SWITZERLAND: An introduction to Litigation

In-House Counsel Privilege – The New Article 167a of the Revised Swiss Civil Procedure Code

Revision of the Swiss Civil Procedure Code

In Switzerland, the attorney-client privilege has traditionally been limited to communications exchanged between clients and their outside counsel. From 1 January 2025, this is set to change. The revised Article 167a of the Swiss Civil Procedure Code ("revCPC") will introduce an in-house counsel privilege into Swiss procedural law.

The driving force behind this development was the considerable pressure in US-related discovery proceedings, which left Swiss companies with very extensive and costly disclosure obligations. The US authorities argued that Swiss law, unlike that of the USA, does not provide any kind of in-house counsel privileges. This was indeed the case, as the professional secrecy protected by criminal law applies to attorneys only, and procedural exemptions to co-operate are derived from these provisions. As a consequence, Swiss companies can be subject to extensive document production duties before US authorities, whilst their US counterparties are permitted to invoke client-attorney privilege. Therefore, Article 167a of revCPC can mainly be seen as an attempt to level the playing field between Swiss and US companies in legal proceedings in the USA.

In the following, we take a closer look at the new provision and discuss some of its potential impacts in more detail.

Application requirements of Article 167a of revCPC

The new Article 167a of revCPC will come into force on 1 January 2025 and will apply to all new civil proceedings, as well as to proceedings pending as of this date. For the provision to apply, the following three conditions must be met cumulatively.

• First, the legal entity invoking the in-house counsel privilege must be registered in the Swiss commercial register or in an equivalent foreign register.
• Second, the head of its legal department is required to either hold a cantonal bar licence or a respective licence from their country of origin. According to the Federal Council, this is to ensure that the compliance section of the company in question entertains a minimum level of professional skills, thus justifying the legal privilege of noncooperation with the requesting court.
• Third, the operation for which the privilege of Article 167a revCPC is sought must be considered "profession-specific" among attorneys.

It is important to note that the new provision is limited to civil proceedings and does not apply to criminal and administrative proceedings.

Limited applicability due to the profession-specific criterion?

With particular regard to the last of the above-mentioned prongs, the question arises as to what kind of services provided by a legal in-house department could be classified as profession-specific. The field of activity of an in-house counsel differs from that of an external counsel as – in addition to dealing with legal issues on behalf of the company – they are often responsible for controlling and compliance matters as well.

The case law of the Swiss Federal Tribunal is relatively strict in this respect. Only if lawyer-specific elements predominate the commercial-operational aspects will the task be considered profession-specific. Such lawyer-specific elements primarily include the representation of parties before courts and the provision of legal advice. By contrast, work that is to be qualified primarily as business-oriented (ie, asset management) or constitutes the taking-over of statutory KYC obligations, such as establishing facts, would not benefit from the exemption. Accordingly, the contours of the in-house counsel's work that fall within the scope of the privilege remain somewhat blurry even under the new law (eg, in relation to internal investigations or commercial negotiations).

A chance to build faith in internal compliance

In relation to internal compliance work, it should be kept in mind that this new provision carries a lot of potential to strengthen the faith in internal compliance departments. Effective compliance work often relies on the employees and their willingness to share personal experiences of irregularities at work, as well as to report potential suspicions. Therefore, a functioning compliance department depends on the trust that every single employee of the respective company has in them. This trust will likely increase when safeguards are implemented such that the shared information is treated confidentially and is not subject to disclosure in potential civil proceedings. Hence, by covering compliance services with the protection of the in-house counsel privilege, the chances are high that companies can improve their ability to enforce legal requirements and objectives.

No "blocking statute"

During the legislative process, some feared that other jurisdictions might regard the new provision as a so-called blocking statute. This refers to legislation specifically enacted to undermine the application of foreign law and, in the past, US courts have sometimes refused to recognise such provisions. However, there is no reason to see the Swiss in-house counsel privilege as a blocking statute, as the newly created privilege also applies to domestic civil proceedings. Put differently, the new provision does not seek a circumvention of foreign law, but rather aims to safeguard confidential communication of in-house counsel and their employers, as accepted to a large degree in other jurisdictions, whilst it facilitates the equal treatment of both parties as a secondary effect.

Outlook

The benefits of the in-house counsel privilege for Swiss companies facing discovery proceedings abroad, most notably in the USA, are evident. The implementation of the new provision strengthens the legal position of companies and offers them additional legal protection in civil proceedings. In particular, Swiss in-house counsel will finally have a secure environment where their legal advice remains confidential to their immediate recipients. Especially for companies with international exposure, this change is likely to enhance the ability of in-house counsel to promote compliance more effectively and proactively, given that the threat of having to disclose internal legal advice is now significantly reduced. Consequently, this will likely foster more open discussions between management and the compliance department. Operational teams will be more encouraged to consult with the legal desk early on when dealing with complex issues involving significant risks, such as competition, tax and compliance matters.