Franchising in Switzerland: overview

A Q&A guide to franchising in Switzerland.

The Q&A provides an overview of the main practical issues concerning local and international franchising, including: current market activity; franchising regulatory framework; contractual issues relating to franchising agreements (analysing pre-contract disclosure requirements, formalities, parties' rights and obligations, fees and payments, term of agreement and renewal, termination and choice of law and jurisdiction); Operations Manual; liability issues; intellectual property; real estate; competition law; employment issues; dispute resolution; exchange control and withholding; and proposals for reform.

To compare answers across multiple jurisdictions, visit the Franchising: Country Q&A tool.

This Q&A is part of the global guide to franchising law. For a full list of jurisdictional Q&As visit www.practicallaw.com/franchising-guide.

Christoph Wildhaber, Streichenberg, Attorneys at law
Contents

Market

1. What have been the main developments in the franchising market over the past 12 months?

There have been no significant developments in the last 12 months. Switzerland continues to have a very liberal commercial and legal environment for franchising. The demanding international market and the various languages spoken in Switzerland make it an ideal vantage point and test market for European expansion.

 
2. What are the most commonly used methods of local and international franchising?

Local franchising

Direct franchising is the most commonly used method for franchising.

The manageable size of the Swiss marketplace easily allows the direct support and guidance of franchisees.

International franchising

Overseas inbound franchising is mostly conducted by master or development franchise agreements. Due to its open borders and the various languages spoken in Switzerland, the European development of franchisors based in Switzerland is also often conducted by way of direct franchising.

Outbound franchising usually follows the customary practices in the target market (often master and development franchising).

 
3. Are there any specific reasons for an overseas franchisor to use a separate entity for entering into a franchise agreement with a franchisee in your jurisdiction?

There are no specific reasons for an overseas franchisor to use a separate entity for entering into a franchise agreement, as far as regulatory matters are concerned. For liability or other reasons, a structure with an intermediate special purpose vehicle company might be advisable, but must be individually discussed in the particular project.

 

Regulation of franchising

4. What is the legal definition of franchising and/or a franchise?

There is no formal legal definition of the terms "franchise", "franchising" or "franchise contract". There are only very few court decisions dealing with franchising.

Therefore, practitioners tend to refer to the definition in the Code of Conduct of the Swiss Franchise Association. Under the Code of Conduct, franchising is a sales and distribution system under which goods and/or services and/or technologies are marketed. It is based on a close and ongoing operation of legally and financially independent and self-employed companies, the franchisor and his franchisees. The franchisor grants his franchisees the right and at the same time imposes obligations on the term to run a business according to this concept. This right entitles the franchisee, against direct or indirect remuneration, within the framework and for the duration of a contract signed between the parties, to use:

  • Ongoing technical and economic support by the franchisor.

  • The system's name or trade mark and/or the logo and/or other IP or protection rights.

  • The know-how, economic and technical methods and the business system of the franchisor.

 
5. What are the laws regulating franchising?

As with many other countries, Switzerland has no specific legislation on franchising. Franchising is regulated mainly under the following laws, which also apply to the ongoing relationship between franchisor and franchisee:

  • The Swiss Code of Obligations.

  • The Trademark Law.

  • The Cartel Law.

  • The Unfair Competition Law.

Franchise relationships are also governed by regulations relating to social security matters, tax law and other legal regulations, depending on the individual set-up and the business involved.

According to legal opinion and practice, franchise agreements form a specific and unique kind of contract, which has not yet become standardised. According to Federal Court decision (BGE 118 II 157 ff) franchise agreements must be judged on a case-by-case basis. Generally, a franchise agreement can be described as a hybrid agreement, containing elements of IP licences, and sale, lease and service agreements.

Depending on the individual case, employment law may also be applicable (for example, the relevant protective provisions) depending on the nature of the relationship between a franchisor and its franchisees.

 
6. What is the regulatory authority responsible for enforcing franchising laws and requirements in your jurisdiction?

There is no regulatory authority responsible for franchising.

 
7. Must the franchisor be registered with a professional or regulatory body before setting up a franchise system?

There is no registration obligation or requirement to pilot before franchising. However, the Swiss Franchise Association recommends piloting a concept before franchising.

 
8. Is there a code of ethics or other means of promoting ethical franchising in your jurisdiction?

The European Code of Ethics for Franchising has been adopted by the Swiss Franchise Association. For the relevant obligations please refer to the Code of the European Franchise Federation (www.franchiseverband.ch).

 
9. Do franchisees benefit from any laws designed to protect consumers or small businesses?

Franchisees do not benefit from any specific laws designed to protect consumers or small businesses.

 
10. Are there any other requirements which must be met before a business can sell a franchise?

There are no legal/regulatory requirements applicable before a business can sell a franchise.

 

Franchise agreement

Pre-contract disclosure requirements

11. Is the franchisor subject to any general or formal pre-contract disclosure requirements?

There are no specific franchise regulations or governmental agencies supervising the franchise industry in relation to the offer or sale of franchises. In general, the legal environment in Switzerland is very favourable to development strategies such as franchising. Switzerland and Swiss Law has far fewer restrictions with regard to franchising than many other jurisdictions. This is one of the reasons why Swiss law is frequently chosen as a legal system for international transactions and should be considered when choosing the law applicable to international franchise relations.

Although there are no particular laws dealing specifically with pre-contractual disclosure, there are, based on general principles of Swiss law, obligations to be observed during the pre-contractual period. Pre-contractual relationships of trust commit a contractual party to act with care and provide pre-contractual disclosure. This is not only an obligation for the franchisor but also (at least to some extent) for the new franchisee.

If a contractual party violates these duties on the closing of the contract (culpa in contrahendo) it may become liable, and the other party can terminate the agreement. Generally, damages for violation of pre-contractual obligations are calculated on the basis of what the financial situation would have been if the franchisee had not entered into the franchise relationship. Therefore, a franchisee may claim back the entry fee, ongoing royalties and ask for the reimbursement of investments made for its franchise business. However, under Swiss law, a franchisor is not required to make representations about future profits, returns on investments and so on.

Whenever pre-contractual disclosure is concerned, a franchisor must explain to the prospective franchisee the relevant aspects of the contemplated franchise relationship. This includes, but is not limited to, information regarding the:

  • Franchise concept.

  • Franchisor's organisation.

  • Franchise offer itself (investments, rights and duties).

  • Franchise agreement.

  • Distribution channels.

  • Financial implications.

In this respect the Swiss Franchise Association has developed a number of recommendations for pre-contractual disclosure by a franchisor towards its prospective franchisees.

An overseas franchisor or IP owner is not required to participate in the local disclosure process.

 
12. Must the franchisor disclose fairly and in good faith all facts material to the prospective franchisee's decision to enter into the arrangement, or must the prospective franchisee rely on its own due diligence?

Acting in good faith is one of the core principles of Swiss law and must be observed by a franchisor when offering a franchise. A franchisee must also rely on its own due diligence when inquiring after a franchise. However, there are no clear guidelines. In general, an educated and experienced franchisee would bear a higher responsibility with regard to investigating a potential franchise than a prospective franchisee inquiring after a franchise in a market that it is not familiar with or that it requires education on. A claim by a franchisee under the pre-contractual disclosure principles may be reduced accordingly.

The franchisor should take a number of precautions with regard to pre-contractual disclosure obligations when offering a franchise in Switzerland, including:

  • A reasonable assessment of the Swiss marketplace and competitors.

  • Conclusive documentation of pre-contractual information.

  • Ample time for a prospective franchisee to become familiar with the information and make adequate investigations (at least 20 business days is recommended).

  • Ensuring communication between all the franchisees and between each franchisee and the franchisor, to ensure that any franchise-related questions are reasonably answered.

There are no legal formalities applicable to how pre-contractual information should be provided. Franchisors usually use either specific pre-contractual disclosure documents, frequently asked questions documentation or just compile information about the franchisor, the franchise system and the market.

Formalities

13. What are the formal contractual requirements to create a valid and binding franchise agreement?

There are no general formal requirements for contractual validity and no particular formalities for franchise agreements in terms of language, stamp duties or notarisation.

If a franchise is established by means of a spin-off from a franchisor, and real estate is to be transferred from the franchisor to the franchisee, particular formalities with regard to the spin-off itself (asset deal) or the transfer of real estate (in an individual transfer) must be observed. Asset deals where the Swiss Merger Act applies must be registered with the commercial register. Sales agreements involving real estate must be notarised by a public notary and registered with the land register.

According to legal opinion and practice, franchise agreements form a specific and unique kind of contract, which has not yet become standardised. According to the Federal Court decision (BGE 118 II 157 ff) franchise agreements must be judged on a case-by-case basis. Generally, a franchise agreement can be described as a hybrid agreement, containing elements of IP licences, and sale, lease and service agreements.

Parties' rights and obligations

14. Is there a general obligation to behave fairly, reasonably or in good faith to the other party during the term of the franchise agreement?

Obligations of the franchisee

The franchisee must use its best endeavours to develop its business in the marketplace.

Obligations of the franchisor

The franchisor must provide a business model that is:

  • Suitable for the marketplace.

  • Feasible for the franchisee to take to market.

  • Based on a proven concept.

An overseas franchisor or its officers and directors cannot be directly liable for failures of the local sub-franchisor. However, if the franchise systems prove to be insufficient for the local marketplace and the agreement does not address this, the local sub-franchisor may claim damages for breach of contract for failure to provide a feasible business concept.

 
15. Does local law require that particular provisions must be expressly included in a franchise agreement?

Swiss law does not require specific provisions to be included in a franchise agreement.

 
16. Are exclusion and entire agreement clauses enforceable in your jurisdiction? If so, are they effective to protect the franchisor?

Entire agreement clauses cannot prevent liability for fraudulent behaviour before the conclusion of the franchise agreement and cannot exclude the applicability of (national or internationally) mandatory law.

 
17. Can the franchisor impose product tying or other purchasing restrictions and non-compete obligations on the franchisee during the term of the agreement?

Restrictions on purchasing and product tying

Tie-in restrictions are considered to be a limitation on entrepreneurial freedom and therefore a restriction on competition. Agreements are unlawful if they (Article 5, Swiss Cartel Law):

  • Significantly affect competition in the market for certain goods or services, and are not justified on the grounds of economic efficiency.

  • Lead to the suppression of effective competition.

An agreement is justified on the grounds of economic efficiency when it (Article 5 II, Swiss Cartel Law):

  • Is necessary to reduce production or distribution costs.

  • Improves products or production processes.

  • Promotes research into or dissemination of technical or professional know-how.

  • Exploits resources more rationally.

Often, time clauses can be justified by reason of quality, efficiency in logistics and professionalism in terms of providing relevant know-how in the handling of the products. However, it may be preferable in certain cases to include, at least partly, a diversification product portfolio. This is often considered as favourable from an "independent entrepreneur" point of view.

Franchise systems with provisions that require contractual products to only be sold to end-users are generally accepted. However, individual cases must be assessed carefully under the competition law.

Non-compete obligations and transfer restrictions

In-term non-compete restrictions are permitted.

There are no restrictions on requiring prior consent to a transfer of business.

Fees and payments

18. What fees are usually payable by the franchisee? Are there any restrictions on the parties' freedom to set the fees and payments, or any other payment requirements?

Initial fees, continuing fees and advertising fees are commonly payable by the franchisee. Franchisees are often required to spend a certain amount on advertising.

Interest can be charged up to 10% to 12%, depending on the form of credit granted.

Term of agreement and renewal

19. Are parties free to agree on the term of the franchise agreement? What is the typical term of a franchise agreement in your jurisdiction?

The maximum duration of a contractual obligation depends on the restrictiveness of the obligation. Five years is a usual period for a local franchise agreement. However, in the case of substantial investments, franchise agreements may remain in force for ten to 15 years or longer. Contracts containing a term of more than 20 years would likely be considered illegal. In addition, the competition law may also limit the contractual term in some circumstances.

 
20. What rights of renewal are usually included in the franchise agreement? Are fees paid on renewal?

Franchisors often follow an initial fixed term, with automatic renewal if the agreement is not properly terminated. However, franchisors are advised to take possible limitations of competition law into account. Generally (exceptions are possible), an agreement with a term of more than five years is considered as limiting competition considerably. Therefore, there must be conclusive justification if a franchise agreement is to be entered into for more than five years (EU competition law applicable to vertical agreements may also be relevant).

There is no legal obligation for the franchisor to renew a franchise agreement. Under the general principle of freedom of contract, there is no general obligation to conclude an agreement with a third party. An exception might be seen in particular cases where, for instance, one party is in a dominant position according to the Swiss Cartel Law. However, this does not amount to general principle for renewal obligations.

A franchise agreement with a fixed term automatically ends on the agreed date if an extension of the contract is not provided.

Termination

21. Are there any limitations on the right of a franchisor to terminate the agreement?

A franchise agreement with a fixed term automatically ends on the agreed date if an extension of the contract is not provided. In any case, and as a mandatory principle of Swiss law, the termination of a franchise agreement is always possible with immediate effect for an important or valid reason. This right exists to the same extent for a franchisee. Important reasons are not legally defined. Generally, in accordance with common practice of the Federal Court of Switzerland, important reasons exist that could justify an early termination of a franchise agreement when:

  • The contract is materially or lastingly violated.

  • Financial obligations are materially not fulfilled.

  • Other contractual provisions which materially affect the franchise relationship are infringed.

Liquidated damages clauses are in general enforceable.

A few years ago the Federal Court of Switzerland granted post-term compensation for clientele of an exclusive distributor (BGE 134 III 497, [2008]). The Federal Court of Switzerland applied Article 418 u. of the Swiss Code of Obligations by analogy to an exclusive distribution agreement. Article 418 u. of the Swiss Code of Obligations grants an agent an inalienable right to adequate compensation, to the extent that such compensation is not inequitable, where both the:

  • Agent has substantially increased the principal's clientele.

  • Principal benefits substantially from the business relations with the acquired clientele

This provision is similar to the position under Directive 86/653/EEC on self-employed commercial agents.

It was argued in the case that the distributor was extensively integrated into the supplier's distribution network and that the supplier had access to the clientele/database of customers and was therefore in a position to substantially benefit from the former business activities of the distributor. According to widespread legal opinion, the situation is usually fairly similar between a franchisee and franchisor, and therefore a franchisee should be entitled to adequate compensation for the business relationships it develops. So far, the Federal Court of Switzerland has not decided a case on franchise agreements. However, it is expected that similar reasoning will be applied to distribution agreements in general, including franchise agreements.

If a franchisee has taken over an existing business from a former franchisee, it is advisable to address this issue in the franchise agreement. It should be made clear what clientele already existed when the franchise agreement was concluded.

By analogy with Article 418u of the Swiss Code of Obligations, a franchisor can further argue that no claim exists if the franchise relationship was terminated for reasons for which the franchisee was responsible.

 
22. Are post-term restrictive covenants enforceable?

Post-term non-compete obligations are permitted. However, a few restrictions must be observed:

  • The prohibition must be reasonably limited in terms of place, time and subject to avoid being an unreasonable impairment of the franchisee's economic prospects. By analogy with Article 340a of the Swiss Code of Obligations, a judge can in his discretion limit an excessive prohibition against competition, taking into account all circumstances and giving due consideration to the franchisor's contributions (if any).

  • Post-term non-compete restrictions can only be imposed within the limitations of competition law. Swiss Competition Law (and the equivalent EU regulations) permit post-term non-compete obligations only if they:

    • refer to products or services which compete with contractual products or services of the franchise system;

    • are limited to premises or real estate which were used by the franchisee as business premises during the contractual term;

    • are indispensable to protect the franchisor's know-how; and

    • are limited to a period of one year after termination of the agreement.

  • According to some legal opinion, the franchisor must also pay adequate compensation for a post-term non-compete obligation imposed on the franchisee. This is argued by analogy to agency law where an agent has an inalienable claim for adequate compensation for post-term non-compete obligations. For the time being, there is no precedent decided by the Federal Court of Switzerland on this point.

 
23. Can the franchisor or a replacement franchisee continue to sell to the former franchisee's customers?

Choice of law and jurisdiction

24. Will local courts recognise a choice of foreign law in a franchise agreement for a business operating in your jurisdiction?

Choice of law provisions are permitted, although a choice of law must not be imposed in bad faith.

 
25. Will local courts recognise a choice of foreign jurisdiction in a franchise agreement for a business operating in your jurisdiction?

The local courts recognise a choice of foreign jurisdiction, although it must not be imposed in bad faith.

 

Operations Manual

26. How does the franchisor ensure that the franchisee complies with the business standards, systems and requirements?

A franchisor will ensure that the franchisee complies with the business standards, systems and requirements by:

  • Providing practicable advice.

  • Good monitoring and controlling.

  • The provision of practicable and useful Operations Manuals.

 
27. Can the franchisor change the Operations Manual unilaterally, as is usually required?

The franchisor can change the Operations Manual unilaterally, as long as this is specifically allowed in the franchise agreement and no material changes are made to the franchise systems.

 

Liability issues

28. What are the franchisee's remedies against the franchisor for deceptive or fraudulent selling practices?

The franchisee's remedies against the franchisor for deceptive or fraudulent practices include termination of the franchise agreement and claims for damages.

 
29. How can third-party claims against the franchisee be brought successfully against the franchisor?

Indemnity

Franchisees are considered legally independent entrepreneurs and are therefore liable for their own operations towards their customers. However, this must be assessed on a case-by-case basis. A franchisee may be considered as an employee under social security or employment law, according to the individual restrictions imposed on him in the franchise agreement. If so, the franchisee's operation may be considered as a branch of the franchisor instead of an independent operation and the franchisor may become liable as a consequence.

Therefore, a franchisor should take adequate precautions in the way the franchise agreement is structured, in the franchise system itself, and in the way the franchisee's operations are communicated to third parties, to avoid any liability for a franchisee's operations.

If a franchisor is a manufacturer of contractual products or is considered a manufacturer by labelling the products with its names or brands, it can become liable under the relevant product liability regulations. Claims can therefore be brought directly against a franchisor.

Franchise agreements usually contain hold-harmless and indemnity clauses under which the franchisee indemnifies and holds the franchisor harmless from any third party claims in connection with the franchisee's operations.

The issue of the franchisee's independence from the franchisor is usually addressed when stationery is defined, name plates of the franchisee's business premises are produced or other methods of communication towards third parties are addressed.

Franchisors should conclude insurance agreements in case customers and/or franchisees claim damages for faulty products or improper franchise systems.

Precautions

See above, Indemnity.

 

Intellectual property

30. What provisions are usually made in relation to intellectual property rights (IPRs), including know-how?

The franchisor's know-how and IPRs can be protected in various ways and are addressed in the franchise agreement as follows:

  • IPRs such as trade marks and patents can be registered in the relevant register in Switzerland (by way of direct registration or by extension under the Madrid system for the international registration of marks).

  • Know-how must be adequately addressed and protected in the contractual arrangement between the franchisor and the franchisee.

  • In certain circumstances, both IPRs and know-how can be protected under the regulations of Unfair Trade Law, such as where the franchisee copies elements of the system guidelines provided to it by the franchisor.

The following issues are usually addressed in detail in the franchise agreement:

  • Scope of the IPRs covered by the franchise agreement.

  • Remedies and procedures if rights of the franchise system are infringed by third parties.

  • Remedies and procedures if rights of the franchise system infringe third parties' rights.

  • Representations and warranties (if any) with regard to licensed IPRs.

  • Discretion for the franchisor to change licensed IPRs when changing the business or operational system of the franchise.

 
31. What are the registration requirements for licensing IPRs?

Registration of the trade mark (not the franchise agreement) with the Swiss Trademark Register is highly recommended. No short-form licence agreement is required.

 

Real estate

32. Are consents from landlords difficult to obtain when transferring leases or granting subleases from a franchisor to a franchisee?

There are no particular issues when obtaining consents from landlords when transferring leases or granting subleases from a franchisor to a franchisee.

 
33. How can a franchisor prevent the franchisee from occupying the premises after the franchise agreement has ended?

If a franchisor retains real estate and permits a franchisee to use the real estate as business premises for the term of the franchise agreement, this issue should be carefully addressed in the franchise agreement itself. If a franchisor enters into a separate sub-lease agreement linked with the franchise agreement to make the term of the lease coterminous with that of the franchise agreement, this can allow the franchisee to claim protection rights under lease law (for example, by extension of the term). It should be made clear that a lease arrangement where a franchisor permits a franchisee to use business premises is ancillary to the franchise agreement, in order to ensure the individual protection rights of a lessee under lease law are not applicable. This was particularly noted by the Swiss Federal Court in its decision BGE 118 II 157 ff. As a consequence, the franchisee would not be able to use the business premises after termination of the franchise agreement. The franchisor can then require the franchisee the leave the premises, both on the basis of the franchise agreement and in its position as main lessee of the business premises.

 
34. How can the franchisor effectively acquire the franchisee's premises at the end of the franchise relationship?

If the franchise strategy and business model requires the franchisee to acquire real estate or to enter directly into a lease agreement, the franchisor's interest in claiming the rights on the real estate and in taking possession of it after termination of the franchise agreement must be secured. This can be done in various ways, depending on whether the franchisee acquires the real title of the real estate itself or is just a lessee of the premises.

Contracts confirming the right of purchase of real property require a notarised deed to be valid. The contract or option is usually also registered in the Land Register in order to make it enforceable against third parties.

The purchase contract or option can provide for valuation and determination of the price of the real estate. The parties can specify the value (with the exception of the situation where there is an obvious disparity between the respective considerations and the conclusion of the agreement was achieved through one of the parties exploiting the distress, inexperience or improvidence of the other (Article 21, Swiss Code of Obligations). There are no mandatory provisions requiring any goodwill or ongoing payments.

In cases where the franchisee is lessee of the business premises, franchise agreements usually address this issue by providing the right of the franchisor to enter into the lease agreement of the franchisee on termination of the franchise agreement. Because the transfer of a lease agreement requires approval of the lessor (see Question 3) it is recommended to address this issue with the landlord of the business premises before conclusion of the franchise agreement.

 
35. If the franchisor leases or subleases its own site to its franchisee, can it pass on all related costs to the franchisee? Can the franchisor charge its franchisee tenant a rent expressed as a percentage of the franchisee's sales?

In principle, common ongoing and usual costs for care and repair can be passed on. Percentage-based rent is allowed.

 

Competition law

36. What is the effect of competition law rules on franchising agreements? Are there any available exemptions?

Competition law

The Swiss Cartel Law contains a number of provisions directly affecting vertical agreements, including agreements between suppliers and distributors such as franchise agreements. Since vertical agreements can also constitute a cartel, these provisions must be carefully respected.

Article 5 of the Swiss Cartel Law sets out a presumption of the elimination of effective competition if agreements in distribution contracts regarding the allocation of territories exclude passive sales and/or give minimum and fixed resale-prices. The Law may be relevant to typical contractual provisions in franchise agreements, such as restraints on infrastructure, competition clauses, marketing provisions or product tie-ins.

Tie-in restrictions are considered a limitation on entrepreneurial freedom and therefore a restriction of competition. Agreements are unlawful if they (Article 5, Swiss Cartel Law):

  • Significantly affect competition in the market for certain goods or services, and are not justified on the grounds of economic efficiency.

  • Lead to the suppression of effective competition.

Exemptions

See above, Competition law as regards justification on the grounds of effectiveness.

Online/e-commerce restrictions

In principle, a franchisor cannot prevent its franchisee from having its own website presence. Exceptions must be carefully addressed.

 

Employment issues

37. Can a franchisee be regarded as an employee of the franchisor?

Franchisees are considered legally independent entrepreneurs and are therefore liable for their own operations towards their customers. However, this must be assessed on a case-by-case basis. A franchisee may be considered as an employee under social security or employment law, according to the individual restrictions imposed on him in the franchise agreement. If so, the franchisee's operation may be considered as a branch of the franchisor instead of an independent operation and the franchisor may become liable as a consequence.

Therefore, a franchisor should take adequate precautions, for example in the way the franchise agreement is structured (no micro-management), the franchise system itself, and the way the franchisee's operations are communicated to third parties, to avoid any liability for a franchisee's operations.

 

Dispute resolution

38. How are franchising disputes typically dealt with? What provisions for handling disputes are usually included in domestic franchise agreements?

Arbitration is acceptable as the exclusive remedy for resolving disputes. It is often seen as more focused, professional and timely than ordinary court proceedings.

Under Article III of the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention), any arbitral award based on franchising agreements must be recognised by a competent Swiss court in the course of the enforcement of the agreements. Enforceability can only be prevented for reasons laid down in the New York Convention, which are not normally relevant in a franchising context.

 
39. How are foreign judgments or foreign arbitral awards enforced locally?

Switzerland is a signatory to the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 and therefore arbitration awards rendered outside of Switzerland are generally enforceable.

The enforcement of judgments from outside of Switzerland is assessed in accordance with the Swiss International Private Law. Under Article 25 of the Swiss International Private Law, foreign decisions are recognised if all the following requirements are satisfied:

  • The jurisdiction of the courts or authorities of the state in which the decision was rendered was established.

  • No ordinary appeal is available against the decision or it is final.

  • There is no ground for refusal under Article 27 (this mainly includes ordre public mandatory public policy reasons).

A recognised decision is declared enforceable on request of the interested party (Article 28 ff, Swiss International Private Law) and is then enforceable.

The enforcement of most European judgments is assessed in accordance with the Lugano Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters 2007 (Lugano Convention). Judgments of a member state of the Lugano Convention are generally recognised in another member state (except for contraventions of mandatory public policy) (Article 33 ff, Lugano Convention). A judgment which was declared enforceable in the member state in which it was decided is enforceable in another member state (except for contraventions of mandatory public policy) (Article 38 ff, Lugano Convention).

 

Exchange control and withholding

40. Are any exchange control or currency regulations applicable to payments to an overseas franchisor?

There are no applicable exchange control or currency regulations.

 
41. Is there a withholding obligation on payments made to an overseas franchisor?

Initial and ongoing fees are typically characterised as royalties, in particular with regard to their tax treatment. However, there are currently no withholding taxes levied on royalties paid by Swiss franchisees to a foreign franchisor.

 

Reform

42. Are there any proposals to reform the laws affecting franchising?

There are no current reform proposals affecting franchising.

 

Contributor profile

Christoph Wildhaber, Partner

Streichenberg Attorneys at law

T +41 44 208 25 25
F +41 44 208 25 26
E christoph.wildhaber@streichenberg.ch
W www.streichenberg.ch

Professional qualifications. Dr. iur. HSG, University of St. Gallen, 1991; Switzerland, Attorney-at-law (admitted to the bar), 1992

Areas of practice. Commercial and corporate law; national and international distribution, especially franchise, licence and tax law; legal organisation; drafting and negotiation of franchise agreements and other related agreements.

Recent transactions

  • Various distribution outsourcing projects by means of international master franchise and development agreements, multimillion US$ volumes each, 20 year deals.
  • Private equity investment in a Swiss start-up company developing online games; interest value multimillion US$.
  • Following a private equity investment in our client's franchised company (which we also supported during the transaction from due diligence, through negotiations of the transaction up to closing and post-acquisition issues) the company decided to purchase back a number of previously franchised operations, up to multimillion CHF volume each.

Languages. German, English, French and some Swedish

Professional associations/memberships.

  • Zurich Bar Association.

  • Zurich, Swiss and International Bar Associations (member).

  • International Franchising Committee of the International Bar Association (member).

  • Eurofranchise Lawyers (member).

  • Swiss Franchise Association (general manager).

Publications. Frequent lecturer and author of various publications on the subject of distribution law.


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