SWITZERLAND Trends and Developments Contributed by: Andrew M. Garbarski, Massimo Chiasera and Louis Frédéric Muskens, Bär & Karrer Ltd
As a result, written communications between a cli - ent (who is not the target of a criminal investigation) and a US law firm, for instance, are not protected by attorney-client privilege if the information is seized by a Swiss prosecution authority. Consequently, such information may be accessed and exploited by the authority. This can be of relevance in the context of cross-border internal investigations in which non- Swiss/EU/EFTA lawyers are involved. Moreover, where the purpose of an internal investiga - tion is to assess a supervised entity’s compliance with AML rules and regulations, attorney-client privilege might not afford an absolute protection, even for Swiss lawyers. Indeed, according to case law, whenever an external counsel is tasked with an internal investi - gation related to the AML compliance of a financial institution, these fact findings amount to a delegation of the supervised entity’s core AML duties, and attor - ney-client privilege does not extend to this portion of the mandate (FSC 150 IV 470; FSC 1B_85/2016 of 20 September 2016). This is particularly true where law - yers perform compliance tasks (including the moni - toring/controlling and documenting thereof) that are typically the duty of the bank itself (and are therefore being carried out on behalf of the bank). Such work products are not deemed privileged (FSC 150 IV 470; FSC 1B_433/2017 of 21 March 2018). However, in two recent decisions (FSC 150 IV 470 and FSC 7B_874/2023, both dated 6 August 2024), the FSC addressed critical issues regarding the appli - cability and scope of legal privilege in internal inves - tigations. As set forth below, the FSC affirmed the applicability of attorney-client privilege to internal investigation reports and resolved some uncertain - ties arising from earlier FSC-rulings. The FSC also found that a voluntary disclosure of such findings to a regulator does not necessarily constitute a waiver of client-attorney privilege. However, the FSC further held that attorney-client privilege does not extend to a third party to whom documents have been voluntarily disclosed (see also 7B_691/2024 and 7B_796/2024 of 7 February 2025 paragraph 5.2.3). In these cases, the bank was able to successfully assert attorney-client privilege. However, the Prosecutor’s Office was still able to obtain the information it sought from FINMA,
especially as this information was derived from, but did not include, the privileged documents themselves. Both FSC decisions originate from proceedings of the Public Prosecutor’s Office of the canton of Zurich against an individual as well as unknown participants within a bank, regarding alleged violations of the Federal Act on Unfair Competition (UCA). The bank had mandated a law firm with conducting an internal investigation into the matter. The first decision (FSC 150 IV 470) deals with the law firm’s investigation report, which the Prosecutor’s Office requested from the bank. The bank produced the report but requested that it be sealed on grounds of legal privilege. The ensuing unsealing request was denied by the District Court. Upon appeal by the Prosecutor, the FSC upheld the lower court’s deci - sion, confirming the applicability of attorney-client privilege to internal investigation reports. In short, the FSC stated that: • in order to be protected by privilege, an activity needs to fall within the typical activities of lawyers (not compliance tasks or business management etc); • the fact-finding contained in the internal investiga - tion report was directly related to legal representa - tion in ongoing or impending litigation, and as such constituted a typical activity of a lawyer and a vital part of any effective representation; • while the raw data pool of original internal bank documents is not protected by attorney-client privi - lege, the process of review, analysis and selection of documents by lawyers qualifies them as a work product that warrants legal privilege; and • sharing confidential information with selected third parties does not make the information public or indicate that the person sharing it intends to make it generally accessible. However, the FSC went on to state that whether a third party can be compelled to testify or hand over documents is a distinct issue. Generally, if confidential information is voluntarily shared with a third party, it leaves the scope of the protected attorney-client rela - tionship, meaning that attorney-client privilege does
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