Background and entry into force

In September 2020, parliament passed the Federal Act on the Adaptation of Federal Law to Developments in Distributed Electronic Register Technology (DLT Bill). With the cover law, various federal laws were adapted in such a way that Switzerland can continue to develop as a leading, innovative and sustainable location in the area of blockchain / distributed ledger technology. The amendments to the Code of Obligations (CO), the Intermediated Securities Act and the Federal Act on Private International Law (IPRG) adopted as part of the DLT bill entered into force on 1 February 2021. The other provisions, in particular the following relevant provisions of the DLT proposal in the Debt Enforcement and Bankruptcy Act (SchKG), entered into force on 1 August 2021.

With the new provision in Art. 242b SchKG, any third party who proves a corresponding legal or contractual entitlement to the data in the context of a bankruptcy should be able to demand access to or surrender of this data (Art. 242b SchKG).

Challenges in practice

In practice, the surrender of data in bankruptcy within the meaning of the DLG Act proves to be a major challenge. For even if a licensee can assert a claim, in practice it is not uncommon that the responsible bankruptcy officials do not have sufficient experience or IT expertise to arrange for the source code to be handed over within a reasonable period of time. Furthermore, the new SchKG provision does not provide for all surrender cases as stipulated in software escrow agreements, but – in accordance with the law – only for bankruptcy cases.

The new provisions in the DLT Act, which introduced the new provision in the SchKG, thus do not provide sufficient security for licensees who need access to the source code for risk considerations.

Conclusion and recommendations

In other words, a SWEAG software escrow agreement, which is based on fiduciary ownership and the data carriers with the source code physically deposited with SWEAG, continues to offer maximum protection to fully meet the security needs of a licensee.

Therefore, software escrow agreements will continue to be needed even after the DLT Act comes into force, whereby only specialised providers with the right facilities and measures, such as SWEAG, can guarantee rapid access to the source code.