In its ruling of 26 January 2023, the Federal Supreme Court once again had to deal with a margin call, i.e. the bank’s request to the client to pay an additional margin.

A client had concluded forward exchange transactions and exchanged Swiss francs for Russian roubles. When the rouble depreciated on 16 December 2014, the bank requested the client by telephone to make an additional margin in a “sufficient amount”. When this was not forthcoming, the bank closed the positions prematurely, causing the client a loss of around CHF 1,500,000.

The Zurich courts and, in the last instance, the Federal Supreme Court dismissed the client’s claim for damages.

The following aspects are interesting about these rulings:

– The evidence for the bank was rather thin: the margin call had only been made by telephone. The bank could only rely on notes of its employees in the customer journal and their witness statements as evidence. The notes do not seem to have been very reliable, and the statements of the employees (who were only questioned as witnesses much later) were rather general.

– It was also undisputed that the bank had neither given an exact deadline for the margin call nor an exact amount.

Nevertheless, the Zurich courts supported the bank’s point of view: the client had known that he had to make an additional margin immediately and the exact amount “in francs and centimes” was not important.

This view of the courts does not seem correct to me: It is well known that the bank’s client journals only serve to justify the bank’s actions (“save your ass”) and are therefore of little probative value. Moreover, it seems to me to be a contractual obligation that the bank communicates the exact amounts and the exact deadlines in a provable form in the case of a margin call.

The fact that the lawsuit failed despite this starting position is probably due to craft errors in the statement of claim:

– The claim was filed in the wrong currency (in Swiss francs instead of roubles), as the client would have been credited with roubles from the transaction, meaning that the bank owed the client roubles and not francs. The Federal Supreme Court found that this alone had to lead to the dismissal of the claim.

– The appeal to the Federal Supreme Court was insufficiently substantiated and thus did not meet the high requirements.

– The risk of a lawsuit would have been massively reduced if only a partial amount had been claimed for the time being. After the failure of this pilot process, a second, improved lawsuit could have been filed. A partial lawsuit would also have reduced the high costs of litigation (court costs, reimbursement of the bank’s legal fees).