Swiss Civil Procedure Law in a Nutshell (Volume 12 of 12)
This blog series provides litigators and corporate counsel from other jurisdictions with a practical understanding of the mechanics, advantages, and limits of litigation before State Courts in Switzerland.
"The Loser Pays it All"
As a rule, the losing party bears the successful party's legal fees as well as the court fees (art. 106 CPC).
While there are only limited restrictions to the fee arrangements between a party and its own lawyer, the successful party's compensation for legal fees is governed by a tariff. As a result, the actual costs incurred by the successful party regularly exceed the compensation awarded.
Advance Payments and Security
Courts almost invariably request an advance payment for the expected court fees from the Claimant.
The Claimant can ask the Court to order the respondent to reimburse it for the court fees it has advanced. However, the Claimant cannot reclaim the advance from the court. Therefore, it is the Claimant, and not the Court, who bears the risk that the Respondent is unable to pay.
A Claimant who is domiciled in a State with whom no bilateral or multilateral treaty on civil procedure law is in place can, upon application by the Respondent, be ordered to provide a security for the Respondent's legal fees. The same applies to Claimants whose financial situation casts doubts on their ability to pay the compensation for the Respondent's legal fees in case the Respondent prevails.
Under specific circumstances, the costs are distributed according to equitable standards (art. 107 CPC).
Parties who do not have the means to finance court proceedings are entitled to legal aid, provided that their claim is not unpromising (art. 117 CPC).
In matters pertaining to parental custody, parties who are unable to finance litigation may be entitled to take recourse to cost-free mediation (art. 218(2) CPC).
Narrow Boundaries for Contingency Fees
Pure contingency fees are not permitted in Switzerland. The fee arrangement between a party and its lawyer may, however, contain some elements of a contingency fee (pactum de palmario).
Third-party litigation funding is possible, but not (yet) very popular. One of the reasons is that an application for third-party funding requires extensive preparatory work for which, typically, the respective party's lawyer would have to bear the economic risk. Another is the fact that there exist narrow boundaries for contingency fees.