Impact of Bribery on Contracts Under Swiss Civil Law
Officially published in the journal Entscheidungen des Schweizerischen Bundesgerichts (BGE)
Relevant considerations with respect to the bribery contract
BGE 26 II 442ff (judgment from the year 1900)
The buyer’s promise of a commission for arranging a purchase was found to be contra bonos mores and thus null and void, because the party receiving the promise was also entrusted by the seller with the safeguarding of his or her interests (444ff E 3f)
BGE 30 II 413ff (1904)
The promise of a pecuniary advantage for the recipient for doing something that conflicted with his or her contractual duties was found to be contra bonos mores (417f E 4f)
BGE 47 II 86ff (1921)
The seller included a commission for the responsible employee in the buyer’s company in the selling price indicated in his or her offers and informed said employee of this; the promise of commission was held to be contra bonos mores without any reasoning provided (88 E 1)
BGE 95 II 37ff (1969)
The promise of bribe money to a guardian (Vormund) was considered contra bonos mores and thus null and void (39f E 2)
BGE 99 Ia 417ff (1973)
The transfer of money for the purpose of bribery from one company to another, with the instruction to keep it available for a third party, does not render the act automatically illegal or contra bonos mores; only had the instruction to bribe someone with the money been issued, would the line have been crossed to a violation of the law or of bonos mores (420f E 3c)
BGE 119 II 380ff (1993)
In this case, the Federal Supreme Court looked above all at the effects of bribery upon the validity of an agreed arbitration clause. Moreover, it also made findings as to the bribery contract and the bribed contract. The promise to pay bribe money was considered unlawful and thus null and void in the sense of Art 19/20 OR; at the same time it contravened the international ordre public (384f E 4b, with further references). As regards the bribed contract, see the information provided below in Sect. 16.3.1
16.2.2 Ex tunc Nullity of the Bribery Contract in the Sense of Art 19/20 OR
According to the decades long unanimous view of the Federal Supreme Court and the relevant doctrine, the bribery contract as such is null and void as a consequence of its contents being illegal or (if not illegal) being contra bonos mores in the sense of Art 19/20 OR.41 As to the decision on whether the contents of the bribery contract are contra bonos mores, it is not material, as the Federal Supreme Court has held, whether the bribe actually leads to any damage for the principal of the bribe-taker.42
As regards the bribery contract, the nullity, which is not defined in the statute, must be understood in the traditional sense according to the Federal Supreme Court.43 This means that the bribery contract is ex tunc null and void, the nullity is absolute in effect, must be observed by the judge ex officio and cannot be cured.44 When it comes to a bribery contract, the only option is the total nullity of the bribery agreement45 and not modified partial nullity in the sense of Art 20 para 2 OR in the form of a reduction of the undue advantage to a permitted amount.46
16.2.3 Restitution: Who Gets the Bribe?
As the bribe-taker often (albeit not always47) renders a performance that is not capable of restitution (for example, by influencing a selection procedure in favour of the bribe-giver’s offer, realising a higher price or a faster conclusion of an agreement in favour of the bribe-giver etc48), the focus in the following is on the restitution of the undue advantage. In this context, the question is – in brief – where the bribe should ultimately remain: with the bribe-giver, the bribe-taker, the principal based on his or her respective internal relationship with the bribe-taker, or the state by way of confiscation?
In the following the question of restitution of the bribe will be briefly addressed in the context of the relationship between the bribe-giver and the bribe-taker (Sect. 16.2.3.1) as well as between the bribe-taker and his or her principal (Sect. 16.2.3.2). Subsequently, the difficult interrelationship of the partial solutions sketched out for the relationship between the bribe-giver and the bribe-taker, on the one hand, and the bribe-taker and his or her principal, on the other hand (Sect. 16.2.3.3), as well as the general question of confiscation of the bribe by the state will be briefly addressed (Sect. 16.2.3.4).
16.2.3.1 Relationship Between the Bribe-Giver and the Bribe-Taker
(a)
In principle, if the contract fails ex tunc (as here in the case of nullity of the bribery contract in the sense of Art 20 OR), restitution of performances already rendered is made in case of movables by way of rei vindicatio (Eigentumsklage, Art 641 para 2 ZGB), in case of real property and limited rights in rem by action to have the land register corrected (Grundbuchberichtigungsklage, Art 975 ZGB),49 and in case of money payments, including bank money, usually50 by way of claim for unjust enrichment (Art 62ff OR).
If pecuniary performance cannot be returned in kind – be it due to the nature of the performance (for example, in the case of amenities and advantages of use, holiday trips etc) or other reasons, the right to having it returned in kind (regardless of whether this is based on rei vindicatio or unjust enrichment) is in principle replaced by a claim in money under the law of unjust enrichment (compensation for value),51 with any special provisions applicable to be taken into account. Some of these special provisions – for example, the provisions on processing things (Verarbeitung, Art 726 ZGB) and joining and mixing movables (Verbindung und Vermischung, Art 727 ZGB) – refer to the rules on non-contractual liability (Art 42ff OR) and unjust enrichment (Art 62ff OR). Others, however, contain their own rules on restitution of performances, for example, Art 938–940 ZGB (responsibility of the possessor in good or bad faith) and Art 671ff (integration of materials (Materialeinbau): using own materials in building work on land belonging to another or materials belonging to another in building work on own land).
(b)
Between the bribe-giver and the bribe-taker, however, the entitlement to claim restitution is barred by the so-called exclusion of restitution. If the right to restitution is based on unjust enrichment, Art 66 OR (so-called Kondiktionssperre) provides that no right to restitution exists in respect of anything given with a view to producing an unlawful or immoral outcome. According to current case law of the Federal Supreme Court and the already long prevailing opinion of doctrine, the exclusion of restitution is only (restrictively) applicable if the performance is made to incite or reward conduct that is illegal or contra bonos mores (crook’s reward – Gaunerlohn), insofar – as the Federal Supreme Court recently added – as the purpose of the rule infringed requires the exclusion of restitution.52 These requirements are fulfilled in respect of bribery.53
The exclusion of restitution does not result in the loss of the right to restitution, according to the predominant view in Swiss doctrine and almost uniform case law of the Federal Supreme Court, but only renders it unenforceable in law; therefore, according to the Swiss legal view, there is still a so-called imperfect obligation (Naturalobligation).54 If the party unjustly enriched (in this case the bribe-taker) restitutes the unjust enrichment voluntarily, any later demand for its return is precluded,55 as the performance in fulfilment of the imperfect obligation does not ensue without legal basis.56
According to (predominant) opinion in legal doctrine, Art 66 OR should be applied by analogy also to rei vindicatio and to actions to have the land register corrected.57 The Federal Supreme Court has until now left the question unanswered in relation to the rei vindicatio claim,58 and it was not yet necessary to decide in relation to the action to have the land register corrected.59 The property law impact of excluding restitution is not assessed uniformly in the relevant literature.60 Some authors consider that excluding restitution has the effect of making the recipient the owner of the object (either eo ipso or by curing the underlying agreement).61 Another opinion contends that the ownership remains with the transferor based on the nullity of the underlying agreement and the causal system of transferring ownership. Such may not, however, bring a rei vindicatio claim or an action to have the land register corrected any more due to the exclusion of restitution. Hence, the object remains de facto with the recipient.62
16.2.3.2 Relationship Between the Bribe-Taker and the Principal
Insofar as the bribe-taker – as just described – may keep the bribe within the relationship between him or her and the bribe-giver due to the exclusion of restitution, the question arises within the relationship between the bribe-taker and his or her principal whether and to what extent the bribe must be passed on to the latter. This depends on the respective internal relationship between the bribe-taker and the principal. If this internal relationship is subject to civil law rules (as applicable to relationships between private persons and in some cases also if the state is involved63), the following may be noted:
(a)
Swiss case law and doctrine proceed – in the case of a simple agency contract (einfacher Auftrag, Art 394ff OR) so far as can be seen unanimously, and as regards employment contract relationships almost64 unanimously – on the premise that bribes must be passed on to the principal or employer. The legal basis for this is, however, the subject of controversy in doctrine.
In the case of a simple agency contract, the Federal Supreme Court – which till now has not often had to deal with the question of passing on bribes to the principal65 – invoking established doctrine (or more precisely part thereof66) upholds the view that bribes, like discounts and commission fees, must be passed on to the principal based on the agent’s (contractual) duty to pass on under Art 400 para 1 OR.67 The Federal Supreme Court does not state its reasoning as to why it assumes that there is – as agreed for discounts and commission fees – an internal connection between the bribe and the carrying out of the agency activity (ie that the bribe comes to the agent from third parties in the process of carrying out the agency activities and not only upon the occasion of carrying out the agency activities)68 and thus they fall within the scope of the contractual duty to pass on. According to the Berner Kommentar (Fellmann), which the Federal Supreme Court repeatedly refers to in affirming the contractual duty to pass on, the internal connection between the advantage and the carrying out of the agency activity must be affirmed even if there is merely a danger that the agent would feel him or herself prompted by virtue of the gift not to consider the interest of the principal adequately. Therefore, the agent is obligated to pass on the bribe as well as discounts and commission fees etc to the principal.69
As regards the employment contract relationship, the duty to pass on in this respect is considered either to be based directly on the employment law duty to pass on in Art 321b para 1 OR70 (although, according to the wording of this provision, the duty to pass on to the employer is based on the intention of the third party to give to the employer71) or on the application by analogy of the simple agency contract duty to pass on in Art 400 para 1 OR.72
In a simple partnership, the duty of the managing partner to pass on the bribe to the other partners is affirmed – in accordance with the reference to simple agency contract rules in Art 540 para 1 OR73 – based on the contractual duty to pass on according to Art 400 para 1 OR.74
Some authors invoke alternative bases for claims for the passing on of the bribe to the principal which, however, the Federal Supreme Court has not yet commented on. As examples, the following have been mentioned: a contractual right to compensation on the part of the principal corresponding to the size of the undue advantage due to infringement of the duty of good faith,75 disgorgement of profit based on false negotiorum gestio (business conduct in the agent’s interest) or unjust enrichment.76 Nonetheless, it would exceed the scope of this paper to go into this in detail.
(b)
Problematic aspect of the passing on of the bribe to the principal. Various authors rightly point out that passing on the bribe to the principal is problematic because the latter should not be enriched either due to transactions that are illegal or contra bonos mores.77 There is an enrichment of the principal if the bribe to be passed on to him or her is larger than any damage which he or she suffers or has suffered as a consequence of the bribery.
In effect, the affirmation of the duty to pass on in the case of bribery was based on a value judgment: within the relationship between the bribe-taker and the principal, the solution granting the latter a claim to have the bribe passed on seems preferable to allowing it to remain with the bribe-taker.78 In order, however, to limit the problem of enrichment of the principal somewhat, the Berner Kommentar (Fellmann) suggests awarding the principal any contractual right to compensation for breach of the duty of good faith by the bribe-taker only insofar as the damage is not already covered by the passing on of the bribe.79
16.2.3.3 Interrelationship Between the Imperfect Obligation to Return the Bribe to the Bribe-Giver and the Duty to Pass on the Bribe to the Principal
The two partial solutions sketched out above (imperfect obligation of the bribe-taker to return the bribe to the bribe-giver and, on the other hand, the duty of the bribe-taker to pass on the bribe to the principal based on the respective internal relationship) have until now – as far as can be seen – only been developed by the Federal Supreme Court in isolation from each other. Accordingly, there have been no Federal Supreme Court pronouncements on the question of how the two partial solutions can be combined. One question that begs itself in this connection is whether the bribe-taker who voluntarily returns the bribe to the bribe-giver on the basis of the imperfect obligation additionally has a duty towards his principal to pass on based on the respective internal relationship (so that the bribe-taker in this case would end up paying twice over)?80
In my opinion either affirming or denying the bribe-taker’s liability for double payment is problematic. A possible argument against such liability for double payment on the part of the bribe-taker is that even if returning the bribe to the bribe-giver is voluntary, it ensues – according to the current view on the legal effects of the exclusion of restitution (see above Sect. 16.2.3.1, under lit b) – on the basis of an imperfect obligation. Even though the imperfect obligation is an obligation of a lower degree, it makes it difficult to blame the bribe-taker if he or she returns the bribe to the bribe-giver. However, if one denies the bribe-taker’s liability for double payment, one allows him or her to tip the scales and arbitrarily return the advantage to the bribe-giver instead of passing it on to the principal, which is anything but a satisfactory solution. All the more does the issue of confiscation of the bribe by the state arise for discussion and this will be dealt with below.
16.2.3.4 Confiscation by the State
The Swiss Code of Obligations does not contain any rule establishing private law confiscation in the event that an undue advantage is accepted by a party exercising a power (for example, an agent, an employee). Neither does the Federal Code against Unfair Competition lay down any explicit private law confiscation in the area of bribery of a private person.81 Thus, under Swiss law there is only the option of confiscation pursuant to the criminal law, in particular the confiscation of assets (Einziehung von Vermögenswerten, Art 70f StGB) when it comes to bribery. The provisions on confiscation that are contained in the general part of the Swiss Criminal Code also apply to the offence of bribery of private persons provided for in the Federal Code against Unfair Competition as the latter does (as mentioned above) not contain detailed provisions on confiscation (see Art 333 para 1 StGB).
According to Art 70 para 1 StGB, the “court shall order confiscation of assets that have been acquired through the commission of an offence or are intended to be used in the commission of an offence or as payment therefor, unless the assets are passed on to the person harmed for the purpose of restoring the prior lawful position”. The latter prerequisite indicates that criminal law confiscation is only applied subsidiarily in relation to private law claims by persons harmed against the perpetrator.82 The state should neither enrich itself at the expense of the victim nor expose the perpetrator to a double obligation.83
If bribery in the sense of Art 322ter ff StGB or Art 4a UWG in conjunction with Art 23 UWG is at stake, criminal law confiscation is affirmed in Swiss case law and doctrine.84
When discussing confiscation in the context of bribery, the core question is that of the interrelationship of the right of the principal to have the bribe passed on based on his or her respective internal relationship with the bribe-taker (see above Sect. 16.2.3.2) and the possibility of criminal law confiscation by the state. According to the rule on the coordination of such options provided in Art 70 para 1 in fine StGB, it is decisive whether the principal’s claim against the bribe-taker to pass on the bribe qualifies as the claim of a “person harmed for the purpose of restoring the prior lawful position”. To date, as far as can be seen, standard criminal law literature does not explicitly answer this question.85 In particular the rights in rem of the person harmed are explicitly mentioned as examples of claims for the purpose of restoring the prior lawful position,86 whereas obligatory claims such as for compensation, unjust enrichment and disgorgement of profit are the subject of controversy.87 In civil law literature the question – if discussed at all – is controversial.88 In my opinion neither the wording nor the examples found in the standard criminal law literature tend to indicate that the right of the bribe-taker’s principal to have the bribe passed on can be qualified as a claim of the “person harmed for the purpose of restoring the prior lawful position” in the sense of Art 70 para 1 in fine StGB. Finally, the value judgment must also come out on the side of criminal law confiscation ahead of the principal’s right to have the bribe passed on based on his or her respective internal relationship with the bribe-taker (regardless of which legal basis there is). The two reasons that come to mind in favour of confiscation by the state have already been addressed above (Sect. 16.2.3.2 under lit b and Sect. 16.2.3.3): (1) that the passing on of the bribe to the principal is associated with the problem that the latter may thus profit from a transaction that is illegal or contra bonos mores; (2) that the partial solutions advocated by the Federal Supreme Court and doctrine – the bribe-taker’s imperfect obligation to return the bribe to the bribe-giver, on the one hand, and the bribe-taker’s obligation to pass it on to the principal based on the respective internal relationship, on the other – allows the bribe-taker to tip the scales and arbitrarily return the advantage either to the bribe-giver or to pass it on to the principal.
If the judgment must come out on the side of criminal law confiscation ahead of the principal’s right to have the bribe passed on (regardless of which legal basis there is), any claim for compensation on the part of the principal against the bribe-taker arising from their respective internal relationship due to infringement of the duty of good faith will be taken into account in the sense of the above-mentioned rule on coordination in Art 70 para 1 in fine StGB.89 The bribe would thus be available in spite of being confiscated primarily as an asset to cover any compensation claims of the principal against the bribe-taker and only any excess will definitely accrue to the state by way of criminal law confiscation.
16.3 Civil Law Consequences in Respect of the Contract Obtained by Bribery
16.3.1 Court Decisions
As regards the bribed contract, understood as the contract that was concluded by the principal, employer or state (in the following: the principal) as a consequence of the bribery, the following judgments, for instance, of the Federal Supreme Court are relevant:
Officially published in the journal Entscheidungen des Schweizerischen Bundesgerichts (BGE) | Relevant considerations with respect to the bribed contract |
|---|---|
BGE 47 II 86ff (1921)90 | As a consequence of bribery, two main contracts were concluded: one by the employer of the bribe-taker and the other by the bribe-taker as agent of his or her employer. The Federal Supreme Court did not address the difference; instead it only dealt with the constellation of the contract being concluded by the employer of the bribe-taker91 |
The court found the bribed contract was not null and void in the sense of Art 20 OR. Reasoning: the use of contra bonos mores means to bring about a contractual relationship that in itself is not improper, does not influence the validity of the resulting contract (88f E 2)92 | |
BGE | Relevant considerations with respect to the bribed contract |
The avoidance of a contract due to a mistake as to the basis of the contract (so-called Grundlagenirrtum) in the sense of Art 24 para 1 no 4 OR was still rejected according to the Federal Supreme Court’s view at the time (this view, however, has changed in the meantime93). Reasoning: the “specific fact”, the mistaken assessment of which renders the contract not binding in a unilateral fashion for the mistaken party according to Art 24 para 1 no 4 OR, may not relate to circumstances external to the contents of the contract (89f E 3). A circumstance that has nothing to do with either the identity or the nature and economic purpose of the thing purchased cannot possibly be characterised as a fact that – as required by Art 24 para 1 no 4 OR – forms a “necessary basis for the contract” “according to good faith in business dealings” (ie according to general standards) (90 E 3) | |
BGE 119 II 380ff (1993) | (For the context see above Sect. 16.2.1) |
Contracts that are concluded as a consequence of bribery are not null and void in the sense of Art 19/20 OR; the contents of the contract are not defective (vicié). However, it is possible due to the misuse of the power of agency or a defect of intention (Willensmangel) that the contract is not binding on one of the parties (385 E 4c) (in comparison in this respect, the existence of a defect of intention was still rejected in BGE 47 II 86, 89f E 3, for the reasons see above in this table) | |
BGE 129 III 320ff (2003) (sewage case – Klärschlammfall) | Regarding the legal effects of bribery (of a public official) on the contract obtained by bribery |
The Federal Supreme Court confirmed the previous case law, according to which contracts that are concluded as a consequence of bribery are not automatically illegal or contra bonos mores (324f E 5.2). The contract brought about by bribery would only be illegal in the sense of Art 19/20 OR if the prosecutable conduct extends to the contents of the contract (325 E 5.2) | |
The bribed contract was not concluded by the bribe-taker him or herself in the name of the city94; thus, agency did not have to be examined | |
BGE | Relevant considerations with respect to the bribed contract |
Both courts of lower instance95 held that there was no intentional deception (absichtliche Täuschung, Art 28 OR); these courts did not regard it as proven that the bribe had an influence on the conclusion, the structure or the processing of the main contract. This was an assessment of evidence, which cannot be re-examined by the Federal Supreme Court (326f E 6.3) | |
The fact that there was a mistake as to the basis of the contract had already been confirmed by the previous instance, was uncontested before the Federal Supreme Court and thus did not have to be examined by the latter (327 E 6.4). The previous instance held in general as regards the mistake as to the basis of the contract, that the mistake could relate to circumstances within or external to the contract, the wrong idea did not have to relate directly to the contents of the contract and that lack of idea was to be considered equivalent to wrong idea.96 As regards the bribery, the court of first instance held, and the court of second instance affirmed this, that the city was mistaken insofar as at the time it concluded the contract and it was performed it (the city) knew nothing of the “actions [by the business partner] constituting bribery and conflicting grossly with good faith in business dealings”, but instead believed it had a “loyal business partner”97 | |
The Federal Supreme Court detailed the legal consequences of a contract not being binding as a result of a defect of intention in particular in the case of ongoing obligations (Dauerschuldverhältnisse) that have been entirely or partly fulfilled in general, ie not with a focus on bribed contracts only (327ff E 7, in particular 328ff E 7.1.2ff) |
16.3.2 Nullity of the Bribed Contract in the Sense of Art 19/20 OR?
Contracts that are concluded as a consequence of a bribe are not automatically illegal or contra bonos mores as a result in the view of the Federal Supreme Court and the prevailing doctrine and thus are not null and void in the sense of Art 19/20 OR.98 The reason for the above-mentioned solution is that in this context – unlike that of the bribery contract itself – the illegality and the violation of bonos mores is not related to the contents of the bribed contract but to the way and manner in which it came about. According to the Federal Supreme Court, the bribed contract would only be deemed illegal pursuant to Art 19/20 OR if the prosecutable conduct extended to the contents of the bribed contract, which, however, is not the case with the rules on the bribery of Swiss and foreign public officials and private persons.99 Likewise, a qualification of the contract as contra bonos mores would have to be based on the contents of the bribed contract itself and not merely the circumstances surrounding the conclusion of the contract.100 This limitation is traced firstly back to the wording of Art 20 OR, which speaks of the “contents” of the contract, and secondly to the overall structural categorisation of Art 20 OR within the statute under the title in the margin, this being “contents of the contract” (Inhalt des Vertrages).101
There is a minority opinion in Swiss doctrine that the fact of bribery should also have an impact on the bribed contract in the sense of absolute or relative nullity.102 However, the Federal Supreme Court held in 2003 without analysing the minority opinion in Swiss doctrine that there was no reason to question the case law.103
16.3.3 Agency Law
16.3.3.1 Scope of Application
If the bribed contract was concluded by the bribe-taker in the name of the principal – and not by the latter directly or another agent of the principal who was, however, not bribed104 – the question of whether a legally effective contract has come about between the principal and the third party despite bribery must be decided according to the rules of the law on agency, in particular Art 32ff OR (so-called civil agency – bürgerliche Stellvertretung).
In respect of the scope of application of the rules of civil agency (Art 32ff OR) two preliminary remarks shall be made:
(a)
Pursuant to Art 40 OR e contrario the rules of civil agency also apply – in part directly, in part by analogy105 – to the power of agency of representatives and bodies of companies and partnerships,106 prokurists (type of registered authorised agent) and other commercial agents (commercial agency – handelsrechtliche Vertretung)107 if the special provisions do not contain any relevant rules. This already arises too from the general rule of lex specialis derogat legi generali, so that it also applies to executive bodies of legal entities regulated in the Civil Code (ie associations and foundations) that are not separately mentioned in Art 40 OR.108 The special provisions generally regulate, for example, the coming about, the scope and the extinguishment of the power of agency; sometimes there are deviations in the case of protection of good faith of third parties, in particular when the power to represent has been recorded in the Commercial Register (Handelsregister).109 However, special rules are missing in particular in connection with the issue at stake here, ie the defect of agency and its legal consequences in respect of the contract, so that within this area the rules of civil agency apply by analogy in the case of representatives and bodies of companies and partnerships, legal entities regulated in the Civil Code and commercial agency as well.
(b)
The rules of civil agency can also be applicable in the case of bribery of public officials within the relationship between the public official and the state, as follows: if the “power to carry out legal acts in the name of another” comes from public law relationships, the rules of civil agency apply according to Art 33 para 1 OR e contrario in a supplementary manner and analogously at least where the public law rules are incomplete,110 which is often the case, for example, in the field of legal consequences of defective agency.111 Likewise the rules of civil agency apply if the collective body (Gemeinwesen) has appointed a (civil) agent in the sense of Art 32ff OR.112
16.3.3.2 Legal Qualification of the Defect of Agency in Case of Bribery
The Federal Supreme Court itself has thus long not dealt in detail with agency in the case of bribery – as far as can be seen. In one case of bribery, it refers to the rules on misuse of the power of agency (abus du pouvoir de représentation), however, without dealing with the solution in detail.113
In doctrine, there have been statements in favour of including bribery under collusion114 (as the most crass example of the misuse of the power of agency115) or the misuse of the power of agency (without acting in a collusive manner)116 as well as for categorising it under acting without authority.117
Ultimately, different constellations of bribery lie behind the different arguments laid out in relation to the law of agency that are mentioned in case law and doctrine. The bribe-giver may, for example, be the third party (ie the contract partner of the principal), a representative of the third party who concludes the bribed contract in the name of the third party, a body of the third party, another employee from the third party’s company who, however, is not involved in the conclusion of the subsequent contract, or an outsider acting completely independent of the third party.
If one accepts the line taken by the Federal Supreme Court and most doctrine to the effect that bribery in itself does not constitute acting without authority on the part of the bribed agent (thus, that further factual elements would be required in this respect, such as the conclusion of a contract due to bribery although the bribed agent would never have had the authority to conclude it in the first place), then in each case the specific bribery constellation must be examined as to whether the qualifying conditions for collusion have been met. If this is not the case, the bribe-taker has misused his or her power of agency (without acting in a collusive manner with the third party).
According to general considerations of the Federal Supreme Court, collusion requires that (1) the misuse of the authority (2) is exploited by a third party in agreement with the disloyal agent (3) in order to damage the principal with a transaction that is disadvantageous to such.118 Additionally, (4) intention on the part of the agent and the third party to damage the principal by concluding a contract is required.119
The first, third and fourth prerequisite can safely be assumed fulfilled in all bribery constellations mentioned above: (Ad 1) There is misuse of the power of agency when the actions of the agent are formally covered by his power of agency but violate the internal rules arising from the internal relationship between the agent and the principal in such a manner that any reliance (by the third party) on the power of agency seems to constitute misuse.120 (Ad 3) It is to be assumed that no pecuniary damage is required in respect of this “disadvantageous transaction” and the “damage”,121 but instead simply the infringement of the duty to comprehensively protect the principal’s interest (in extreme cases to the effect that in case of offers of equal value the dice – and not the intent of the agent as influenced by the bribe – should decide).122 (Ad 4) In the case of bribery, the intention of the bribe-giver is certainly directed at obtaining an undue advantage for him or herself (or a proximate third party), even if it is only to know the bribed agent on his or her side in the case of a final decision between several offers of equal value. The disadvantage to the principal of the bribed agent is, in turn, if not intended then at least accepted. The same applies in respect of the bribe-taker.
(Ad 2) The second prerequisite (acting in concert between the third party and the bribed agent), on the other hand, must be assessed differently depending on the bribery constellation. In general, there will have been collusion between the third party and the bribed agent when the third party itself gives the bribe. Collusion must also further be assumed if someone else whose actions can either be imputed to the third party (qua agency) or qualified as the direct actions of the third party (thus, executive bodies of legal entities123) or – if this is not the case – if someone within the sphere of the third party has knowledge of the bribe-giver’s actions and this knowledge can be imputed to the third party. Thus, there is also collusion, for example, if the agent or a body of the third party that is entrusted with concluding the subsequent agreement bribes the agent of the later contract partner. There is, however, no collusion, for instance, when an independent outsider gives the bribe and nobody within the sphere of the third party whose knowledge can be imputed to such third party has knowledge of the bribery.
16.3.3.3 Legal Consequences
In respect of collusion and misuse of the power of agency, the legal consequences are the subject of controversial debate.
(a)
Collusion. According to the Federal Supreme Court and one part of the doctrine, the contract that has come about by means of collusion is not binding for the principal pursuant to Art 2 ZGB; the principal may invoke the exceptio dolivis-à-vis the third party if the latter raises claims arising out of the (in casu bribed) contract or relies on the authority of the agent.124 This view implies that the limitations of the agent’s authority have been preserved from a formal point of view – despite collusion – so that there is no acting without authority. The issue here is not the scope of the power of agency but the type and manner of action by the agent.125
Another part of Swiss doctrine advocates different (more or less) deviating views with respect to the legal consequences of collusion. According to one view (not substantially deviating from the point of view of dogmatic construction of the afore-mentioned solution of the Federal Supreme Court and one part of the doctrine), the contract is not binding for the principal due to the analogous application of Art 2 para 2 ZGB (defence of manifest abuse of a right – Rechtsmissbrauchseinrede).126 A fundamentally different academic opinion contends that the contract brought about by collusion must be deemed contra bonos mores and thus null and void in the sense of Art 19/20 OR.127 Another fundamentally different opinion ultimately does not proceed from the premise that the actions of the agent are formally covered by his or her authority (although the internal rules between principal and agent were infringed in such a way that there is misuse of the power of agency or even collusion) but instead takes as the basis the actions being without any authority (Art 38 OR).128
(b)
Misuse of the power of agency. According to the Federal Supreme Court and some academic writers, a misuse of the power of agency does not in principle prevent the contract from being effective either; the principal of the disloyal agent is, however, not bound by the contract if the contract partner acted in bad faith.129 Some authors, on the other hand, argue that in the case of misuse of the power of agency, the agent acted without authority.130
Following the line taken by the Federal Supreme Court, it is the principal that has the burden of proof that the third party acted in bad faith.131 There was bad faith if the third party either knew of the misuse of the power of agency or, according to Art 3 para 2 ZGB, could not have acted in good faith had he or she paid as much attention as might be required of him or her given the circumstances.132 In the case of the latter, the Federal Supreme Court holds that – regardless of whether the disloyal agent is a civil or commercial agent – even relatively weak doubt or slight negligence of the third party suffices in order to assume bad faith.133
(c)
Conclusion. If the principal, having gained knowledge of the bribery, invokes in case of collusion the exceptio doli or if he or she proves in the case of misuse of the power of agency (without collusion between the third party and the disloyal agent) that the third party acted in bad faith, the contract that is non-binding for the principal falls ex tunc.134
16.3.3.4 Restitution
As already mentioned above (in Sect. 16.2.3.1, under lit a), ex tunc invalidity of the contract means that performance already rendered must be restituted according to the rules on rei vindicatio (movables) (Art 641 para 2 ZGB), the action to have the land register corrected (real property and limited rights in rem) (Art 975 ZGB) or unjust enrichment (usually money and in principle, ie with the exception of special rules applicable, pecuniary performance that cannot be returned in kind) (Art 62ff OR).135
In the case of synallagmatic contracts, the parties are only obliged to make returns contemporaneously against the rendering of the counter-performance (Zug um Zug). This also applies when they have claims under unjust enrichment against each other.136
16.3.4 Defect of Intention (Art 23ff OR)
16.3.4.1 Scope of Application
If the bribed contract is not concluded by the bribe-taker in the name of the principal but by the latter directly or another agent of the latter who was, however, not bribed, then the rules regarding defect of intention in Art 23ff OR play a role in respect of the question of whether a legally effective contract has come about between the principal and the third party despite bribery.
The rules on defect of intention in Art 23ff OR also apply as an “expression of general legal principles” analogously and in a subsidiary manner to public law contracts.137
16.3.4.2 Legal Elements of Intentional Deception and Mistake as to the Basis of the Contract
The offences included under Art 23ff OR are: mistake of expression (Erklärungsirrtum), mistake as to the basis of the contract (Grundlagenirrtum), intentional deception (absichtliche Täuschung), and duress (Furchterregung). In the context of bribery it is intentional deception (Art 28 OR) and mistake as to the basis of the contract (Art 24 para 1 no 4 OR) that are in the foreground.
16.3.4.2.1 Intentional Deception
According to Art 28 para 1 OR, the contract is not binding on the party who was induced by intentional deception on the part of the other party to conclude the contract even if the mistake prompted was not fundamental. Para 2 provides that the intentional deception practiced by a third party only hinders the contract from being binding upon the party deceived if the other party (ie the contract partner of the party deceived) knew of the deception at the time of the contract being closed or should have known of such.