Art. 400 CO is the doctrinal anchor for retrocession surrender duties. This post explains the ‘inner connection’ test, the conflict-of-interest rationale, and how relationship type (wealth management, advice, execution-only, custody) drives the analysis.
This note summarises the legal foundations of retrocessions under Swiss law as presented by Abegglen, with an emphasis on Art. 400 CO (OR), the duty of loyalty and the disclosure/waiver logic that flows from conflict-of-interest prevention. Abegglenpp.1–2Abegglen pp. 1–2Abegglenpp.1–2
Abegglen’s starting point is Art. 400(1) CO, under which the mandatary must surrender to the principal everything that comes to the mandatary “in consequence of the management of the business” (“infolge seiner Geschäftsführung”). Abegglenpp.1–2Abegglen pp. 1–2Abegglenpp.1–2
The Federal Supreme Court applied this rule to third-party payments made for the introduction of clients and the intermediation of commission revenues (finders’ fees and retrocessions), holding that such payments must be handed over to the principal. Abegglenp.1Abegglen p. 1Abegglenp.1
The analysis therefore turns on whether a third-party benefit is received in a sufficiently close connection with the mandate, rather than merely “on the occasion” of the mandate. Abegglenp.2Abegglen p. 2Abegglenp.2
In Abegglen’s account of the case law, the key test is whether there is an “inner connection” between the third-party benefit and the performance of the mandate. Abegglenp.2Abegglen p. 2Abegglenp.2
Art. 400(1) CO is described as a concretisation of the duty of loyalty under Art. 398(2) CO and as serving the prevention of the risk of conflicts of interest; it is a central element of the “foreign-benefit” character (Fremdnützigkeit) of the mandate. Abegglenp.2Abegglen p. 2Abegglenp.2
Consequently, the surrender duty does not require proof that the mandatary actually acted in breach of duty or that the principal suffered a concrete loss; it can be sufficient that a conflict risk exists. Abegglenp.2Abegglen p. 2Abegglenp.2
Abegglen structures the analysis as a two-step programme: first, determine whether mandate law (Art. 394 et seq. CO) is applicable directly (mandate) or indirectly (e.g., via commission law and Art. 425(2) CO); second, assess whether an inner connection exists between the benefit and the relevant service relationship. Abegglenp.5Abegglen p. 5Abegglenp.5
He illustrates that the contractual framework differs materially across relationship types.
Where the bank manages assets at its discretion (including setting and implementing an investment strategy), the potential for conflicts of interest is evident if remuneration from product providers is linked to investment choices; Abegglen treats the surrender duty as rightly affirmed in such settings. Abegglenp.2Abegglen p. 2Abegglenp.2
The contribution notes that the Federal Supreme Court has not yet had to address retrocessions in the pure investment-advice setting, while suggesting that similar conflict considerations would apply. Abegglenp.2Abegglen p. 2Abegglenp.2
The “Gretchenfrage” whether a surrender duty exists in execution-only relationships is explicitly described as unresolved at Federal Supreme Court level, with cantonal courts taking divergent approaches. Abegglenpp.2–4Abegglen pp. 2–4Abegglenpp.2–4
Abegglen argues that pure custody services (mere safekeeping without transaction execution) do not create the kind of loyalty/discretion space that would trigger the conflict-prevention logic, and he also points to the fact that FIDLEG does not apply to pure custody (Art. 3 lit. c FIDLEG e contrario). Abegglenp.7Abegglen p. 7Abegglenp.7
A first constellation in which the inner connection is absent concerns remuneration for “genuine services” performed for the third party: if the payment compensates an independent service rendered for the third party and the remuneration is commensurate, it is not treated as subject to surrender. Abegglenp.6Abegglen p. 6Abegglenp.6
Abegglen lists cumulative criteria in this context, including that the payment must be for a genuine service to the third party, the service must not already be owed to the client/principal, and the remuneration must be in line with market practice (at arm’s length), otherwise it may indicate a “hidden retrocession”. Abegglenp.6Abegglen p. 6Abegglenp.6
Where no genuine third-party service is present, Abegglen’s position is that the decisive criterion is the risk of a conflict of interest. Abegglenp.7Abegglen p. 7Abegglenp.7
He frames a potential conflict as requiring (cumulatively) a duty of loyalty toward the client and a decision/discretion margin in performing the mandate; he then uses this to distinguish wealth management and advice (discretion exists) from typical execution-only situations (usually no discretion), while acknowledging exceptional execution-only patterns (e.g., incentives from an executing second broker) in which a conflict risk may arise. Abegglenp.7Abegglen p. 7Abegglenp.7
The contribution repeatedly ties the civil-law analysis to the supervisory context, explicitly invoking the principle of the unity of the legal order and the “radiating effect” of supervisory rules on private law where interpretation room exists. Abegglenpp.6,8Abegglen pp. 6, 8Abegglenpp.6,8
Abegglen discusses Art. 26 FIDLEG in this regard and emphasises its placement in the conflict-of-interest section, which aligns with the conflict-prevention rationale of the surrender/waiver architecture. Abegglenpp.8–9Abegglen pp. 8–9Abegglenpp.8–9
He also points to Art. 45b VAG (in force from 1 January 2024) as a parallel retrocessions regime in insurance supervision, using it as further support for the idea that the decisive trigger for surrender/acceptance rules is the presence of conflict-of-interest potential in a relationship of loyalty. Abegglenp.9Abegglen p. 9Abegglenp.9
On Abegglen’s account, the core legal foundation is not a free-standing “general enrichment” concept, but a structured conflict-of-interest prevention mechanism anchored in Art. 400(1) CO as a concretisation of the duty of loyalty under Art. 398(2) CO, applied through a relationship-sensitive “inner connection” analysis. Abegglenpp.2,7–8Abegglen pp. 2, 7–8Abegglenpp.2,7–8
Abegglen pp. 1–2
Abegglen pp. 2–4
Abegglen pp. 5–8
Abegglen pp. 8–9
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In this series
Further reading you may find relevant.
Despite extensive clarification, key issues remain unresolved. This post discusses the execution-only question, cantonal divergence, the doctrinal debate between conflict-prevention and “non-enrichment” theories.
A practical playbook: governing retrocessions as incentive risk, segmenting relationship types, implementing court-accepted disclosure, documenting waivers and repapering, and operationalising client inquiries.
The source does not provide a standalone analysis of statutory limitation periods. This source-limited note explains which time-related elements Abegglen actually addresses: retroactive waivers, layered disclosure and periodised bandwidth disclosure.
Regulatory notice
This material is for information purposes only and does not constitute investment advice, an offer, or solicitation. It is directed exclusively at qualified investors and is not intended for US persons.
