IN BRIEF:
SWISS FEDERAL TRIBUNAL BACKS BANK ON EXECUTION-ONLY RETROCESSIONS

In a decision designated for publication, the Swiss Federal Tribunal has confirmed that a bank operating on an execution-only basis is not required to remit distribution commissions to its client — resolving a question the Court had previously left open and offering the clearest guidance to date on where the duty to account ends in non-advisory relationships.

BACKGROUND

The assignee of a former private banking client sought restitution of approximately CHF 31,000 in distribution commissions received by the bank between 2010 and 2017, in connection with collective investment schemes and structured products. The client had operated on a purely execution-only basis: she selected her own investments, and the bank’s role was limited to carrying out her instructions. Both the cantonal courts and the Federal Tribunal dismissed the claim.

THE COURT’S ANALYSIS

The central question was whether the commissions were obtained “within the scope” of the performance of a mandate — making them restitutable under Art. 400(1) CO — or merely “on the occasion” of it, which they are not. The Court held that this boundary is mainly drawn by a single test: the prevention of conflicts of interest.

In an execution-only relationship, that risk was deemed to be absent. The bank exercised no discretion over investment decisions — those belonged entirely to the client. The client was experienced, chose her own products, and had been informed through amended general conditions in 2011 of the approximate level of the payments. The commissions were characterised as compensation for the bank’s distribution network and infrastructure, not as classic retrocessions tied to advisory influence. With no ability to steer investment decisions, there was no conflict to prevent and no intrinsic link to the performance of the mandate.

POINTS TO WATCH

• Venue and broker selection: The Court appears not to have completely ruled on conflicts arising from the choice of trading venue or broker, which could leave a slight opening for future claimants.
• No blanket rules: The conflict-of-interest criterion appears to cut both ways: neither a systemic duty to restitute nor a blanket cost-compensation defence will suffice on its own, as the test calls for a concrete appraisal of whether the remuneration could in fact have influenced the bank's conduct.
• FinSA signal: Although the facts predate the Financial Services Act, the Court indicated — in an obiter remark — that the same conflict-of-interest lens should guide the interpretation of Art. 26 FinSA. This may, over time, narrow the reading previously drawn from the legislative materials.

At SKANDAMIS AVOCATS, we advise banks and financial institutions on regulatory, contractual and contentious matters, including the structuring of client relationships, cross-border issues, and the management of legal and reputational risk under Swiss law.