1.1 What are the main trends/significant developments in the project finance market in Switzerland?
The project market in Switzerland is focused on infrastructure projects in the areas of transport, energy, water, waste disposal and leisure. At present, many infrastructure projects are financed by public funds. It is expected that population growth and rising mobility will keep the demand for infrastructure and transport related construction high and will confront the public sector with increasing need for structured finance.
In addition, as from 2012, Switzerland has introduced a hospital financing system, known as a DRG (Diagnosis Related Groups) based system. This system also includes investment allowances in the case-based tariffs. As a result, the cantons must cease providing government deficit guarantees and bargain loans to public hospitals. Project finance schemes may become a valid solution to the provision and financing of infrastructure investment in this area.
1.2 What are the most significant project financings that have taken place in Switzerland in recent years?
In 2010, the project "Neumatt Burgdorf" set a landmark as Switzerland's first Public Private Partnership project which was carried out based on international project finance standards. The project encompasses the demolition of old buildings, as well as planning, financing, construction, and operation of administrative premises and of a prison (110 beds). Neumatt Burgdorf was explicitly designated as a pilot project and it is expected that other public bodies will initiate projects on their own. Moreover, substantial project financing schemes have been established for data centres and in the energy sector.
2.1 Is it possible to give asset security by means of a general security agreement or is an agreement required in relation to each type of asset? Briefly, what is the procedure?
In Switzerland, asset security is commonly given either by pledge or by assignment or transfer for security purposes. A pledge grants the security holder a limited right in rem over an asset. The security holder (or a third party) will take possession of the pledged assets while the security provider retains ownership. The following assets may be pledged: (i) real estate property; (ii) movable assets (e.g. equipment, certificated shares); and (iii) claims and rights. In contrast to the pledge, the assignment or transfer for security purposes is a security under which full ownership of the asset is transferred to the security holder. The latter is, however, contractually obliged to re-assign/re-transfer the ownership to the security provider in accordance with the terms of the security agreement. Claims and rights may be assigned for security purposes while movable assets are transferred for security purposes.
Under Swiss law, the valid creation of a pledge or an assignment/transfer for security purposes requires that: (i) the security provider and the security holder conclude a security agreement whereby the security provider undertakes to pledge or transfer/assign for security purposes certain specified assets (so-called Verpflichtungsgeschaft) to the security holder; and (ii) the specific actions necessary for the perfection of the security interest for each type of asset are taken (e.g. a declaration of pledge/assignment, delivery of shares, recording with the real estate register) (so-called Verfugungsgeschaft). It is therefore possible to give asset security by means of a general security agreement if and to the extent that the specific actions necessary to perfect it are performed. In practice, the parties enter into separate agreements for each specific assets.
Swiss law distinguishes between accessory (the pledge) and nonaccessory (the assignment) security. A prerequisite for a valid "accessory security" is that the secured parties must be identical with the creditors of the secured claim. This implies that a pledge cannot be granted to a third party security holder acting in its own name and for its own account. The pledge must instead be given to either each creditor of the secured claim or to a third party agent acting as direct representative in the name and for the account of all secured parties. In contrast to accessory security, non-accessory security may be granted to a third party security agent, who will hold such non-accessory security as fiduciary in its own name but for the benefit of all secured parties.
Registration of the pledge or assignment/transfer for security purposes is not required for the perfection of a security interest except for certain assets such as for instance airplanes, ships or real estate property. As a matter of Swiss law, even pledges over IP do not require registration to be validly created. However, if not registered, the IP may be acquired by a bona fide third party acquirer, in which case the pledge would become extinct.
2.2 Can security to be taken over real property (land), plant, machinery and equipment (e.g. pipeline, whether underground or overground)? Briefly, what is the procedure?
It is possible to grant security over real property, plant, machinery and equipment. Swiss law distinguishes between movable and immovable assets. Movable assets comprise all property that does not qualify as immovable, for example machinery, inventory or equipment.
If movable assets are not permanently attached to an immovable asset, they may be pledged or transferred for security purposes - although in practice the pledge is the most widely used type of security. The creation of a pledge or a transfer for security purposes requires that (i) the security provider and the security holder conclude a written security agreement which clearly specifies the pledged assets, and (ii) the security provider does not retain the exclusive possession of the movable assets (so-called depossession requirement). The last condition is satisfied by either (a) the security provider handing over the assets to the security holder, or (b) if the movable assets are in third party's possession, the security provider notifying the third party possessor that the movable assets have been pledged. Because of this requirement, equipment, machinery or inventory is generally not taken as security. Specific rules apply to certain movable assets, such as ships, railroads or aircraft, where the security is perfected by the entry of the security in the respective register. Security over intermediated securities is subject to the provisions of the Federal Act on Book-entry Securities.
Immovable assets comprise in particular real property (i.e. land, including any fixed buildings). The two most common forms of security over real property are the mortgage note and the mortgage. To be valid, both forms require the conclusion of a mortgage agreement (a public deed), registration in the land registry and, if in certificated form, the hand-over of the certificate(s) (duly endorsed in case of a registered mortgage note). The mortgage note is issued in bearer form (Inhaberschuldbrief) or registered form (Namenschuldbrief). Generally, the mortgage note is the preferred security interest due to its nature as a tradable security which can itself be sold and pledged. As of 1 January 2012, mortgages may also be established by means of a registered mortgage certificate. Registered mortgage certificates are easily transferable instruments and may also be pledged.
2.3 Can security be taken over receivables where the chargor is free to collect in the receivables in the absence of a default and the debtors are not notified of the security? Briefly, what is the procedure?
Receivables are considered to be claims and rights as a matter of Swiss law. The most efficient way to take security over receivables is by way of an assignment for security purposes. In particular circumstances, a pledge may be considered as well, but generally the assignment for security purposes is considered to be more robust (a pledge is especially avoided in situations where the secured party and the third party debtor of a claim are or may become identical as this would result in a receivable becoming extinct).
No assignment (for security purposes) is possible where the underlying agreement contains a ban on assignment. An assignment is possible where the underlying agreement is silent on that question. It is customary to obtain representations and warranties to this effect. However, if certain receivables are of very particular relevance, one should consider reviewing the underlying agreements.
The assignment for security purposes requires a written agreement between the assignor and the assignee that specifies the receivables. No notarisation or other involvement of official authorities is required. Future rights and claims can be assigned as well, provided the specification in the agreement allows for identification of the claims and rights when coming into existence; the perfection will however only occur upon such receivables coming into existence and, upon the opening of bankruptcy over the assignor, receivables coming into existence thereafter would no longer be assigned, but will become part of the bankrupt estate.
Notification of the third party debtor is not a perfection requirement (i.e. the assignment would be valid in an insolvency scenario). The assignment can thus be "silent". However, prior to notification, the third party debtor may still validly discharge its obligations towards the assignor. It is customary to agree that (i) the assignor is allowed to continue to collect in the receivables as long as no event of default occurs, and (ii) that the assignee can notify third party debtors upon the occurrence of an event of default. Note that certain authors take the view that an assignment is only effective if the assignee has the contractual and factual ability to notify the third party debtors of the assignment at any time.
Receivable lists (with...