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Anglo-Swiss Divorce Proceedings Post-Brexit, Part II: Recognition and Enforcement of Financial Orders

Roxane Reiser, barrister of 1 Hare Court, analyses the impact of Brexit on the recognition and enforcement of English financial orders in Switzerland.

 


 

 

 

 

 

 

 

 

 

 

Roxane Reiser, Barrister,1 Hare Court

This is the second part of a two-part article on Anglo-Swiss Divorce Proceedings in the Post-Brexit world.The first part of this article discusses recognition of English divorce decrees in Switzerland.

This part concentrates on the recognition and enforcement of English financial orders in Switzerland.

Please note that this article, originally published on 19 May 2021, has been updated as of 20 August 2021 to reflect fresh guidance from the Swiss government on the transitional provisions of the Lugano Convention.

I. The Lugano Convention no longer applies to Anglo-Swiss civil and commercial proceedings initiated after 31 December 2020

Before the end of the transition period, some financial orders obtained in the UK benefited from a simplified recognition and enforcement regime in Switzerland under the Lugano Convention. By way of reminder, the Lugano Convention only applies to "maintenance", i.e. needs-based awards. It does not apply to divorce and legal separation, nor does it apply to property rights arising out of a matrimonial relationship (i.e. "sharing claims").

The Lugano Convention provisions on jurisdiction, recognition and enforcement are akin to those contained in the 2009 EU Maintenance Regulation ('MR') previously applicable between the UK and EU countries. It differs in a number of important respects, however1:

1. The Lugano Convention is not a European law instrument like the MR. It is an international agreement between the EU and three non-EU States, namely Norway, Iceland and Switzerland.

2. The Lugano Convention is not a family law specific instrument. It is aligned on the Brussels I Regulation. It applies to civil and commercial matters, and is primarily used in that context.

3. The Lugano Convention contains different, more complex, rules of jurisdiction than the MR. The governing principle of jurisdiction of the Lugano Convention is that persons domiciled in a State bound by the Convention should be sued in the courts of that State.

4. The Lugano Convention allows prorogation clauses both in respect of spousal maintenance and child maintenance, unlike the MR, which prohibits prorogation in respect of child maintenance.

The UK was a party to the Lugano Convention by virtue of its EU membership. The Lugano Convention continued to apply between the UK and Switzerland during the transition period. Specifically, it continued to apply to proceedings initiated in the UK before 11 p.m. on 31 December 2020 by virtue of Regulation 92(1), (2)(d) and (3) of the Civil Jurisdiction and Judgment (Amendment) (EU Exit) Regulations 2019. Similar provisions were made in Swiss law to ensure the reciprocal application of the Convention during that period.

Accordingly, proceedings for recognition and enforcement initiated after 11 p.m. on 31 December 2020, whether in the UK or in Switzerland, do not fall within the "temporal scope" of the Lugano Convention. This is subject to transitional provisions.

After a period of uncertainty as to the applicable transitional arrangements in Switzerland, the Swiss Federal Office of Justice confirmed in late April 2021 that judgments obtained in the UK before 1 January 2021 would continue to benefit from the Lugano Convention's "fast-track" regime for recognition and enforcement in Switzerland. This was reaffirmed in a decision of the Swiss Supreme Court (ATF 5A_697/2020 of 22 Mars 2021, consid. 6, published in July 2021). The continued application of the Lugano Convention in these cases does not arise from fresh Swiss legislation. Instead, per the Office of Justice and the Swiss Supreme Court "it flows from the general principles of international and civil procedural law (droits acquis, prohibition of retrospective legislation, requirement of legal certainty)", which are protected by provisions of Swiss civil and private international law.

This is indisputably positive. However, the lack of clear early guidance resulted in differing judicial opinions. By way of example, in a judgment dated 24 February 2021,  the Zürich Bezirksgericht held that the "fast-track" recognition and enforcement regime of the Lugano Convention did not apply to an order of the High Court obtained by the applicant in September 2020 because the UK was no longer a party to the Convention at the time when enforcement was sought. Instead, the applicant had to resort to rules of Swiss private international law.

Similarly, Swiss legislation governing the continued application of the Lugano Convention to judgments obtained after 1 January 2021 in proceedings commenced before that date would have been helpful. The guidance of the Swiss Federal Office of Justice states that a Swiss court validly seised before 1 January 2021 under the jurisdictional provisions of the Lugano Convention retains jurisdiction after that date even if the court lacks jurisdiction under Swiss law. However, there is no guidance as to whether an English order obtained after 1 January 2021 in proceedings initiated before then can benefit from the continued application of the Lugano Convention when it comes to recognition and enforcement in Switzerland. It is said by the Federal Office of Justice that "this is a controversial question" and that "differing opinions are expressed in the academic literature". It is likely that this issue will have to be determined by the Swiss Supreme Court at some stage.  

There was some hope that the UK might re-join the Lugano Convention as a member in its own right. On 8 April 2020, the UK made an application to that effect. On 4 May 2021, the European Commission published an assessment on the UK's application to accede to the 2007 Lugano Convention addressed to the European Parliament and the Council.

The European Commission's view is that the EU should not give its consent to the accession of the UK to the Lugano Convention. Although the European Parliament and the Council still have the opportunity to offer their views on the UK's application, an EU-wide rejection of the European Commission's advice is highly unlikely. Therefore, unless and until a bilateral agreement is reached between the UK and Switzerland, reference must be made to Swiss and English national rules on jurisdiction, recognition and enforcement in lieu of the Lugano Convention where it previously applied.

II. Recognition and enforcement of English financial orders in Switzerland

Subject to the transitional provisions set out above, the recognition and the enforcement of UK financial orders in Switzerland are now governed by:

1. Rules of Swiss Private International Law ('SPILA'), and

2. The 1973 Hague Convention on the Recognition and Enforcement of Decisions Relating to Maintenance Obligations.

Rules of Swiss Private International Law

A foreign decision can only be recognised in Switzerland provided that (Art. 25 SPILA, Art. 27 SPILA):

1. The authorities of the State of origin had jurisdiction according to Swiss rules of indirect jurisdiction, such as Art. 65 SPILA below, – the question is not whether the court of origin had jurisdiction according to its own law;

2. The decision can no longer be appealed or is final;

3. The decision is enforceable in the State of origin; and

4. None of the following grounds of non-recognition applies:


a. The decision is manifestly incompatible with Swiss public policy;

b. A party did not receive proper notice of the proceedings under either the law of their domicile or the law of their country of habitual residence, unless they submitted to jurisdiction without reservation;

c. The decision violates fundamental principles of Swiss procedural law (eg. where a party had no opportunity to present a defence);

d. A dispute between the same parties, with the same subject matter:


i. is the subject of proceedings pending in Switzerland, or

ii. has already been decided in Switzerland, or

iii. has already been decided in another State.
provided in each case that the decision can be recognised.

In addition to those general requirements, Art. 65 SPILA, discussed in the first part of this article, contains divorce-specific grounds of non-recognition based on "indirect jurisdictional grounds". The aim of this provision is to ensure a sufficient connection between the parties and the jurisdiction in which the divorce was granted. By way of reminder, Art. 65 SPILA states as follows:

(1) A Foreign decree of divorce or separation shall be recognised in Switzerland if it has been rendered in the State of domicile or habitual residence, or in the national State, of either spouse, or if it is recognised in one of these States.

(2) However, a decree rendered in a State of which neither spouse or only the petitioner spouse is a national shall be recognised in Switzerland only if:

a. At the time of filing the petition, at least one of the spouses was domiciled or had his or her habitual residence in that State and the defendant spouse was not domiciled in Switzerland;

b. The defendant spouse submitted to the jurisdiction of the foreign court without reservation; or

c. The defendant spouse expressly consented to recognition of the decree in Switzerland.

Note that Art. 65 extends to the recognition of financial orders flowing from the divorce such as maintenance and rights in matrimonial property. It does not, however, extend to the recognition of foreign orders made in respect of Swiss pensions. Swiss courts have exclusive jurisdiction over Swiss pensions by virtue of Art. 63(1)bis SPILA. A UK financial order dealing with a Swiss pension will not be recognised in Switzerland. Parties must seek a "complementary judgment" in Switzerland dealing with Swiss pensions only2.

Readers may be anxious to know whether the Swiss courts would also claim exclusive jurisdiction in relation to real property located in Switzerland, with the consequence that a Swiss court would not recognise a UK financial order dealing with Swiss real property. This is debatable. Article 97 SPILA provides that the courts of the place where real property is located in Switzerland have exclusive jurisdiction to entertain real property claims. Just because real property is involved in a legal dispute does not however mean that the underlying claim is a "real property claim"3. Issues relating to real property arise in various contexts including divorce, succession and contractual disputes. Further, times have changed since Art. 97 SPILA came into force in 1987. Forum clauses in respect of maintenance (under the Lugano Convention) but also in respect of matrimonial property (Art. 5 SPILA) are now admissible. As such, there is much to be said for the view that Art. 97 SPILA can be circumvented in most, but perhaps not all divorce cases.

Just like under the Lugano Convention, there can be no review as to the substance of the decision under SPILA. However, the recognition of a foreign decision in Switzerland does not preclude an application for a "complementary judgment" where the original decision is silent on a particular aspect (eg. Swiss pensions).

Those familiar with the Lugano Convention will note the following important differences:


1. The SPILA regime set out above applies to the divorce and all its financial consequences (except pensions), unlike the Lugano Convention, which only applied to maintenance obligations.

2. As such, it is no longer crucial to delineate precisely which part of a UK financial order relates to maintenance for the purposes of recognition and enforcement in Switzerland. Note however, that such delineation remains prudent, should recognition and enforcement be sought in the EU under the MR at a later stage.

3. Under the Lugano Convention, a decision need not be final or incapable of appeal in order to be recognised.

4. The Lugano Convention does not include requirements of "indirect jurisdiction" such as those contained in Art. 65 SPILA.

The primary practical difference between these two regimes is procedural, however. Recognition of a foreign decision under the rules of Swiss Private International Law requires free-standing recognition proceedings. By contrast, decisions to which the Lugano Convention applies benefit from automatic recognition pursuant to Art. 33(1). Note, nevrtheless, that in both contexts, a foreign decision can only be enforced – as opposed to recognised – if it is declared enforceable. An exequatur procedure is necessary (Art. 28 SPILA and Art. 38 CL respectively).

The 1973 Hague Convention on the Recognition and Enforcement of Decisions Relating to Maintenance Obligations

The 1973 Hague Convention on the Recognition and Enforcement of Decisions Relating to Maintenance Obligations (the '1973 Convention') applies reciprocally between Switzerland and the UK. Note that Switzerland is not a party to the 2007 Hague Maintenance Convention on the International Recovery of Child Support and Other Forms of Family Maintenance, unlike all EU countries. Reference must be made to the 1973 Convention and the Maintenance Orders (Reciprocal Enforcement) Act 1972, Part I for recognition of Swiss maintenance decisions in the UK.

The 1973 Convention applies to maintenance obligation arising from a family relationship, parentage, marriage or affinity (Art. 1). It applies both to spousal maintenance and child maintenance.

Readers should note that the Convention applies not only to decisions, but also settlements made by or before a judicial or administrative authority of a Contracting State. This encompasses maintenance agreements perfected into a court order. It does not extend to authentic instruments, unlike Article 57 of the Lugano Convention.

The 1973 Convention takes precedence over SPILA. However, it permits the application of more generous criteria of recognition and enforcement contained national law. In practice, both instruments are used in tandem. If the criteria for recognition under the 1973 Convention are not met, recognition is sought under SPILA. Free-standing recognition proceedings are required in both contexts in any event.

Article 4 of the 1973 Hague Convention provides that a decision rendered in a Contracting State shall be recognised or enforced in another Contracting State –

(1)  if it was rendered by an authority considered to have jurisdiction under Article 7 or 8; and

(2)  if it is no longer subject to ordinary forms of review in the State of origin.

Article 7 of the Convention contains rules of indirect jurisdiction based on habitual residence, nationality and submission to jurisdiction. It states:

"An authority in the State of origin shall be considered to have jurisdiction for the purposes of this Convention -

(1)  if either the maintenance debtor or the maintenance creditor had his habitual residence in the State of origin at the time when the proceedings were instituted; or

(2)  if the maintenance debtor and the maintenance creditor were nationals of the State of origin at the time when the proceedings were instituted; or

(3)  if the defendant had submitted to the jurisdiction of the authority, either expressly or by defending on the merits of the case without objecting to the jurisdiction."

Note that sole nationality of the State of origin is not a ground of indirect jurisdiction under the 1973 Hague Convention. Contrast this with Art. 2(4) of the 1970 Hague Convention on the Recognition of Divorces and Legal Separations ('the 1970 Convention'), which includes as one of its grounds of indirect jurisdiction necessary for the recognition of a foreign divorce the sole nationality of the petitioner, provided that it is coupled with (a) the petitioner's habitual residence in the State of origin, or (b) the petitioner's habitual residence in the State of origin for one year falling at least in part within the two years preceding the institution of the proceedings.

Without prejudice to Art. 7, Art. 8 of the Convention aligns indirect jurisdiction for maintenance with indirect jurisdiction for divorce. If the court of origin fulfils the criteria of indirect jurisdiction for the divorce, then the court of origin is also considered to have had indirect jurisdiction in respect of maintenance. In the example of sole nationality given above, this means that a Swiss court assessing indirect jurisdiction in respect of a UK maintenance order under the 1973 Convention will accept that the grounds of indirect jurisdiction are met if the criteria contained in Art. 2(4) of the 1970 Convention are met. Readers are referred back to the first part of this article for the grounds of indirect jurisdiction applicable to a divorce obtained in the UK and sought to be recognised in Switzerland pursuant to the 1970 Hague Convention.

Once rules of indirect jurisdiction have been assessed, one must turn to the grounds of non-recognition contained in Art. 5 of the Convention, which states:

"Recognition or enforcement of a decision may, however, be refused –

(1)  if recognition or enforcement of the decision is manifestly incompatible with the public policy ("ordre public") of the State addressed; or

(2)  if the decision was obtained by fraud in connection with a matter of procedure; or

(3)  if proceedings between the same parties and having the same purpose are pending before an authority of the State addressed and those proceedings were the first to be instituted; or

(4)  if the decision is incompatible with a decision rendered between the same parties and having the same purpose, either in the State addressed or in another State, provided that this latter decision fulfils the conditions necessary for its recognition and enforcement in the State addressed."

Finally, Art. 6 of the Convention provides that "a decision rendered by default shall be recognised or enforced only if notice of the institution of the proceedings, including notice of the substance of the claim, has been served on the defaulting party in accordance with the law of the State of origin and if, having regard to the circumstances, that party has had sufficient time to enable him to defend the proceedings". Note that Art. 5 is expressed in permissive, rather than mandatory terms. By contrast, the word "shall" in Art. 6 indicates that its requirements are mandatory.

Neither the grounds of non-recognition contained in SPILA, nor those contained in the 1973 Convention are dramatically different from those contained in the Lugano Convention (see Art. 34 LC).

A summary of the specific methods of enforcement available in Swiss law is beyond the scope of this article. Suffice it to say that enforcement in Switzerland is governed by Swiss law and procedure. Local advice should be sought.

III. A note on parallel proceedings

With the end of the Lugano regime as between Switzerland and the UK, comes the end of the lis pendens rule contained in Art. 27 of the Lugano Convention. Swiss courts faced with parallel proceedings (i.e. proceedings in respect of the same cause of action) initiated in the UK first in time will no longer be subject to a duty to stay proceedings in Switzerland until such time as the jurisdiction of the UK court is established.

Instead, a Swiss court will stay proceedings only if it is to be expected that the UK court first seised will render a decision capable of being recognised in Switzerland within a reasonable time, and if the Swiss court is satisfied that the UK court has jurisdiction in accordance with Swiss criteria of indirect jurisdiction contained in Art. 26 SPILA. This is a significantly more demanding hurdle to overcome than under the Lugano Convention. It requires an assessment of:


1. Whether the UK court is first seised;

2. Whether the UK court has jurisdiction in accordance with Swiss criteria of indirect jurisdiction (i.e. not in accordance with English law).

3. Whether the UK court will deliver a decision within a reasonable time; and

4. Whether the UK court decision can be recognised in Switzerland in the future.

IV. A note on choice of forum clauses

As explained above, prorogation clauses in respect of spousal maintenance and child maintenance are permissible pursuant to Art. 23 of the Lugano Convention, provided that certain formal criteria are met. Now that the Lugano Convention no longer applies between the UK and Switzerland, reference must be made to Art. 5 SPILA, which permits forum clauses in respect of patrimonial – i.e. financial - matters only. The scope of Art. 5 SPILA does not extend to legal status of the parties – i.e. to the divorce – but it does encompass financial obligations flowing from the divorce. A forum clause under Art. 5 SPILA is exclusive unless otherwise provided.

The application of Art. 5 SPILA is not without difficulties. This is because Swiss Private International Law does not permit forum clauses in respect of the divorce itself, and simultaneously provides that a Swiss court with jurisdiction to deal with the divorce also has jurisdiction to deal with all financial aspects flowing from the divorce (Art. 63 SPILA). The better strategy remains to file for divorce and in respect of all financial consequences first in time in one's preferred jurisdiction, rather than wait for the other court to stay or dismiss the proceedings based on a forum clause pointing towards another jurisdiction.

V. Conclusion

In sum, the main change brought about by Brexit when it comes to recognition and enforcement of financial orders between Switzerland and the UK is the end of the application of the Lugano Convention. This change affects the reciprocal recognition and enforcement of maintenance (i.e. needs-based) financial orders between the two countries. Reference must now be made to rules of Swiss Private International Law and/or the 1973 Hague Convention.

While the continued existence of a reciprocal international agreement between the UK and Switzerland in respect of maintenance is pleasing, practitioners should not underestimate the importance of seeking local legal advice before seeking to enforce a UK financial order in Switzerland. In all such cases, the success of a cross-border enforcement crusade will largely depend on (a) the assets against which enforcement is sought, (b) the effectiveness of Swiss enforcement measures having regard to the nature of the assets, and (c) the proportionality of the voyage.

 Footnotes

1.For a more extensive analysis of the Lugano Convention and of the differences between the Lugano Convention and the Maintenance Regulation, see "The Lugano Convention: the UK's European maintenance law from 2021?", David Hodson OBE MICArb, [2020] IFL 211.

3.Practitioners should note that Swiss law contains mandatory provisions on the sharing of Swiss pensions upon divorce. Seek local advice.

4.See Commentaire Romand sur la Loi fédérale sur le droit international privé et la Convention de Lugano, 2011, Helbing Lichtenhahn Verlag, ch. 7, §7.

19/05/21
Updated 29/6/21