1. The organisers of the Conference thank the following for their support
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Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili

2. The Project for Reform of Swiss Restructuring Law
Rodrigo Rodriguez, University of Bern

3. The Swissair Insolvency as the trigger of restructuring reform
Insolvency of the Swissair Group in 2001/2002
The Reform project presented here was triggered by the insolvency of the Swissair Group in 2001/2002. In the aftermath of that traumatic bankruptcy the question was arose whether a more sophisticated and more restructuring-friendly insolvency law – similar to chapter 11 of the US Bankruptcy Code - could have avoided the bankruptcy of the Swissair Group, particularly in view of similar cases in the US that did not lead to the airlines in distress to be liquidated.

4. The Swissair Insolvency as the trigger of restructuring reform
Results of the report and suggestions for a reform (2008)
No need for a fundamental reform of the law of 1889 regarding group insolvencies
Certain modifications to improve the current restructuring procedures in insolvency are advisable
The Swiss government decided to convene a panel of experts to come up with a report on the current legal restructuring provisions and to make suggestions for a possible reform in view of encouraging restructuring. The report was delivered in Its main conclusions were the following:
The law of 1889 does not need a fundamental or major reform in order to address group in-solvencies. In particular, the atomistic approach (dealing with each individual entity of the group irrespective of the existence of a group) of the law has not hindered an efficient administration of the Swissair insolvency;
[SO; NO TO A GROUP INSOLVENCY REGIME: CONTINUE THE ATOMISTIC APPROACH]
however
2. certain modifications to improve the current restructuring procedures in insolvency are advisable. These selected modifications are briefly exposed hereinafter.

5. Basic elements of the proposed restructuring reform
Facilitating the opening of restructuring proceedings:
Keep the opening of restructuring proceedings “secret”?
Publication exceptionally excluded, when the restructuring procedures have a clearly temporary and limited purpose
A lower threshold to authorize a restructuring plan
Requirement of provision of security for unsecured claims abolished
Possibility to authorize a financing agreement by the administrator or the court
thereby excluding its later avoidability, can be sole purpose of the proceeding
Based on this report, the Federal Government has made a legislative proposal to reform the current provisions on restructuring in insolvency law (“Nachlassverfahren”, “procedure concordataire”). The modifications contained in the reform project are of a considerable importance. They involve (i.a.):
the possibility to keep the opening of restructuring proceedings “secret” (non-published), namely the request for a stay and the naming of a provisional administrator). However, this “secrecy” shall apply only exceptionally and mainly when the restructuring procedures have a clearly temporary and limited purpose ;
[Not “secret” but simply not published: my interpretation. How else?]
a lower threshold to authorize a restructuring plan, especially because the requirement to secure unprivileged claims is eliminated. The inclusion of an „automatic“ stay (as under chapter 11), however, was ultimately refused. The stay still has to be expressly authorized.
the possibility for the administrator to rescind long term contracts against full compensation (such compensation becoming an ordinary claim in the insolvency, employment contracts being excluded) in restructuring procedures;
The purpose of this elements of teh revision is to encourage restructuring procedures and to allow such proceedings to have a merely temporary function, without necessarily having to lead to liquidation or a restructuring plan, for example, for the mere purpose of obtaining court approval of a financing agreement or to obtain a stay.
- the elimination of the obligation of the transferee of a business to take over employment contracts

6. Basic elements of the proposed restructuring reform
Facilitating a successful restructuring:
Possibility for the administrator to rescind long term contracts against full compensation
The compensation becoming an ordinary claim
Elimination of the obligation of the transferee of a business to take over employment contracts
- the possibility for the administrator to rescind long term contracts against full compensation (such compensation becoming an ordinary claim in the insolvency, employment contracts being excluded) in restructuring procedures;
[Controversed an essential element of the Reform: gives administrator
the elimination of the obligation of the transferee of a business to take over employment contracts
Give raise to many discussions in parliament.
Here: Purpose is to provide the administrator with additional restructuring tools. Something he is desperatly lacking under current law, wich has very little more to offer than what could also be achieved outside insolvency proceedings (on a contractual basis).
As a consequence, «restructuring» («Sanierung») ist currently often not even considered in terms of insolvency law, but with the means of company or contract law. The additional possibilities offered by insolvency law are often not even considered. Their advantages seen not to be not sufficient to outweight the disadvantages (damage to the reputation related to the filing).
When this means fail, it is usually too late for any serious restructuring unde the insolvency.
The reform wants to change this with a double approach:
Make the opening easier (more discrete)
Provide truly additional powers and bargaining power to the debtor
There must be a psycological change in perception: insolvency shall be perceived as a hosptial: up to now, it is perceived as the morgue.

7. Particular provisions on group insolvencies
Possibility for different competent courts to agree upon a common forum for the insolvency of companies of a same group
Two new assumptions in the context of avoidance provisions that apply to related companies:
Knowledge of one member of the group about the financial situation of the other member of a group
Knowledge of a disproportion between the performances of a contract between related companies of a group is presumed by law
Other practice developments to coordinate the procedures
Despite the main conclusion from the group of experts that no particular legislation regarding group insolvencies was necessary, the legislative proposal includes two provisions specifically aimed at taking into account the group context of an insolvency of several closely related companies, namely:
1. A new provision creating the possibility for the different competent courts to agree up on a common forum for the insolvency of companies of a same group that would (under general rules of jurisdiction) have to be opened in different courts. The feasibility and practical relevance of this solution based on the voluntary agreement of the courts has yet to be proven.
2. Two new assumptions in the context of avoidance provisions that apply to related companies. Accordingly, (1) knowledge of one member of the group of the financial situation of the other member of a group, and, (2) knowledge of a disproportion between the performances of a contract between related companies of a group is presumed by law. The related company has the burden of proof to the contrary (that it did not know about the financial distress of the related company or about a disproportion of the performances in a contract).
The possibility of including cases of substantial consolidation (pooling of all assets of the companies of the group) was examined by the group of experts but finally rejected due to concerns against modifying or annulling an existing situation upheld under corporate law. These concerns ultimately outweighed the possible advantages.
In this context, it must be noted that practice has developed further possibilities to coordinate the procedures in a group context which are not explicitly mentioned by the law. The most important is that of naming one common administrator for different companies of the same group, as it was made in the Swissair group insolvency. It must also be noted that communications between courts or between courts and administrators are already permitted on an informal basis. Swiss courts and insolvency administrators have entered into at least two cross-border protocols, one of them in the context of the Swissair case. There may (still) be no explicit legal basis for such agreements but also none prohibiting them. In the end, the most important developments in respect of group insolvencies have been happening “outside” the legislative process by an innovative interpretation of the law.

8. A word on the international context…
International insolvency law remains unaffected
Still the same uncomfortable legal situation for foreign insolvency administrators:
Non-applicability of the European Insolvency Regulation (EuInsReg)
No bilateral agreements (worthy of note)
No adoption of the UNCITRAL Model Law
The current revision of Swiss insolvency law focuses on the internal restructuring procedures. Inter-national insolvency law remains completely unaffected by the revision. Foreign insolvency administrators having assets to recover in Switzerland will thus still have to face the current and uncomfortable legal situation, as:
• Switzerland cannot participate in the European Insolvency Regulation (EuInsReg) and is not part of any bilateral agreement worthy of note;
• Switzerland has not (yet) adopted the UNCITRAL Model Law and has a very cumbersome procedure for recognition ; and therefore

9. A word on the international context…
Consequences for foreign administrators:
For any recovery of assets in Switzerland:
recognition procedures,
a mandatory secondary proceeding
If omitted: exposition to criminal charges
Improbability of new regulations or bilateral agreements in the near future
• foreign administrators need to undergo recognition procedures and a mandatory secondary proceeding for any action to be taken in Switzerland if they do not want to be exposed to criminal charges .
Switzerland is usually on the receiving end of requests for recognition. It is a place where assets are placed that foreign administrators would like to claim. So, there will hardly be any political pressure from the local service industry (especially banks) to improve the current system. There has also been no interest – so far – from the European Commission to negotiate such an agreement with Switzerland or any other third state. One could imagine, for instance, a parallel convention to the EuInsReg in order to include the EFTA States (Switzerland, Norway and Iceland) and Denmark as it exists with the Lugano Convention of 30 October 2007 (and before, the same of 16 September 1988). Meanwhile, bilateral agreements between Switzerland and the EU Member States are de facto blocked by the exclusive competence of the European Commission in that matter.

10. Swiss restructuring law following the «mainstream»
Closing Words
Swiss restructuring law following the «mainstream»
When to enter into force (if at all)?
What about the cross-border context?
That is: encourage restructuring. Encourage EARLY initiation of resctrucutring proceedings. Allowing «limited» intervention of insovency law, limited and puntual application of the tools provided by insolvency law to solve limited and temporary financial distress.
Earliest 2012.
. Inter-national insolvency law remains completely unaffected by the revision. Foreign insolvency administrators having assets to recover in Switzerland will thus still have to face the current and uncomfortable legal situation, as:
• Switzerland cannot participate in the European Insolvency Regulation (EuInsReg) and is not part of any bilateral agreement worthy of note;
• Switzerland has not (yet) adopted the UNCITRAL Model Law and has a very cumbersome procedure for recognition ; and therefore
• foreign administrators need to undergo recognition procedures and a mandatory secondary proceeding for any action to be taken in Switzerland if they do not want to be exposed to criminal charges .
Switzerland is usually on the receiving end of requests for recognition. It is a place where assets are placed that foreign administrators would like to claim. So, there will hardly be any political pressure from the local service industry (especially banks) to improve the current system. There has also been no interest – so far – from the European Commission to negotiate such an agreement with Switzerland or any other third state. One could imagine, for instance, a parallel convention to the EuInsReg in order to include the EFTA States (Switzerland, Norway and Iceland) and Denmark as it exists with the Lugano Convention of 30 October 2007 (and before, the same of 16 September 1988). Meanwhile, bilateral agreements between Switzerland and the EU Member States are de facto blocked by the exclusive competence of the European Commission in that matter.

11. The organisers of the Conference thank the following for their support
Conference Sponsor
Conference Supporter
Academic Forum Sponsor
Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili

12. The organisers of the Conference thank the following for their support
Conference Sponsor
Conference Supporter
Academic Forum Sponsor
Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili

13. Coffee
Break

14. The organisers of the Conference thank the following for their support
Conference Sponsor
Conference Supporter
Academic Forum Sponsor
Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili