Navigating Monitorships in Switzerland: Recent Developments, Challenges and Trends.

What is the Swiss context of monitorships?

Joel Fischer: Compliance monitorships in the US sense, such as those included in Non-Prosecution or Deferred Prosecution Agreements, are not part of the Swiss criminal law framework. However, the Swiss Financial Market Supervisory Authority (FINMA) utilizes a similar mechanism administratively, appointing "investigating agents" for enforcement proceedings or supervisory measures in the financial sector. These agents generally have a more narrowly defined mandate compared to foreign compliance monitors.

Additionally, Switzerland experiences the influence of foreign compliance monitors. Swiss companies or foreign companies with Swiss subsidiaries can be subject to monitorships imposed by foreign authorities, such as the United States. This has been evident in cases of Swiss banks monitored by US authorities during the tax disputes from 2014 onwards, and the Glencore case in 2022, where the US Department of Justice appointed compliance monitors.

Moreover, multilateral development banks, including the World Bank, employ monitorships in their sanctions’ regimes. These monitors assess whether companies excluded from World Bank-financed projects are complying with the conditions for re-participation in these projects, like implementing appropriate compliance programs. An example in the Swiss context is Alstom, which installed an independent compliance monitor following a settlement with the World Bank.

The Swiss blocking statute prohibits under criminal consequences any person from carrying out certain activities on behalf of a foreign state on Swiss territory without permission by the Swiss government

What are the main legal challenges you foresee arising from holding a monitorship, and how do you address them?

Saverio Lembo: From a legal point of view, there are several challenges to consider – notably in cross-border settings. First, the Swiss blocking statute prohibits under criminal consequences any person from carrying out certain activities on behalf of a foreign state on Swiss territory. However, the Swiss Government can, upon request, grant permission that excludes criminal liability. It is thus of essence to assess at an early stage whether permission must be obtained from the Swiss government.

Second, (foreign) monitors must comply with other Swiss law provisions relevant in the context of a monitorship, notably compliance with duties under data protection, employment law and certain secrecy obligations. Such questions arise for example in the context of interviews conducted with Swiss employees or the transfer of the monitor’s work products abroad. To this end, it is standard practice that foreign monitors retain Swiss counsel to ensure that the monitor has an independent advisor on Swiss law issues. Bär & Karrer is active in this regard, and Eric Stupp and I have been appointed by US and Swiss authorities as members of a monitorship team.

Could you explain the operational modalities of a monitorship? How are decisions made and enforced?

SL: A monitorship’s operational modalities involve a combination of defined responsibilities and collaborative planning between the monitoring agent and the monitored company. For agents appointed by FINMA, their tasks are outlined in the enforcement order. For foreign compliance monitors, the duties are usually specified in an agreement between the requesting institution and the agreeing company, with further details in an engagement letter. In most cases, the monitor drafts a comprehensive work plan, crucial for both parties, to guide the review process. Monitorships are resource-intensive, often necessitating the monitored company to have a dedicated team to coordinate and respond to the monitor's requests. In terms of decision-making and questions of enforcement, the monitor typically has the power to assess compliance, recommend corrective actions, and monitor their implementation. However, the ultimate decision-making authority regarding legal consequences or regulatory measures lies with the respective governmental authorities, whether Swiss or foreign.

Foreign compliance monitors in Switzerland... have been evident in cases like Swiss banks monitored by US authorities during the tax disputes from 2014 onwards and the Glencore case in 2022.

Do you believe specific cases have set a precedent for future monitorships inside and outside the financial sector in Switzerland?

JF: In the context of foreign compliance monitorships, the plea agreements between Glencore group companies and the DOJ have established a precedent beyond the financial sector in Switzerland. Glencore, being the inaugural non-financial company subjected to a major DOJ mandated monitorship, marks an interesting development for monitorships within Switzerland. This precedent outside the financial sector in Switzerland has the potential to raise awareness of foreign – notably US – expectations and standards for corporate compliance programs across diverse industries within Switzerland.

How do recent monitorships represent the broader trends in international collaboration for compliance enforcement?

JF: Recent monitorships are in line with the continuing shift in the global regulatory landscape, emphasizing transparency and accountability. We see a trend of increased cross-border regulation and enforcement, particularly regarding transnational challenges like tax evasion, corruption and money laundering. In this respect, the fact that the Swiss government continues to issue permissions to foreign compliance monitors to act within the Swiss jurisdiction signals a shared commitment to upholding ethical business practices on a global scale.

The plea agreements between Glencore group companies and the DOJ have established a precedent beyond the financial sector in Switzerland.

What impact do you think monitorship have on the legal landscape in Switzerland, particularly regarding foreign state involvement?

SL: The impact of monitorship on the Swiss legal landscape, especially regarding foreign state involvement, requires a nuanced balance of interests. Swiss authorities, when considering permissions under the Swiss blocking statute, weigh Switzerland's interest in safeguarding its sovereignty and legal order against various public or private interests. In the cases to date, the Swiss authorities have found that cooperation in the area of law enforcement and the fight against crime are fundamental public interests of Switzerland and permitted foreign compliance monitors, among others, on this ground. However, this remains a case-by-case assessment.  Additionally, Swiss authorities often include a local lawyer as a liaison in these permissions to advise on Swiss legal matters.

The presence of foreign compliance monitors in Switzerland has sparked debate over the need for a legal framework for Swiss independent compliance monitors. In 2018, the Swiss Attorney General’s Office suggested incorporating Deferred Prosecution Agreements and the possibility of appointing monitors in the criminal procedure revisions. Although not adopted by the Federal Council, the idea remains relevant, with support from various members of the Swiss legal community. Establishing Swiss monitorships could boost foreign authorities’ confidence in the Swiss legal system and its compliance standards, potentially reducing the need for foreign-appointed monitors.