22 December 2016

Caution when asserting foreign currency receivables.

Foreign currency receivables – What is at issue?
If a receivable is denominated not in Swiss francs, but in a foreign currency, caution should be exercised when asserting it. While, under the Swiss Code of Obligations, a debtor basically has the option of discharging his debt in either the foreign currency or Swiss francs, the situation is more difficult for the creditor: In civil proceedings, he must claim, according to the case law of the Swiss Federal Supreme Court, foreign currency receivables in the foreign currency. If the foreign currency receivable is nevertheless converted into Swiss francs and then claimed, the claim will be dismissed.
However, in the case of debt enforcement proceedings, the reverse is true: The creditor must convert the foreign currency receivables into Swiss francs before claiming.

Discharge of a foreign currency debt according to the Swiss Code of Obligations
Under the Swiss Code of Obligations, the debtor is generally obliged to pay monetary debts in the currency owed. A foreign currency debt must therefore be settled in that currency.
However, the debtor of a foreign currency debt that can be fulfilled in Switzerland is also entitled to discharge it in Swiss francs, unless the parties have excluded this by including in the contract the expression "actual currency" ("Effektiv-Klausel").

Foreign currency receivables in civil proceedings
If the creditor wishes to assert his claim against the debtor, his position is much less flexible: While he has to accept a payment in Swiss francs from the debtor (subject to an "actual currency" clause), he himself can only demand payment in the agreed foreign currency. Consequently, he has to assert the claim in court in the agreed foreign currency.
According to the case law of the Swiss Federal Supreme Court, the court may only award the creditor a payment in the foreign currency owed. If he has mistakenly claimed the owed payment in Swiss francs, the court is bound by this request, and may not award it to him in the foreign currency, even if it is owed. Accordingly, the court has to dismiss the action.

Foreign currency receivables in debt enforcement proceedings
It is exactly the opposite in debt enforcement proceedings: If the creditor wishes to enforce a foreign currency receivable in the course of debt enforcement proceedings in Switzerland, he must convert his claim into Swiss francs (subject to a so-called "actual currency" clause which leads to enforcement of specific performance in accordance with the Swiss Civil Procedure Code, "Realvollstreckung"). The conversion is a rule of public order and a requirement of practicality with a purely enforcement law purpose.

Consequences and practical advice
A creditor is well advised to check in advance if he is asserting a foreign currency receivable in the correct currency. If a foreign currency debt is wrongly claimed in Swiss francs, such will result in a dismissal of the action with costs. According to the case law of the Swiss Federal Supreme Court, however, the creditor is free to refile his claim and to demand the correct currency in his request. A definitive loss of rights can thus be avoided, even if a second process involves time expenditure and costs.

However, should a court (in our opinion, mistakenly) find that the dismissal of the action would have res judicata effects, the creditor would be barred from filing a new claim for performance in the correct currency. Therefore, it is im-portant that the creditor, prior to initiating civil or debt enforcement proceedings, makes sure that he asserts his claim in the correct currency from the outset.

Our Insolvency and Litigation teams will be happy to answer any further questions you may have.

Authors: Thomas Weibel, Claudia Walz, Sebastian Schenk

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