Interesting SFT decision related to the SNB’s lifting of the EUR/CHF exchange rate peg

Interesting SFT decision related to the SNB’s lifting of the EUR/CHF exchange rate peg

Recently, the Swiss Federal Tribunal (SFT) published on its website an interesting judgment related to the 15 January 2015 decision of the Swiss National Bank (SNB) to lift the EUR/CHF exchange rate peg (the judgment with the case reference 4A_248/2018 is dated 12 September 2018).

The relevant factual circumstances are summarized at letter A of the SFT judgment discussed herein. For the purposes of this post, below is a simplified and condensed version of the relevant factual backdrop:

The claimant, a German ship captain and ship owner, maintained two safe custody accounts with the defendant, a Swiss bank. In view of entering into foreign exchange (FX) transactions through the bank, the claimant signed various bank forms, including a framework agreement for the settlement of over-the-counter (OTC) FX transactions. Moreover, the claimant pledged all the securities held in his safe custody accounts to secure the bank’s exposure resulting from OTC FX transactions entered into by the bank on behalf of the claimant. In this regard, the claimant signed a bank form with the title “General deed of pledge and assignment” (in German: Allgemeine Faustpfandverschreibung). Such a form, which is, in principle, valid and binding under Swiss law (DFT 142 III 746) and the use of which corresponds to an industry standard among Swiss banks, grants the bank an extensive right of lien and set-off vis-à-vis its customer.

On 18 December 2014, the claimant bought, inter alia, EUR 20m at a forward rate as per 20 January 2015 of CHF 1.2095 per Euro (corresponding to a total purchase price of CHF 24,190,000.00). On 15 January 2015, at 10.30 a.m. CET, the SNB announced that it was lifting the minimum rate of CHF 1.20 per Euro, which immediately triggered a significant depreciation of the Euro (and of the USD) vis-à-vis the CHF. On the same day, the claimant closed his open forward FX transactions, including the one in the currency pair EUR/CHF. The total loss at value date 20 January 2015 was close to CHF 10m.

On 15 January 2015, the bank issued a margin call to its client, i.e., requested the claimant to provide additional collateral in an amount of CHF 6,231,000.00 by Friday, 16 January 2015, 11.00 a.m. CET. In its margin call, the bank informed the claimant that should he fail to provide the mentioned additional collateral within the set deadline, it would, without further notice, realise the securities held in the client’s safe custody accounts, which, as mentioned, had been pledged by the client as security, at its discretion and offset its claim against the claimant’s assets. As the additional collateral was not provided within the deadline, the bank closed out the (remaining) option transactions and liquidated the claimant’s (pledged) assets held with it.

On 17 September 2015, the claimant filed a claim with the Commercial Court of the Canton of Zurich (Zurich Commercial Court), essentially asking that the bank shall be ordered to pay damages to him, asserting that his total losses deriving from the above-mentioned FX transactions amounted to approximately EUR 10m. The claimant argued, inter alia, that the bank had breached its obligations of diligence and care by steering him into an “overall concept” with a complex asset and investment structure and high risk exposure, while he had neither the necessary expertise nor the practical experience to properly assess such investment strategy.

Both the Zurich Commercial Court as well as the SFT rejected the claimant’s claims.

The new SFT judgment 4A_248/2018 raises some comments and thoughts, set forth below.

(1) The German owner of a shipping company, who fought his case up to the SFT, is not the only person who lost money in connection with the SNB’s decision to lift the EUR/CHF exchange rate peg. Pursuant to the renowned daily newspaper Neue Zürcher Zeitung, there were many investors who lost money because of this decision. In detail the trades made might have had different features, but many supposedly had the common element that the investors assumed that the minimum price level of CHF 1.20 per EUR declared by the SNB constituted a floor, i.e., a kind of stop-loss granted by the SNB. Presumably, such investors thought that they could, essentially, speculate on a raising Euro against the Swiss Franc, without having to take into consideration a EUR/CHF price below CHF 1.20 per EUR. On the basis of this assumption, presumably many investors leveraged their FX trades in question, in other words, obtained capital from their bank or broker to significantly increase the size of their bets, with a corresponding increase of the potential profits and losses, respectively. These FX trades that went sour because of the surprising SNB decision communicated on 15 January 2015 are a good illustration of the old rule that there is no such thing as a free lunch. Differently put, potentially high returns are invariably linked to high risks.

(2) The Zurich Commercial Court as well as the SFT uphold the rule that the investor who makes a risky investment does, in principle, have to assume the losses sustained because of such investment, and that he or she cannot pass the losses to his or her bank or broker. In this context, the SFT confirms that the bank client is to be informed by the bank about the risks associated with an investment only if he or she is not already aware of these risks. In other words, a bank client who has the necessary knowledge to understand the risks associated with a particular transaction does not need risk disclosure from the bank (see consideration 3.1, in particular: “Der Kunde ist hinsichtlich der Risiken der beabsichtigten Investitionen aufzuklären, soweit er um diese Risiken nicht bereits weiss.“). I think it is both welcome and important that this principle is upheld. There is a general tendency in our modern welfare societies to expect a liable party for all losses. If, however, an investor knows the risks associated with a transaction, it is only right and proper if he or she has to bear the materialising risks.

(3) The Zurich Commercial Court and the SFT confirm the situation under Swiss commercial law that a person who signs a document is, in principle, bound to the content of such document, even if he or she did not read the document (in its entirety) (see consideration 2.3.3, in particular: “Die Vorinstanz […] ging […] zutreffend davon aus, dass die […] mangelnde Achtsamkeit [des Beschwerdeführers] ihn nicht von den mit Unterzeichnung des Dokuments eingegangenen Verpflichtungen entlasten könne, weshalb die behauptete fehlende Durchsicht des Dokuments ohnehin nicht entscheiderheblich sei […].“). In my opinion, this is an important and correct principle. To decide otherwise would, in the end, mean ignoring the principle of pacta sunt servanda, which would undermine the fundamentally important legal certainty requirement (Rechtssicherheit) in business dealings.

(4) In the proceedings before the Zurich Commercial Court, the claimant had, in essence, asserted that a bank employee(s) had repeatedly confirmed to him that the total risk of his strategy would be limited to 5% of his assets. Obviously, if true, such a factual element would have been highly relevant in the dispute at issue. Nevertheless, the Zurich Commercial Court did not wish to hear the claimant’s testimony in relation to the mentioned assertion; a decision that has not been sanctioned by the SFT (see consideration 2.3.3, in particular: “[Die Vorinstanz] ist nicht in Willkür verfallen, wenn sie in antizipierter Würdigung auf die beantragten Zeugeneinvernahmen und die Befragung des Beschwerdeführers verzichtete.“). From the perspective of common law systems as well as the usual procedure in international commercial arbitrations this decision to discard the claimant’s oral testimony on such an important assertion looks odd. However, Swiss commercial courts regularly discard certain evidence, namely oral testimony and court-appointed expert opinions, on the basis of the principle referred to as anticipated assessment of evidence (in German: antizipierte Beweiswürdigung). According to such principle, a Swiss court may rule that it is not necessary to administer certain evidence, such as the oral testimony of a witness or a party, because, among other reasons, the court already formed its opinion and is convinced that this opinion will not be changed by the acceptance of further evidence (for more information on this topic, please see my article published on 3 February 2014 in Jusletter, with the title Abgrenzung der zulässigen antizipierten Beweiswürdigung von der Verletzung des Rechts auf Beweis im Zivilprozess). In the present context, it is to be highlighted that it is quite common in commercial proceedings before Swiss courts that no oral testimonies are heard at all. It is important that non-Swiss parties realize that in proceedings before Swiss commercial courts, they might not have their day in court.

(5) Litigating before the Zurich Commercial Court has certain advantages, among others its tradition to early invite the parties to a settlement negotiation hearing, i.e., after the first exchange of written briefs, which gives them the opportunity to dispose of the dispute early before litigation costs continue to rise significantly. This approach of the Zurich Commercial Court is very successful in practice, given that more than 50% of all civil actions filed with this court are terminated by a settlement at the mentioned early stage of the proceedings (for more information on this topic, please see my article published on 6 January 2014 in Jusletter, with the title Praktische Hinweise zur früheren Referentenaudienz bzw. heutigen Ver­­gleichs­verhand­lung vor dem Handelsgericht Zürich). But there are, depending on the circumstances, also disadvantages to litigate a case before the Zurich Commercial Court, namely the fact that there is no court of second instance that can freely review the establishment of the facts and the assessment of the evidence by the Zurich Commercial Court. This is so because judgments rendered by the Zurich Commercial Court can only be appealed to the SFT that, as Switzerland’s highest court, has the principal function to ensure the uniform application of Swiss law by the Swiss courts. Pursuant to this function, the SFT does freely review the lower instances’ interpretation of Swiss law, but does review such instances’ assessment of the facts and evidence only with great restraint. In other words, the parties to proceedings before the Zurich Commercial Court do, in principle, only have one shot at establishing the facts of their case, since the establishment of the facts and the assessment of the evidence by the Zurich Commercial Court is — at the level of the SFT — only subject to an arbitrary test. The hurdle to pass such arbitrary test is high (see consideration 2.3.2, in particular: “Das Bundesgericht hebt einen kantonalen Entscheid wegen Willkür vielmehr nur auf, wenn er offensichtlich unhaltbar ist, mit der tatsächlichen Situation in klarem Widerspruch steht, eine Norm oder einen unumstrittenen Rechtsgrundsatz krass verletzt oder in stossender Weise dem Gerechtigkeitsgedanken zuwiderläuft […].“). Depending on the circumstances, the mentioned limited review of the lower instances’ factual findings also severely reduces the chances of succeeding with an appeal before the SFT.

PHH, Zurich, 25 October 2018 (

The information contained in this post is for general informational purposes only and is not intended to constitute legal advice. Readers of this post should not take any actions or decisions without seeking specific legal advice.




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