Commentaries

The Swiss Federal Supreme Court recently handed down a new ruling on the subject of fraudulent bank orders, in which it annulled a cantonal decision on the grounds that it did not address all the issues raised by the plaintiff (ruling 4A_135/2023 of October 16, 2024). Although this ruling mainly concerns questions of civil procedure, it nevertheless serves as a useful reminder of the scope of the examination that the court must undertake in the presence of fraudulent orders. In[...]

The European Regulation on Artificial Intelligence (AI Act) adopts an approach based on the risks that an artificial intelligence system (AIS, cf. Caballero Cuevas, cdbf.ch/1382) may pose to the health, safety and fundamental rights of individuals. AIS are divided into four categories, respectively AIS presenting an unacceptable risk, AIS presenting a high risk, AIS presenting a limited risk and AIS presenting a minimal risk. This commentary focuses on the first three categories of AIS. A. AIS presenting an unacceptable risk[...]

In our last commentary on a Federal Court ruling on sealing (7B_313/2024, intended for publication), we stated that ‘banking secrecy no longer constitutes a ground for sealing where it is invoked by a third party, i.e. a person not involved in the criminal proceedings’ (Villard, cdbf.ch/1383). Following the publication of judgment 7B_976/2024, which is commented on here, the second part of the statement should be deleted: banking secrecy no longer constitutes a ground for sealing. Ruling 7B_976/2024 was not concerned[...]

A lawyer specializing in banking law, who agrees with his client that he will receive banking correspondence on his behalf, should be able to detect the unusual nature of fraudulent orders. If he fails to do so, he may incur contractual liability and must compensate the client (4A_269/2024). A Geneva lawyer specializing in banking law sets up and manages a Panamanian company for a French businessman. The company opens a bank account in Geneva. The contract stipulates that correspondence is[...]

The development of artificial intelligence (AI) has become an issue of global importance. AI is now used not only in industry, but also in the service and entertainment sectors. Robots can help lawyers, doctors, bankers, brokers, nurses, farmers, social workers or even artists. The increased use of AI is having a positive effect, as robots can now replace difficult, repetitive or even dangerous activities (such as cleaning up polluted sites) and boost productivity. However, its impact on the future of[...]

On 21 November 2024, the International Organisation of Securities Commissions (IOSCO) published a consultation on the practice ofpre-hedging. Pre-hedging vs front-running Pre-hedging must be distinguished from front-running, which is prohibited as an unfair practice. Front-running consists of a financial institution executing proprietary transactions prior to a client's transactions, to the client's detriment, with a view to exploiting future price fluctuations in the client's favour. Unlike front-running, pre-hedging enables securities firms to hedge their exposure to client orders in advance. Pre-hedging[...]

On September 18, 2024, the First Civil Chamber of the French Court of Cassation handed down ruling no. 23-13.732, which addresses the notion ofactivity directed towards a Member State within the meaning ofart. 17, § 1, c) of the Brussels I bis Regulation (RBI bis), in the context of banking services rendered by a Lebanese bank to a customer resident in France. This decision confirms that customers based in the EU who enjoy “consumer” status may bring their claims before[...]

Artificial intelligence (AI) can prove invaluable in the human resources management of a bank or financial services provider. Employers can use it to automate various tasks, such as sorting applications, assessing performance, issuing warnings and even dismissals. These practices raise various legal questions: to what extent can an employer rely on AI for such tasks? Can employees challenge the use of AI on them, or obtain explanations of the criteria used by AI? In Switzerland, there are no regulations specifically[...]

Since the revision of the Code of Criminal Procedure, which came into force on January 1, 2024, banking secrecy no longer constitutes a ground for sealing documents when invoked by a third party, i.e. a person not involved in the criminal proceedings. The Swiss Federal Supreme Court ruled to this effect in its ruling 7B_313/2024 of September 24, 2024, intended for publication. The Office of the Attorney General of Switzerland was conducting criminal proceedings for fraud and money laundering against[...]

The European Regulation on Artificial Intelligence (AI Act) has been in force since 1 August 2024 (see cdbf.ch/1359/). It applies both to artificial intelligence systems (AIS) and to general-purpose AI model (art. 2 AI Act). This commentary focuses on the definitions of these two key concepts in the application of the AI Act and attempts to highlight their characteristics and specificities. A. The concept of SIA According to art. 3 ch. 1 AI Act, an AIS is “machine-based system that is[...]

A bank can benefit from guarantee clauses stipulated in the standard contracts of suppliers of AI systems. These clauses provide for compensation in the event of infringement arising from the use by such systems of training data protected by intellectual property rights. This commentary examines the scope of such clauses, their conditions and the possible need to extend their benefit to third parties to the initial contract. The quality of the responses provided by AI systems depends in particular on[...]

In ruling 4A_394/2024 of 18 September 2024, the Federal Supreme Court confirms the inadmissibility of a clear-case application to debit the account of a client subject to sanctions, in order to pay his lawyer's fees. A client held several bank accounts in Switzerland, in particular with a bank whose group was also active in Europe and the United Kingdom. The client is subject to sanctions in connection with the conflict in Ukraine, and his assets have been frozen by Switzerland,[...]

Cross-border financial market supervision and effective international cooperation are essential for the stability and integrity of the world's financial markets. To this end, the Federal Council has just launched a consultation on amendments to the Financial Market Supervisory Authority Act (LFINMA), the Audit Supervision Act (ASA) and the Swiss National Bank Act (NBA) to adapt the Swiss legal framework to the current conditions for international cooperation. This commentary focuses exclusively on the proposed amendments to LFINMA. The preliminary draft seeks[...]

Recent advances in generative artificial intelligence (AI) have rekindled financial players' interest in chatbots for managing customer relationships. According to a report by the US Consumer Financial Protection Bureau (CFPB) published in 2023, around 37% of Americans interacted with a banking chatbot in 2022, and all the major US banks are using them. However, their deployment raises many questions. Some of these are not new, particularly concerning the management of data and subcontractors; others are more specific to the technology[...]

The members of the board of trustees of a pension fund must draw up the investment strategy and organise and supervise its implementation. If they fail to do so, in particular if they conclude a discretionary mandate without any investment strategy and without supervising the investment manager, the members will incur civil liability (9C_496/2022, 9C_503/2022, 9C_504/2022, 9C_505/2022). A pension fund for a nursing home in Fribourg decided to enter into a discretionary management contract with an asset management company. The[...]

ChatGPT and GenAI - these new words have been part of our daily lives since November 2022, and we no longer need to introduce them. The growing use of artificial intelligence (AI) in the banking sector raises complex legal and regulatory issues. How do you navigate the world of AI when you are active in the financial sector in Switzerland? The starting point is to understand the existing legal and regulatory framework. To date, there are few laws specifically governing[...]

The overview of the “ leading cases ” of the Swiss Banking Supervisory Commission (hereinafter: the Commission) for the1st half of 2024 is now available. Among the few decisions mentioned, we would like to highlight two. In the first ([533/60]), it is recalled that underart. 18 of the investigation regulations of December 16, 2019, the bank is obliged to cooperate in establishing the relevant facts when an investigation procedure is opened against it. In the case in point, the reporting[...]

FINMA may publish a press release concerning the closure of enforcement proceedings against a named subject, in particular to show the public that it is not inactive in the face of violations of financial market law (2C_682/2023 intended for publication). FINMA closes enforcement proceedings against a bank that has seriously violated money laundering regulations. A few weeks later, the regulator informs the bank of its intention to publish a press release on the proceedings six days later. The draft press[...]

In ruling 4A_57/2024, the Swiss Federal Supreme Court held that an arbitration award ordering the debtor of an outstanding loan to pay interest at a rate of 24% was not contrary to Swiss public policy within the meaning of Art. V ch. 2 let. b of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (NYC). Two Chinese companies had entered into a loan agreement for a period of 2 months, with an interest rate of[...]

In a recent decision, the Swiss Federal Supreme Court ruled on the question of whether the person identified in form A as the beneficial owner of assets deposited in a bank account can claim ownership of these assets in enforcement proceedings on this basis alone (decision 5A_208/2023 of July 10, 2024). This ruling arose from taxation proceedings against B and C, in which the Geneva Cantonal Tax Administration (AFC-GE) requested - and obtained - the sequestration of three bank accounts[...]

The question has long been posed by legal scholars: what happens to a criminal prosecution brought against a company when the latter, in one way or another, disappears? The Court of Appeal of the Federal Criminal Court addressed this issue in a decision dated August 19, 2024 (CN.2024.18). It ruled that the takeover of one company by another - i.e., a merger by absorption within the meaning ofart. 3 para. 1 let. a FusG - did not extinguish the criminal[...]

In ruling ACJC/1002/2024 of 19 August 2024, the Geneva Court of Justice considers that the question of the obligation to return retrocessions in an execution-only relationship, which is controversial in the legal literature and the subject of divergent cantonal rulings, may remain undecided due to a valid waiver by the client. Since 2008, a customer and a Geneva bank have been bound by a simple bank custody agreement (execution only). The bank amended its general terms and conditions several times[...]

The Swiss Federal Supreme Court has upheld the immediate dismissal of a Ticino bank manager, initially on the basis of mere suspicion, on the basis of formal procedural rules (ruling 4A_399/2022 of June 3, 2024). The employee had been working since June 2008 as investment manager of a bank's Lugano branch, and then as manager of the branch from June 2013. On that date, the parties agreed, among other things, a salary of CHF 400,000 per annum with a minimum[...]

Federal Court decisions 7B_158/2023 and 7B_874/2023 of 6 August 2024 were handed down in the same case, by the2nd Criminal Court, in the context of a sealing procedure. The first, intended for publication, seems convincing to us, unlike the second. For once - and this is important - the criminal proceedings were not opened for money laundering but for breach of the law against unfair competition. In short, the Zurich Public Prosecutor's Office suspects an individual, who is understood to[...]

In ruling ACJC/201/2024 of February 13, 2024, the Geneva Court of Justice confirms the validity of a clause excluding the benefit of real discussion (beneficium excussionis realis), under which the bank is free to choose between taking action against the customer personally (and thus attacking his entire estate) or realizing the pledged assets in his bank account. The facts are as follows: On May 4, 2013, a Saudi customer entered into a framework credit facility agreement and a deed of[...]

The Federal Administrative Court (FAT) has confirmed that comparis.ch AG (Comparis) qualifies as an insurance intermediary within the meaning of Art. 40 para. 1 ISA on the basis of the services it offers and must therefore be entered in FINMA's public register of unrelated intermediaries (ruling B-5886/2023 of 5 July 2024). In September 2023, FINMA decided that Comparis was an insurance intermediary within the meaning of Art. 40 ISA and ordered it to be entered in the register of non-related[...]

On 20 August 2024, Switzerland enters a new era in bank transfers, with the introduction of Instant Payments. Around 70 banks (representing more than 98% of payments in Switzerland) will accept such payments ‘in real time’. The technical implementation of instant payments in Switzerland is based on the new ‘SIC5’ payment platform developed by SIX, the operator of the Swiss stock exchange, and the Swiss National Bank (SNB). Instant payments are coming late to Switzerland. In fact, this system is[...]

When the bank liquidates the customer's positions and the result is a negative balance, it is up to the bank to prove the losses. Otherwise, the bank does not prove the existence of its claim against the customer (judgment 4A_301/2023 of 16 July 2024). In 2011, a client used a Vaud bank's IT platform to speculate on fluctuations in the USD/CHF exchange rate. On 15 January 2015, the SNB announced that it was abandoning the CHF/EUR floor rate. This caused[...]

In a recent ruling 4A_26/2024 of 11 June 2024, the Swiss Federal Supreme Court was called upon to rule on the interpretation of a confidentiality clause contained in a settlement agreement between a bank and a private investigator. Specifically, the key question was whether the parties intended to protect secret information in the formal or material sense. In 2019, a company active in investigation and security services became involved in the "Khan affair", in which it was revealed that Mr[...]

The Swiss Federal Supreme Court has upheld the immediate dismissal of an employee due to his careless application of the bank's anti-money laundering rules (ruling 4A_67/2023 of 12 June 2024). The employee had been working in the Panamanian branch of a Ticino bank since July 2012. He received two warnings, the first on 19 June 2015 following an angry outburst towards an employee in the Legal & Compliance department, and the second on 24 July 2017 for his carelessness in[...]