SWITZERLAND Trends and Developments Contributed by: Andrew M. Garbarski, Massimo Chiasera and Louis Frédéric Muskens, Bär & Karrer Ltd
not prevent the third party from being obliged to testify or produce such documents (see hereafter). In the very same matter, the Prosecutor’s Office also made a request to the bank’s regulator, FINMA, for documents pertaining to its enforcement proceed - ings, namely the enforcement order and the report of the investigation agent appointed by FINMA. This led to the second decision (decision 7B_874/2023 of 6 August 2024). The bank had invoked attorney-client privilege because FINMA’s documents were in part based on the internal investigation report and sup - porting documents which the bank had voluntarily provided to FINMA. The FSC ruled in favour of the Prosecutor’s Office, allowing the use of the docu - ments in the criminal investigation. The FSC stated that (i) legal privilege does not extend to a third party to whom information was voluntarily and deliberately disclosed, as it has left the attorney-client relation - ship and, (ii) as the disclosure was not elicited by the threat of coercive measures by FINMA, the disclosure qualified as voluntary in the present case. The bank’s argument that, while handing over the respective doc - uments to FINMA, it had explicitly stated that their co-operation did not constitute a waiver of the attor - ney-client privilege was not heard by the FSC which noted that the law allows FINMA to invoke supervisory privilege and that it can do so at its own discretion to take the disclosing party’s interests into account. Implications and outlook The most recent FSC decisions outlined above pro - vide a welcome clarification on the scope of the attor - ney-client privilege. The FSC has now made it clear that attorney-client privilege generally covers inter - nal investigations, including the establishment of the underlying facts and the pre-existing documents that have been analysed and selected by lawyers. Legal privilege certainly applies when the investigation is linked to ongoing or potential future legal dispute. Where interactions with regulatory authorities such as FINMA are concerned, the most recent FSC decisions emphasise and illustrate the risk connected to any vol - untary disclosure, by clearly stating that the attorney- client privilege does not extend to third parties and that it is at the sole discretion of FINMA whether to invoke regulatory privilege to oppose the sharing of
information and documents with prosecution authori - ties. The fact that the targeted documents were not the privileged work product itself, but rather docu - ments containing information derived from these privi - leged materials, may have been a detrimental factor in this second ruling which unlike the first decision has not been published in the official collection of the FSC. Conclusion There are many cases in which financial institutions engage outside counsel to conduct internal investiga - tions and prepare a report, frequently as part of their duty to cooperate with their regulator. Such reports are often ultimately forwarded to the prosecution authorities and are used as incriminating evidence in criminal proceedings. As a result, tensions may well arise regarding the fundamental right not to incrimi - nate oneself, as well as in relation to attorney-client privilege. The FSC has invoked the principle of the rule of law in explaining that upholding attorney-client privilege outweighs the prosecution’s interest in unhindered access to evidence (FSC 150 IV 470). This has been put into perspective by the second FSC decision (7B_874/2023 of 6 August 2024), where the court pri - oritised the smooth collaboration between regulatory bodies and criminal authorities. In doing so, case law might further deter supervised entities from maintain - ing an open discourse and collaboration with the regu - latory authorities regarding privileged documents. It remains to be seen whether this case law will increase the importance and frequency of supervisory privilege invoked by FINMA. Inadmissibility in Criminal Proceedings of Evidence Submitted to FINMA Introduction Criminal proceedings, particularly within the financial sector, are frequently initiated as a result of criminal complaints filed by FINMA following pre-enforcement or enforcement actions. Moreover, due to FINMA’s denunciation duty and the extensive cooperation between FINMA and prosecution authorities (Article 38 et seq FINMASA), evidence gathered in FINMA proceedings often ends up as part of criminal pro - ceedings. This inevitably raises the question of its
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