Mediation as International Trend

With the  incorporation of  ombudsman / mediation organ provisions in FinSA, Switzerland follows the international trend of alternative dispute resolution in the financial sector. For example, the G20 High-Level-Principles on Financial Consumer Protection (2011) state that “jurisdictions should ensure that consumers have access to adequate complaints handling and redress mechanisms that are accessible, affordable, independent, fair, accountable, timely and efficient”. The World Bank released “Fundamentals for a Financial Ombudsman” (2012). Consumer dispute resolution is also an important topic in the European Union: the main documents are the Directive 2013/11 on Alternative Dispute Resolution for Consumer Disputes and the Regulation 524/213 on Online Dispute Resolution for Consumer Disputes; since February 2016, the Online Dispute Resolution (ODR) platform is in operation.

Ombudsystems can be found in the following countries, for example: The United Kingdom implemented the Financial Ombudsman Service (FOS) by the Financial Services and Markets Act in 2000, replacing eight previous Ombudsman Bureaus; this system survived the shift of the regulatory supervision in 2010. In Australia, financial intermediaries are obliged to implement an internal complaints mechanism; thereafter, a not settled dispute can be submitted to the Australian Financial Complaints Authority. Japan knows a less developed alternative dispute settlement regime with a Financial Services Agency.

Some countries have implemented a mediation or arbitration framework for disputes between financial intermediaries and their customers: In Hong Kong, the Financial Dispute Resolution Center has been handling small disputes fast, at low costs and impartially since 2012. In Singapore, the Financial Industry Dispute Resolution Center was established in 2005 implementing a three steps dispute resolution scheme. In the United States, several mediation/arbitration organizations exist; the most well-known is the Financial Industry Regulatory Authority.

Scope of Application and Obligations of Financial Intermediaries

The new provisions on the ombudsman regime (arts. 74-86 FinSA and arts. 98-101 and 107 of its Ordinance) have a broad scope of application: all financial services providers active in Switzerland or providing services to clients based in Switzerland are obliged to affiliate with an ombudsman / mediation organ. The term “provider” also encompasses all financial institutions which are regulated in the simultaneously implemented Federal Act on Financial Institutions. Consequently, not only banks, security dealers and organizers of collective investment schemes, but also asset managers, trustees, family offices or client advisers providing financial services in Switzerland fall under the new regime. The affiliation with an ombudsman / mediation organ must be done until the end of 2020.

This obligation to affiliate (art. 77 FinSA) with such an organ includes the future obligation to participate in the respective ombudsman proceedings. In concrete terms, the financial services providers are bound to contribute to the establishment of the factual background of the dispute as well as to actively conduct the negotiations (art. 78 FinSA). Furthermore, the financial services providers have the duty to inform their customers about the possibility to initiate ombudsman proceedings (art. 79 FinSA).

Finally, the Swiss legislator wants to implement a privately financed ombudsman / mediation regime; therefore, financial services providers are obliged to finance the costs of the ombudsman / mediation organ in general as well as the specific costs of an ongoing dispute settlement proceedings (art. 80 FinSA).

Procedural Principles

According to art. 75 para. 1 FinSA, the proceedings should be straightforward, fair, quick, impartial and inexpensive (or even free of charge) for the customers. Furthermore, confidentiality is an important aspect of the proceedings. Statements made during the mediation proceedings may not be used in a later ordinary court or arbitration procedure (art. 75 para. 2 FinSA). Therefore, no party has a right to get access to the correspondence between the ombudsman / mediation organ and the other party (art. 75 para. 3 FinSA).

The FinSA gives a relatively broad discretion to the ombudsman / mediation organ who has the right to design the concrete procedural steps. However, each organ is obliged to issue procedural regulations which are subject to recognition by the government.

Ombudsman / mediation proceedings are possible if a previous attempt to directly settle the matter between the financial services provider and the customer has failed and if the dispute is not pending with any other jurisdictional body. As mentioned, the financial services provider is obliged to participate in the proceedings; in contrast, the customer is not subject to such a duty if he/she is a “defendant”. Any kind of legal claim relating to the financial services can be submitted to the ombudsman / mediation organ.

The objective of the ombudsman / mediation proceedings is to reach an amicable settlement and the organ, as customary in mediation proceedings, does not have any right to make a binding decision. However, if no settlement can be reached, the organ has the possibility to give the parties its own factual and legal assessment of the dispute based on the information available and include it in the notification of conclusion of proceedings (art. 75 para. 8 FinSA).

A pending ombudsman / mediation proceeding does not deprive the parties from initiating a claim or complaint with the ordinary courts. In such court procedures the parties do have all procedural rights and guarantees as per art. 6 of the European Convention on Human Rights. If an ombudsman / mediation proceeding is pending and in parallel a court action is initiated, the claimant is entitled to waive the settlement meeting in the ordinary court proceedings with the peace judge as per art. 197 Swiss Civil Procedure Act.

Recognition of Ombudsman / Mediation Organ

As mentioned, the ombudsman / mediation organ must be in place prior to the end of 2020 since financial services providers are obliged to become affiliated with such an organ during this year. The Swiss Chambers’ Arbitration Institution (SCAI), best known for its arbitration and mediation services, was recognized by the Swiss Federal Finance Department as ombudsman / mediation organ on 5 August 2020 (art. 85 para. 1 FinSA). SCAI is now offering the respective services according to the Rules of Mediation Procedure for Financial Services. Foreign services providers may also include in their contracts a mediation / arbitration clause referring to SCAI and the SCAI Rules of Mediation Procedure for Financial Services, or agree with their clients to refer thereto once a dispute arises; dedicated model clauses can be found on the SCAI website (www.swissarbitration.org).