This decision closes a chapter of doctrinal and cantonal divergence on the question. Prior to this ruling, the Zurich Commercial Court (Handelsgericht) had been willing to impose restitution in execution-only scenarios. By contrast, the Commercial Court of the canton of St. Gallen and the Court of First Instance of the canton of Geneva aligned with a more restrictive approach, denying any duty to return retrocessions in pure execution-only relationships, on the grounds that no conflict of interest arises where the client makes investment decisions on its own.

In contrast to established case law on discretionary management and advisory mandates – where retrocessions are generally subject to restitution absent a valid waiver – the Federal Supreme Court now confirms that no obligation to return retrocessions arises in an execution-only mandate.

As already discussed in our latest article on this topic (Retrocessions and execution-only - Geneva courts deny restitution), we view this decision as a coherent solution, providing much-needed clarity after years of uncertainty.

The Federal Supreme Court reiterated that under an execution-only relationship, the bank's role is strictly limited to executing the client's orders. It neither provides investment advice nor exercises discretionary control over the client's portfolio. Accordingly, the bank does not assume a general duty to safeguard the client's interests beyond the proper execution of orders.

Crucially, the Federal Supreme Court clarified that the mere existence of an indirect economic benefit is insufficient to trigger restitution. Restitution under Article 400 CO requires two cumulative conditions:

• The benefit must be intrinsically linked to the execution of the mandate, and
• It must be capable of giving rise to a concrete conflict of interest in light of the contractual obligations.

In an execution-only relationship, the bank does not know in advance which transactions the client will order or which products will be selected, and therefore cannot foresee the remuneration it may receive. The Federal Supreme Court emphasized that the bank's remuneration depends exclusively on the client's independent investment decisions and not on any discretionary conduct or influence exercised by the bank. As a consequence, there is no intrinsic link between the execution of the mandate and the benefit received.

Furthermore, where the bank has no discretion to choose between different platforms or brokers generating varying levels of remuneration once the client's instructions are received, there is no concrete risk that the bank would favor a more remunerative solution to the detriment of the client. Absent such a conflict of interest, restitution is not justified under Article 400 CO. 

Importantly, the Federal Supreme Court also clarified that the requirement of a concrete conflict of interest constitutes the decisive criterion when assessing whether third-party remuneration must be returned under Article 26 of the Financial Service Act (FinSA). As no such conflict of interest arises in a pure execution-only relationship, retrocessions cannot be claimed on that basis either.

This ruling finally clarifies a question that the Federal Supreme Court has repeatedly avoided addressing in the past, bringing uniformity to previously divergent cantonal case law. For banks and relationship managers who had been monitoring the cantonal divergence with some concern, this decision will likely come as a welcome clarification.