptcy decree issued in the country of the debtor's domicile will be recognized in Switzerland upon application by the foreign trustee in bankruptcy or by one of the creditors, if (a) the decree is enforceable in the country where it was rendered, (b) the recognition is not against Swiss public policy and, (c) the country issuing the decree grants reciprocity.

An application for recognition of a foreign bankruptcy decree must be filed with the court where the assets are located in Switzerland. If assets are located in several places, jurisdiction lays with the court where the application was first filed.

As soon as a motion to recognize a foreign bankruptcy decree has been made, the court may, upon petition, order conservatory measures. Actions in attachment that are pending or have become pending during the recognition proceedings are suspended until the proceedings are concluded.

The judgment on the recognition of the foreign bankruptcy decree is published in Switzerland. The recognition is officially communicated to the office of execution, the office of bankruptcy, the office for land registration, the office for commercial registration at the location of the assets and, depending on the case, to the office of industrial property. The same applies for closing, suspension and cancellation of the proceedings.

Unless otherwise provided, with respect to the assets in Switzerland, the recognition of a foreign bankruptcy decree has the effects of bankruptcy set forth under Swiss Law.


A. International Conventions

Switzerland is not a member of the United Nations, but it belongs to important UN sub-organizations such as UNCTAD and hosts the United Nations in Geneva. As Switzerland is highly dependent on free international trade, bilateral agreements or multinational conventions have been concluded with nearly all countries involved in international trade.

Switzerland has a crucial interest in protecting free international trade. To promote this international trade policy, Switzerland has been, since 1966, a member of the General Agreement on Tariff and Trade (GATT) and, since 1963, a member of the OECD. Switzerland is a member of the European Free Trade Association (EFTA) and, in 1972, concluded a Free Trade Agreement with the European Economic Community (EEC), which provides for the free exchange of goods between the members of the EFTA and the EEC.

The UN Convention on Contracts for the International Sale of Goods of 1980 is expected to come into force in Switzerland in 1991.

With its more important trading partners, Switzerland has concluded "double taxation treaties." Between the United States and Switzerland, two double taxation treaties have been concluded: one to avoid double taxation on income and the other to avoid double taxation on inheritance. Both were concluded in 1951.

The Swiss Federal Council has recently submitted a bill to Parliament for ratification of the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, signed in Lugano, Switzerland, on September 16, 1988. The Lugano Convention, which would heavily influence Swiss procedural law, is presently expected to be ratified by Switzerland early in 1991.

B. Bilateral Treaties with the U.S.

Numerous treaties between the United States and Switzerland are particularly noteworthy in the context of this guide:

1. Convention of friendship, commerce and extradition of November 25, 1850.

The convention stipulates the principle that the citizens of the two Contracting States shall be admitted and treated upon a footing of reciprocal equality in the two countries, where such admissions and treatment shall not conflict with the constitutional and legal provisions of the Contracting Parties.

2. Treaty on mutual assistance in criminal matters of May 25, 1973.

The treaty provides for assistance in criminal investigations with respect to certain offenses, the punishment of which falls within the jurisdiction of the judicial authorities of the requesting Country. The assistance to be granted includes ascertaining the whereabouts of persons, taking the testimony or statements of persons, effecting the production of documents, the service of judicial documents and the authentication of documents. The treaty does not apply to investigations concerning political and military offenses. Also excluded are the enforcement of cartel or antitrust law, as well as the prosecution of tax violations. Political, antitrust and fiscal offenses fall under the treaty if the investigation is directed against a person connected with organized crime.

3. Treaty on social security of July 18, 1979, with supplementary agreement of June1, 1988.

The treaty applies to Swiss and U.S. federal old-age, survivors and disability insurance for citizens of the two countries, refugees and stateless persons residing in either country, and other persons with respect to rights derived from persons in the above groups. The treaty provides for equality of treatment of the citizens of the two countries under the social security law of both countries.

4. Treaty for the avoidance of double taxation with respect to taxes on income of May 24, 1951.

This treaty covers, in the case of the United States, the federal income taxes, including surtaxes and excess profits taxes, and, in the case of Switzerland, the federal, cantonal and community taxes on income and any other income or profits tax of a substantially similar character imposed by one of the countries.

5. Treaty for the avoidance of double taxation with respect to taxes on estates and inheritances of July 9, 1951.

The treaty refers to taxes asserted upon death; in the case of the United States, to the federal estate tax, and in the case of Switzerland, to the estate and inheritance taxes imposed by the cantons and any political subdivision thereof.

There is no convention between the United States and Switzerland on service abroad, or on the taking of depositions in civil and commercial matters.


A. Arbitration Practice

Arbitration is widely used in Switzerland, especially in international commercial litigation. Residence of one of the parties or a special link with Swiss law is not required. Parties often insist on the seat of the arbitration court being on neutral ground. The procedure of international arbitration in Switzerland is not necessarily conducted in one of Switzerland's official languages. Quite often arbitration cases are conducted in English. The parties can agree upon the procedural rules applicable in the arbitration case. The Zurich, Geneva, and Basel chambers of commerce and even the Swiss-American Chamber of Commerce have adopted arbitration rules which the parties may agree to apply. For arbitration in Switzerland, the parties may, of course, also agree on the rules of the International Chamber of Commerce (ICC) in Paris or other (e.g., UNCITRAL) rules.

The Zurich Chamber of Commerce recommends the following arbitration clauses:

1. Clause providing for appointment of all three arbitrators by the Zurich Chamber of Commerce:

All disputes arising out of or in connection with the present agreement, including disputes on its conclusion, binding effect, amendment and termination, shall be resolved, to the exclusion of the ordinary courts by an Arbitral Tribunal (or a three-person arbitral tribunal/a sole arbitrator) in accordance with the International Arbitration Rules of the Zurich Chamber of Commerce. (Optional: The decision of the Arbitral Tribunal shall be final, and the parties waive all challenge of the award in accordance with Art. 192, Private International Law Statute.)

2. Clause providing for the appointment of one arbitrator each by the parties:

All disputes arising out of or in connection with the present agreement, including disputes on its conclusion, binding effect, amendment and termination, shall be resolved, to the exclusion of the ordinary courts by a three-person Arbitral Tribunal in accordance with the International Arbitration Rules of the Zurich Chamber of Commerce. If there are not more than two parties involved in the procedure, each party nominates an arbitrator. (Optional: The decision of the Arbitral Tribunal shall be final, and the parties waive all challenge of the award in accordance with Art. 192, Private International Law Statute.)

The recognition and enforcement of foreign arbitration awards in Switzerland is governed by the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958. Likewise, an award rendered by an arbitral tribunal with seat in Switzerland is enforceable in almost any country.

The provisions of Switzerland's Private International Law Statute of December 18, 1987, apply to all international arbitrations, i.e., to arbitrations where the seat of the arbitral tribunal is in Switzerland and where, at the time of the conclusion of the arbitration agreement, at least one of the parties had neither its domicile nor its habitual residence in Switzerland. The following is a brief synopsis of the international arbitration rules.

The arbitration agreement must be made in writing, by telegram, telex, telecopier or any other means of communication which permits it to be evidenced by a text. Furthermore, an arbitration agreement is valid if it conforms either to the law chosen by the parties, or to the law governing the subject matter of the dispute, in particular the main contract, or to Swiss law.

The arbitrators shall be appointed, removed or replaced in accordance with the agreement of the parties. In the absence of such agreement, the judge where the tribunal has its seat may be seized with the question; he then shall apply, by analogy, the provisions of cantonal law on appointment, removal or replacement of arbitrators. The parties may, directly or by reference to rules of arbitration, determine the arbitral procedure; they may also submit the arbitral procedure to a procedural law of their choice. If the parties have not determined the procedure, the arbitral tribunal shall determine it to the extent necessary, either directly or by reference to a statute or to rules of arbitration.

Regardless of the procedure chosen, the arbitral tribunal shall have to guarantee equal treatment of the parties and the right of both parties to be heard in adversarial proceedings.

A plea of lack of jurisdiction must be raised prior to any defense on the merits. The arbitral tribunal may then decide on its own jurisdiction by preliminary award.

The arbitral tribunal shall decide the case according to the rules of law agreed upon by the parties or, in the absence of a choice of law, by applying the rules of law with which the dispute has the closest connection. The parties may also authorize the arbitral tribunal to decide the case ex aequo et bono.

The award is final from its notification and may only be challenged:

  • when the sole arbitrator was not properly appointed or when the arbitral tribunal was not properly constituted;

  • when the arbitral tribunal wrongly accepted or declined jurisdiction;

  • when the arbitral tribunal's decision went beyond the questions submitted to it, or failed to decide one of the items in the claim;

  • when the principle of equality of the parties or the right of the parties to be heard was breached; and

  • when the award is contrary to public policy.

If none of the parties have their domicile, their habitual residence, or a business establishment in Switzerland, they may, by an express statement in the arbitration agreement or by a subsequent written agreement, waive fully the action for annulment, or they may limit it to one or several of the grounds listed in Art. 190, subsection 2. If the parties have waived fully the action for annulment and if the award is to be enforced in Switzerland, the New York Convention of June 10, 1958 on the Recognition and Enforcement of Foreign Arbitral Awards applies by analogy.