Over four years after the launch of the Ukraine invasion by Russia, companies continue to face the novel and ever-evolving sanctions regulatory landscape. Throughout the war, sanctions measures have increased in complexity. The type and scope of sanctions imposed against Russia go beyond measures previously taken against other countries.

The multitude of sanctions regimes, albeit their principles being somewhat co-ordinated by the G7 at times, also gives rise to a number of challenges. Businesses often struggle to understand which sanctions regimes are applicable and often regimes are simultaneously applicable. Assessing which sanctions regime applies is the first step companies need to take, in order to ensure compliance. Some sanctions regimes, such as US sanctions, are notoriously extraterritorial and can apply even in the absence of a clear US jurisdictional nexus. Meanwhile, we are also seeing expansion tendencies in the EU, with its sanctions regime increasingly reaching beyond strictly its borders and persons. Switzerland, by contrast, continues to view sanctions primarily as territorial in scope, although certain effects are meanwhile also extending beyond its borders. This is mostly a consequence of the concept of “instruction or direction out of Switzerland”, which may lead to the application of Swiss sanctions to foreign group entities. At the same time, there is a continued broadening beyond traditional trade and financial sanctions to include services, investments and related areas.

Under the sanctions imposed against Russia and Belarus, there is no prohibition per se on conducting business in either Russia or Belarus – ie, there is no trade embargo. Nevertheless, doing so raises significant sanctions risks that must be carefully assessed in advance of any such business transactions, and in the wider context of the purpose underlying these sanctions. Many measures have been introduced in an attempt to cut Russia off from the global financial markets – eg, by designating a vast number of Russian financial institutions. The sanctions imposed on Belarus were designed with similar purposes in mind and continue to be strengthened alongside the measures targeting Russia.

Companies, financial institutions and other market players are constantly having to adapt to new and expanded sanctions measures. There has been a certain slowdown in the frequency of new EU sanctions packages, with three new packages adopted in the last 12 months (the 19th on 23 October 2025, the 20th on 23 April 2026, and the 21st on 23 July 2026), most of which have been comprehensive and expansive in scope.

One notable trend is Switzerland’s increasing temporal lag in implementing these EU measures. The 19th package was only fully implemented on 26 February 2026, while the 20th package had, at the time of writing, been implemented only partially (limited to listings) as of 22 May 2026. It is expected that Switzerland will not adopt the substantive measures included in the 20th package before mid-August 2026.

The challenge for many companies is to understand new sanctions measures, navigate increasing divergences across regimes, and implement the necessary changes to their businesses in an informed manner – particularly for companies operating across multiple jurisdictions.

Many companies are also wrestling with whether to maintain business operations in or ties with Russia or to exit the market entirely. While sanctions regimes continue to permit divestments and such steps are generally supported from an EU and Swiss policy perspective, this decision-making process is increasingly shaped by risks arising from Russian countermeasures. In particular, there is a growing risk of assets being placed under so-called temporary administration or even full nationalisation, which is now being seen with increasing frequency.

The latest EU measures place a clear emphasis on anti-circumvention. The EU’s “anti circumvention tool” – targeting exports of specified items to certain third countries to prevent onward supply to Russia – has been activated for the first time, in relation to Kyrgyzstan. Switzerland has not yet introduced a comparable mechanism, although some form of action may be expected to avoid circumvention risks.

There is also an increased focus on third-country designations. Recent EU packages – largely mirrored by Switzerland – target companies in jurisdictions such as China and India deemed to support Russia’s war efforts, adding further complexity for businesses across their supply chains. At the same time, Switzerland has taken a more selective approach, notably under the 20th package, by not listing certain EU designated third-country entities, in particular Chinese companies.

A further key development is the introduction of targeted restrictions relating to Russian special economic zones (SEZs), which have had a significant impact on business activities connected to Russia. The breadth of these measures – covering investments, contractual relationships and financing arrangements – materially limits companies’ ability to maintain or develop ties with entities operating in such zones.

There is also a continued expansion of services and software restrictions as a key area of focus. Recent measures reflect an increasing effort to restrict access to high-value technical, digital and intellectual inputs, coupled with broader authorisation requirements. This underscores a wider shift towards targeting non goods-based contributions to the Russian economy and further adds to the compliance burden for companies.

Finally, taking a broader view on Swiss sanctions policy, Switzerland has, in line with wider international developments, recently adjusted its approach across different sanctions regimes. On the one hand, sanctions against Syria were significantly eased as of 20 June 2025, with measures now more narrowly targeted at specific actors and sectors. On the other hand, sanctions against Iran were materially expanded on 12 December 2025, including the reintroduction of a range of trade-related and financial restrictions, as well as funds transfer controls.

Neither the State Secretariat for Economic Affairs (SECO) nor the European Commission have issued comprehensive guidance on due diligence and compliance standards. Companies must therefore apply a risk-based approach, calibrating measures to their risk profile, including robust screening systems and regular counterparty (including payment providers) checks against relevant sanctions lists.

Companies must also ensure that their internal compliance frameworks are adequately resourced and structured to manage sanctions risks effectively. Against this backdrop, they may consider limiting transactional activity involving counterparties with a Russia or Belarus nexus and refraining from expanding such business ties.

Sanctions have an impact on almost all relevant sectors of the Swiss economy. The Swiss industrial and financial sectors, but also the trading, energy as well as healthcare, luxury and consumer goods sectors, have been particularly affected.

Switzerland’s pragmatic implementation of EU sanctions measures in the Swiss Ordinance on measures in connection with the situation in Ukraine (“Ukraine Ordinance”) has meant that companies that are exclusively subject to Swiss jurisdiction are granted a greater level of flexibility than companies that are subject to EU jurisdiction. Switzerland has – eg, at times deviated in its implementation of EU financial sanctions by adopting broader exemptions to the restrictions on deposits, trusts and the sale of transferable securities. It has also limited the scope of the deposit restrictions. Although many banks are also subject to other sanctions regimes and therefore tend to apply the stricter EU measures, Switzerland is attempting to offer financial institutions greater leeway.

However, there are instances where SECO has adopted a very restrictive interpretation of exceptions and exemptions, even for companies operating in the healthcare industry, which has traditionally been impacted less by sanctions. For example, SECO tends towards a more restrictive interpretation of the scope of the exemption for goods and services intended for “medical or pharmaceutical purposes” under Article 6 paragraph 2 letter l or the licensing ground of “medical or pharmaceutical purposes with an end use of a non-military character” under Article 11a paragraph 4 letter a of the Ukraine Ordinance. In these cases, SECO is concerned with the risk of diversion and requires operators to have oversight over the supply chain. SECO typically requires evidence of a robust supply chain traceability system and identification of end-users.

The EmbA forms the legal basis for the adoption and implementation of sanctions in Switzerland. It is a so-called framework law, which regulates matters of general application (purpose, responsibilities, obligation to provide information, monitoring, data protection, administrative and legal assistance, legal protection and criminal provisions).

As mentioned in 1.4.1 Types of Sanctions, the Federal Council alone has the authority to enact and amend coercive measures by means of sanctions ordinances (Article 2 paragraph 1 EmbA).

SECO is the competent authority to implement and enforce Swiss sanctions (see 2.2.1 Enforcement Responsibilities).

There are numerous reporting obligations under Swiss sanctions laws. In principle, under the current SECO guidance (“SECO FAQ”, version of 30 June 2026 – eg, questions 2.9.6 and 2.17.4), such reports must be submitted to SECO by the individuals or companies concerned (or their legal counsel based on a power of attorney), usually via electronic means such as file transfer or by email.

In particular, within the scope of financial sanctions, various reporting obligations must be observed. One of the most important reporting duties can be found in Article 16 of the Ukraine Ordinance, whereby companies and individuals who hold or manage assets owned or controlled by designated individuals or entities, or who have knowledge of the existence of such assets, are obliged to notify SECO immediately of all transactions which occurred in the two weeks prior to the listing of these persons, companies or organisations. Further details can be found in the section on “Trends in the financial sector” of the Switzerland Trends and Developments chapter in this guide.

Other reporting obligations (or notification obligations, as they are usually referred to) can for instance be found in Article 28e paragraph 6 of the Ukraine Ordinance – ie, the notification of ongoing services or software still being provided to Russian group companies held by Western parent companies.

Finally, reporting obligations are also commonly attached to licensed activities, requiring companies to notify SECO on a regular basis of the execution of transactions (eg, exports or sales) carried out under granted licences.

The last five years have been dominated by the implementation of the EU sanctions packages against Russia into the Swiss sanctions framework. Although case law remains comparatively limited compared to developments in other jurisdictions, the past two years have seen a noticeable increase in sanctions-related case law, including decisions issued by the Federal Administrative Court, which hears appeals against SECO’s penalty orders.

As far as the enforcement environment in Switzerland is concerned, reference is made to the section on “Swiss Enforcement Landscape” in the Switzerland Trends and Developments chapter in this guide.

The authors wish to draw attention to the following recent judgments.

Judgment of 15 October 2025 of the Federal Administrative Court (B-4169/2023)

The standard of proof in Article 16 paragraph 1 of the Ukraine Ordinance for the reporting obligations applying to those holding or managing frozen funds

Under Article 16 paragraph 1 of the Ukraine Ordinance, persons and institutions that hold or manage assets which are presumed to be subject to a freeze pursuant to Article 15 paragraph 1 of the Ukraine Ordinance must report such assets to SECO without delay. Financial institutions holding assets owned or directly or indirectly controlled by designated persons are therefore required to prevent any action that would enable the management or use of such funds.

In its judgment of 15 October 2025, the Federal Administrative Court confirmed that a reduced standard of proof applies to reports under Article 16 paragraph 1 of the Ukraine Ordinance, requiring only a certain degree of plausibility. This standard applies exclusively to reporting persons and institutions that have independently implemented asset-freezing measures on the basis of Article 15 paragraph 1 of the Ukraine Ordinance. By contrast, SECO must assess the lawfulness of asset-freezing measures based on the standard of a preponderance of probability (consideration 5.2.5).

Judgment of 2 February 2026 of the Federal Administrative Court (B-3805/2025)

The judgment of the Federal Administrative Court of 2 February 2026 focused on the interpretation of the concept of control. The Federal Administrative Court examined whether, as of 2 March 2022, a sanctioned person exercised control within the meaning of Article 15 paragraph 1 of the Ukraine Ordinance over an incoming payment of USD60 million labelled “Gift to Brother”, and whether SECO had correctly applied the standard of proof of preponderant probability.

Definition of “control” according to Article 15 paragraph 1 of the Ukraine Ordinance

In the context of sanctions law, where control relationships between natural persons are at issue, it must be determined who, at the time of the contested decision, in fact exercises ultimate decision-making authority over the use of the assets concerned. The existence of a control relationship must be assessed in light of the criteria set out in the SECO FAQ (considerations 6.3.1.-6.3.2). These criteria are not exhaustive (consideration 7.5).

The Federal Administrative Court further noted that the Swiss legislature acknowledges the risk of sanctions circumvention through asset transfers occurring immediately before or shortly after a person is sanctioned (consideration 7.5.2).

On the basis of the various indicia discussed in considerations 7.1-7.9), the court concluded that the donation in question constituted an attempt to circumvent sanctions, and that continued de facto control by the sanctioned person over the assets could not be excluded.

Activities allowed under the asset freeze

The Federal Administrative Court confirmed that monitoring measures allowing the use of frozen assets, as an alternative to an asset freeze, would be incompatible with the fundamental approach of Article 15 paragraph 1 in conjunction with the legal definition set out in Article 1 paragraph b of the Ukraine Ordinance. Ring-fencing is also not applicable to sanctioned natural persons (consideration 8.4.4).

Judgment of 24 June 2025 of the Swiss Federal Supreme Court (4A_95/2025)

In its judgment of 24 June 2025, the Federal Supreme Court examined a dispute between a Swiss subsidiary of a Russian group and a Turkish company concerning the supply of specific chemicals. At the heart of the dispute was the failure to meet the binding purchase volumes that were to be ordered during the period from 1 March to 31 December 2022. The dispute arose against the backdrop of the inclusion of the relevant chemicals in Annex 20 to the Ukraine Ordinance, effective on 23 November 2022, which restricts trade in those chemicals and related services. Nevertheless, for contracts concluded before 24 November 2022, the relevant prohibitions only became applicable as of 4 February 2023.

The appellant argued that the arbitral award violated substantive public policy (ordre public matériel) under Article 190 paragraph 2 of the Swiss Private International Law Act (PILA) – which lists the grounds for appeal on which a claim may be brought in matters of international arbitration – because it required payment of claims allegedly prohibited under the Swiss and EU Russia sanctions regimes.

Importantly, the court confirmed that the violation of a mandatory provision of Swiss law (such as Swiss sanctions) does not automatically amount to a breach of substantive public policy under Art. 190 paragraph 2 letter e PILA. This ground for appeal is not intended to protect the Swiss legal order as such, nor to review the failure to apply or the incorrect application of (mandatory) foreign law.

Consequently, the court concluded that the award was not incompatible with substantive public policy and dismissed the appeal.

Judgment of 3 March 2026 of the Swiss Federal Supreme Court (4A_454/2025)

The case concerned PostFinance AG’s refusal to maintain a banking relationship with a Russian national resident in Switzerland who was subject to US and UK sanctions, although he was not sanctioned in Switzerland. The customer had been designated by the US authorities as a “primary financial facilitator” acting on behalf of his uncle, who has also been subject to Swiss sanctions since 2022.

In December 2022, PostFinance opened a Swiss-franc account for the plaintiff but terminated the relationship only a few days later. It justified the termination primarily on the basis of the customer’s US sanctions designation and invoked an exception to its statutory universal service obligation (Grundversorgung).

The Swiss Federal Supreme Court dismissed PostFinance’s appeal and upheld the decision of the Commercial Court of the Canton of Bern of 16 July 2025 (HG 23 72). The court confirmed that PostFinance must maintain the banking relationship, continue operating the plaintiff’s account in Swiss francs for domestic payment transactions of up to CHF15,000 per month for both credits and debits, and accept cash deposits of up to CHF15,000 for QR-bill payments in favour of payees domiciled or resident in Switzerland.

This judgment must be viewed against the constitutional and statutory framework governing Switzerland’s universal service obligation in the field of payment services. The Swiss Post is in this regard required to ensure an adequate, universal and affordable basic supply of postal and telecommunications services throughout the country; this mandate also encompasses basic payment services (see Article 92 paragraph 2 of the Swiss Federal Constitution and Articles 1 and 32 of the Postal Act). PostFinance is entrusted with fulfilling this universal service mandate (Article 2 paragraph 2 of the Postal Ordinance [VPG]), which includes basic domestic payment services in Swiss francs to residents in Switzerland and excludes cross-border transfers in any currency (Article 43 VPG). Article 45 VPG contains the following exceptions allowing PostFinance to refuse such services:

• where national or international provisions relating to financial market, anti-money laundering or sanctions legislation conflict the provision of the service; 
• where compliance with such legislation would impose on PostFinance a disproportionately high burden; or
• where there is a risk of serious legal or reputational harm.

The central issue before the court was therefore whether any of these exceptions applied in the present case, thereby justifying PostFinance’s exclusion of the plaintiff from the provision of the relevant payment services.

Importantly, the court agreed with the lower court that a “conflict” with domestic or international legislation within the meaning of the first bullet point above can only arise from a prohibition on the business relationship imposed by legislation that is directly applicable in Switzerland (eg, Swiss or UN sanctions). Accordingly, the mere fact that a customer is subject to US sanctions does not, in itself, justify an exception to PostFinance’s universal service obligation (consideration 5.2.2).

The court further rejected the argument that Swiss financial supervisory law effectively requires Swiss financial institutions to comply with foreign sanctions law. Rather, FINMA merely expects supervised institutions to identify, mitigate and monitor the legal and compliance risks arising from foreign sanctions law (consideration 5.2.3).

Additional compliance work deriving from the classification of the plaintiff as high-risk does not automatically amount to a disproportionate burden within the meaning of the second bullet point above. The burden must be assessed against the level of compliance effort typically associated with other categories of customers who require enhanced monitoring (consideration 7.3).

Finally, the court was not persuaded by PostFinance’s argument that maintaining the account exposed it to the risk of US sanctions – including secondary sanctions – and could adversely affect its reputation and relationships with correspondent banks. The court stressed that the plaintiff only sought a Swiss-franc account for domestic transactions relating to everyday expenses and there was no evidence that the account would be used for transactions capable of triggering sanctions concerns (considerations 8.2.-8.3).

The judgment provides important guidance on the relationship between PostFinance’s universal banking service obligations and foreign sanctions regimes and therefore cannot be extrapolated to other financial institutions. In essence, the court reaffirmed that PostFinance’s universal service obligation takes precedence unless it can demonstrate a concrete legal prohibition applicable in Switzerland, a genuinely disproportionate compliance burden, or a substantiated risk of serious legal or reputational harm.

It is to be expected that the Swiss sanctions system, including the guidance for the implementation of sanctions, the involvement of the courts in sanctions matters and the enforcement of sanctions by SECO, will continue to become more robust and also more diversified in the future. In particular, it is expected that the enforcement landscape will further expand.

In light of 1.4.3 Domestic and/or Supranational Measures, Switzerland is expected to continue the current trend of implementing the sanctions regulations of the European Commission. There is no indication that this current trend should change, although the Swiss legislature is expected to continue implementing the European sanctions framework with certain “Swiss finishes” (as has been the case in the past: an example of such Swiss finish can notably be found in the notification obligation instead of a licensing requirement concerning the provision of services or software under the services and software ban, Article 28e paragraph 9 of the Ukraine Ordinance).

Sanctions lists are updated based on the corresponding lists of the UN or, in the case of alignment with EU sanctions, the EU (see Article 1 paragraph 1 EmbA; see 1.4.3 Domestic and/or Supranational Measures). For example, in the case of EU sanctions against Venezuela, Switzerland has aligned with all EU sanctions measures and has so far also aligned with EU delistings.

Thus, the responsible Swiss agencies and courts will generally reject delisting requests for as long as the individual or entity concerned is designated by the corresponding international or foreign authority with which Switzerland has aligned. Designations should actually be challenged before the foreign or international authority that initially decided on the designation. As far as UN sanctions are concerned, delisting requests should be submitted to the Office of the Ombudsperson to the ISIL (Da’esh) and Al-Qaida Sanctions Committee and, for other sanctions regimes, the Focal Point for Delisting.

The process for a designated person to domestically seek judicial review in Switzerland to overturn a Swiss listing should follow the Federal Act on Administrative Procedure (Administrative Procedure Act (APA), see Article 1 paragraph 2 let. a APA). In Nada v Switzerland, where the Grand Chamber of the European Court of Human Rights considered that the applicant had exhausted the domestic remedies available in Switzerland relating to the sanctions regime in question to claim his delisting, the applicant had pursued the following procedure:

• submission of a request for the deletion of the name of the applicant from the annex to the respective Swiss sanctions ordinance to SECO;
• following the dismissal of such request, lodging of an administrative appeal with the Federal Department of Economic Affairs, Education and Research (EAER);
• following the dismissal of such appeal, lodging of an appeal to the Federal Council;
• the Federal Council ruled on the appeal and referred the applicant’s appeal to the Swiss Federal Supreme Court; and
• the Swiss Federal Supreme Court decided on the admission and merits of the appeal (see paragraphs 30–52 of judgment of 12 September 2012, ECHR, Grand Chamber, case of Nada v Switzerland).

See also the recent delisting case law of the Federal Administrative Court, which dismissed the appeals brought by Alexander Pumpyanskiy, Viktor Filippovich Rashnikov and Dmitry Konov, all of whom are designated under Annex 8 to the Ukraine Ordinance. The judgments followed the EAER’s rejection of their respective delisting requests (Federal Administrative Court judgments B-4084/2023 of 18 March 2025, B-3584/2023 of 23 June 2025 and B-5313/2023 of 1 September 2025).

In these judgments, the Federal Administrative Court emphasised that the Swiss authorities bear the burden of proving the facts that justify the individual’s inclusion in Annex 8 (and any sanctions imposed pursuant to the EmbA), applying the standard of proof of preponderant plausibility. The court further held that the designated persons cannot rely on the presumption of innocence, as sanctions are political in nature and have no, or only limited, punitive character (B-4084/2023 consideration 5.3; B-3584/2023 consideration 4.2; and B-5313/2023 consideration 4.3). Applying these principles, the court found that there was sufficient evidence to conclude that the grounds for the designation of Pumpyanskiy, Rashnikov and Konov continued to exist and therefore upheld the rejection of their delisting requests.

Margin of Appreciation of UN Member States for Delisting

The responsible Swiss agencies and courts generally reject the delisting if the individual or entity concerned is mentioned on sanctions lists issued by the UN (or, in case of alignment with EU sanctions, the EU). See, in this regard, the reasoning of the Swiss Federal Supreme Court in Nada v Switzerland in 4.1 Process. The Swiss Federal Supreme Court, when examining the question of the extent to which Switzerland is bound by the relevant UNSC resolutions and whether it has any margin of appreciation in implementing them, held that sanctions, including the names of those affected by them which are also notified to UN member states, afford UN member states no margin of appreciation in their implementation. For obtaining deletion from a sanctions list, the relevant sanctions committee provides a specific procedure, so that UN member states are debarred from deciding on their own on the delisting; Switzerland would thus be in breach of its obligations under the UN Charter were it to delete the names of a UN designated person from the annex of the relevant ordinance (see paragraph 50 of judgment of 12 September 2012, ECHR, Grand Chamber, case of Nada v Switzerland).

Effects of Delisting

In cases where a delisting occurs, the corresponding restrictive measure is no longer applicable.

However, in practice, most companies typically take a global approach when considering whether individuals or entities are designated. Thus, a delisting should be obtained in all jurisdictions in which the individual or entity has been designated.

It is difficult to predict the time it might take to obtain delisting for the reasons set forth in 4.1 Process and 4.2 Remedies, but it can take between months to years, also given Swiss listings originate either in UN or EU listings.

As mentioned in 1.4.1 Types of Sanctions, sanctions take a number of different forms, including restrictions on the supply of certain services to sanctioned countries.

Typically, there are bans on so-called ancillary services of any kind which relate to the trade of goods restricted under a specific sanctions regime.

Less common amongst the sanctions regimes is the stand-alone ban on the provision of certain services or software to Russia. Article 28e of the Ukraine Ordinance prohibits, inter alia, the direct or indirect provision of services such as business and management consulting, legal advisory and IT consultancy services, or of certain business software to the government of Russia or legal persons, entities or bodies established in Russia.

Providers should therefore conduct regular assessments to ascertain whether their services are linked to underlying goods that are subject to restrictions under the applicable sanctions regimes.

Most sanctions regimes impose restrictions on the trade of certain goods, namely military and dual-use goods.

For example, the restrictive measures against Iran include a ban on the sale, supply, export, etc, of goods for nuclear items or drones to Iranian persons or organisations or for use in Iran. Furthermore, there are bans on the export of arms, repressive equipment and equipment for surveillance purposes which traditionally form part of every sanctions regime.

Under the Russia sanctions regime, the scope of these bans is considerably broader, extending beyond goods that may be used for military purposes to encompass those that could potentially support or enhance Russia’s economy. Such measures include export bans on luxury goods, goods destined to strengthen Russia’s industry as well as an import ban on goods that generate significant revenue for Russia. These export or import restrictions include a wide array of goods such as also coal, iron and steel as well as other (otherwise common) goods.

The case law of the Swiss Federal Supreme Court on the question of impossibility of performance due to compliance with sanctions is scarce. Worth mentioning, however, are the following decisions.

Judgment of 6 August 2021 of the Swiss Federal Supreme Court (4A_659/2020)

This decision deals with the impact and implementation of foreign sanctions in Switzerland. The appellant was a Panamanian company ultimately owned by an individual that was designated in 2018 by the US. In 2013, the company opened certain accounts with a Swiss bank. As part of the banking relationship, the parties signed a loan and a pledge agreement in 2013. In 2015, the bank granted the company a loan in the form of a fixed advance in the amount of USD160 million which was collateralised with deposited securities.

After the publication of the sanctions listing and shortly before the fixed advance fell due, the company instructed the bank to sell some of the USD securities from the custody account and use the proceeds to repay the loan. The bank refused to carry out the instructions alleging that the beneficial owner of the company was an SDN and any transactions in USD in connection with the company were therefore prohibited. The bank demanded to remedy the existing shortfall or otherwise it would sell the shares that were not denominated in USD.

In the first instance, the Commercial Court of the Canton of Zurich (in Judgment HG180215-O of 16 November 2020) held that OFAC sanctions were not directly applicable in Switzerland, but that the bank is obliged under Swiss banking supervisory law to refuse to carry out transactions that violate US sanctions laws. Furthermore, the company had no claim to fulfilment under contract law either, because the execution of the disputed instructions would make the bank’s position unreasonably difficult, as a result of the penalties that it could face.

The Federal Supreme Court stated that the bank was able to rely on its General Terms and Conditions, thus on a contractual right of refusal, which authorised the bank to refuse performance that was not in accordance with the regulations or practices of stock exchanges or other trading venues, which was to be interpreted broadly, thus also including OFAC regulations.

The Federal Supreme Court stated, without going deeper into the discussion, that the bank would have had the right under statutory law (ie, the CO) to refuse performance due to unreasonableness, given the threat of penalties and possible exclusion from the US financial market. Thus, the case was subject to Article 119 CO on impossibility of performance.

Judgment of 23 May 2022 of the Swiss Federal Supreme Court (4A_583/2021)

In its judgment of 23 May 2022 (4A_583/2021), the Swiss Federal Supreme Court dealt with an appeal against the judgment of the Commercial Court of the Canton Zurich of 7 October 2021 (HG180161-O). The appellant, domiciled in the UAE and acting as paying/financial agent for the respondent, domiciled in Iran, stopped carrying out any activities under the relevant service contract from August/September 2013, after the entry into force of the UN sanctions against Iran in the UAE. In July 2013, the appellant issued an invoice for its claims for fees and expenses and retained around AED60 million from the monies received to cover its alleged claims. A fee dispute subsequently arose between the parties. The Commercial Court of the Canton of Zurich noted that the discontinuation of the appellant’s activity after August 2013 as a result of impossibility due to the implementation of the sanctions in the UAE justified a discretionary reduction of the retainer fees by three quarters from September 2013 until the end of the contract. The Swiss Federal Supreme Court held that the first instance court did not breach federal law, including Article 119 CO, by its discretionary reduction of the retainer fee by 75%.

The Swiss Federal Supreme Court noted that it had to be assumed that the retainer fee was agreed between the parties with regard to all services to be provided, which is why a corresponding reduction had to be made if a service was cancelled due to impossibility. The reduction of 75% could be justified by the fact that the most important part of the service provision under the contract became impossible (see consideration 7).

In this decision, however, the Swiss Federal Supreme Court was largely bound by the factual findings of the lower court for procedural reasons. Thus, the Swiss Federal Supreme Court did not have to decide whether the sanctions imposed on Iran actually constituted a case of objective or subjective impossibility within the meaning of Article 119 CO. The lower court – ie the Commercial Court of the Canton of Zurich, also did not have to decide whether the fulfilment of the contract was actually impossible. Rather, for procedural reasons (because the appellant did not sufficiently dispute this), the first instance court was able to rely on the allegation of permanent impossibility of fulfilment of the contract put forward by the respondent and therefore concluded that the requirements of Article 119 CO were met (see HG180161-O, consideration 4.2.3.4).

Complementing the referred case law on the impossibility of performance under Article 119 CO in sanctions-related contexts, the following judgments provide important guidance on the circumstances in which a party may lawfully refuse performance pursuant to Article 20 paragraph 1 CO in the same context.

Judgments of 28 April 2026 of the Federal Supreme Court (4A_535/2025 and 4A_537/2025)

In 4A_535/2025, the claimant was a financial services entity wholly owned by a foundation established on behalf of the nephew of an individual who had been designated by OFAC since 2018 and subsequently listed by the EU, the UK and Switzerland in March 2022. The nephew served as the foundation’s protector until April 2022 and was himself designated by OFAC in November 2022 due to his close personal and business ties to his uncle.

In 4A_537/2025, the claimant was an entity incorporated in 2018. Until February 2023, it was owned by the spouse of its original Chief Operating Officer (COO), who was the same nephew referred to in the first case.

In both cases, the respondent was a FINMA-licensed securities firm engaged in the trading and custody of crypto-assets. While the respondent itself did not operate in the US market, its group maintained US connections, including licences and relationships with US counterparties.

In November 2021, the parties entered into agreements governing the trading and custody of cryptocurrencies. Following the nephew’s designation by OFAC in November 2022, the respondent blocked the claimants’ crypto-assets. When the claimants subsequently instructed the respondent in February 2023 to transfer those assets to external wallets, the respondent refused, relying on its obligations under applicable sanctions laws.

The Federal Supreme Court held that the mandatee’s duty to comply with the mandator’s instructions under Article 397 CO is not absolute. A mandatee is not required to follow unlawful instructions, and a right to refuse performance may arise from the obligations and prohibitions imposed by the Ukraine Ordinance (consideration 3.2.1).

Given the concrete indications that the assets were – at least indirectly – controlled by a sanctioned person, compliance with the claimants’ transfer instructions would have violated the Ukraine Ordinance and, by extension, the EmbA (see consideration 3.2.3). The court therefore held that the respondent was obliged to maintain the asset freeze and was entitled to refuse to follow the instruction received and, thus, performance under the relevant contractual arrangements (cf. Article 20 paragraph 1 CO). Accordingly, it found no breach of the respondent’s contractual duties under Article 397 CO (consideration 3.2.3).

These judgments confirm that financial institutions may rely on Article 20 paragraph 1 CO to refuse client instructions that would result in violation of sanctions law and may therefore lawfully refuse contractual performance on that basis.

The authors expect that the continuing extension of the Swiss sanctions framework combined with resulting cases of (alleged) impossibility to fulfil contractual obligations may lead to further court decisions in the near future. It will be of particular importance to understand how the courts involved will approach the element of burden of proof which must be borne by the party arguing in favour of the impossibility to perform under the contractual agreement.

The authors refer to 2.2.3 Civil Enforcement Action for case law explicitly dealing with the enforcement of judgments or arbitral awards on sanctions-based issues.

In accordance with Article 2 paragraph 1 EmbA, the Federal Council is responsible for enacting restrictive measures, including designations. With regards to UN sanctions, the Federal Council automatically adopts the designations originating from the corresponding UN Sanctions Committee established by the relevant UN Security Council Resolution, whereas it will have a certain margin of appreciation in the adoption of designation decisions originating, for example, in the EU, where no automatism applies. However, under the Russia sanctions, all EU designations have been implemented by Switzerland, usually within days.

Indirect Designations

In addition to persons expressly listed in the annexes to the respective sanctions ordinances, non-designated third parties may qualify as sanctioned parties if the designated person is determined to own or have control over them.

Article 15 of the Ukraine Ordinance is a good example of the meaning and impact of “indirect designation”. This provision imposes a freeze of the funds and economic resources owned or directly or indirectly controlled by individuals and entities listed in Annex 8 to the Ukraine Ordinance, individuals and entities acting on behalf of or on the instructions of the latter, as well as entities owned or controlled by these. Thus, this provision subjects to asset freeze not only those designated in Annex 8, but also (i) those acting on behalf of or on the instructions of those designated, and (ii) those entities owned or controlled by those designated.

Article 18 of the Ukraine Ordinance provides another example. It restricts the provision of certain services in connection with securities and money market instruments with certain maturities and issued after certain dates. This provision subjects to this prohibition hose designated in Annex 9, as well as (i) those foreign entities more than 50% owned by those designated, and (ii) those acting on behalf of or on the instructions of those designated.

Concept of Ownership

SECO FAQ, question 1.10, defines “ownership” as the fact that the designated person “directly or indirectly holds 50% or more of the ownership shares in a company or an organization”. As provided in the judgment of the Federal Administrative Court of 7 November 2023 (B-547/2023), “the Ukraine Ordinance does not define the cases in which an ownership or control relationship relevant under sanctions law is to be assumed. Swiss case law links this to principles of control and domination under company law and of beneficial ownership” (consideration 4.2). Switzerland follows therefore the same definition of “ownership” as the EU (see EU Best Practices, paragraph 63).

SECO also follows an “aggregated” concept of “ownership”, taking into account the ownership quotas of all designated persons involved in each case (see SECO FAQ, question 1.10), again in alignment with the EU.

Concept of Control

In accordance with SECO FAQ, question 1.11, if any of the following criteria is met, it is assumed that the entity in question is controlled by a designated person:

“a) the natural person, company or organization has the power to appoint and/or remove, formally or de facto, the majority of the members of the administrative or management body of the company or organization;

b) he or she formally or de facto holds the majority of the voting rights of the company or organization;

c) he or she has the right to exercise a dominant influence over the company or organization by virtue of a contract concluded with it or by virtue of a provision laid down in the memorandum or articles of association;

d) he or she has the power to exercise the right to exercise a dominant influence within the meaning of point (c) without itself holding that right;

e) he or she has the right to use all or part of the funds and economic resources of the company or organization or to determine how they are used;

f) he or she manages the business of the company or organization on a uniform basis with the preparation of consolidated accounts;

g) he or she is jointly and severally liable for the financial liabilities of the company or organization or acts as guarantor for it;

h) as a lender, he or she formally and/or de facto exercises a controlling influence on the decisions of the management.”

These criteria may be met individually or based on agreements with another shareholder or a third party. The presumption established by meeting any of these criteria can be rebutted on a case-by-case basis (see SECO FAQ, question 1.11; see also below on “ring-fencing”). These criteria coincide with those in the EU Best Practices, paragraphs 63-65.

In addition, SECO takes into account the following non-exhaustive criteria to assess whether funds or economic resources have been formally transferred to third parties, but the designated person still exercises control over them:

• “the close relationship (family, business, personal) between the person directly subject to the asset freeze and the third party;
• the economic and/or professional independence of the third party who is now the nominal owner of the funds or economic resources;
• the value and frequency/regularity of the benefits in question in comparison with benefits to the third party that were made before the sanction was imposed;
• existence and content of formal agreements between the sanctioned person and the third party;
• compliance with the arm’s length principle in the transfer of value (eg, terms of sale of company shares)” (see SECO FAQ, question 1.12).

Under the last criterion, transactions must take place under the same conditions as would be agreed between unrelated third parties in an environment of free competition and under comparable circumstances.

Measures of Ring-Fencing

Where the above-mentioned ownership or control is established with regards to entities significant for the economy, operating in sensitive sectors or employing a significant workforce, SECO supports the implementation of ring-fencing measures. Ring-fencing in this sense aims at removing the designated person from the day-to-day operations and any business decisions of the entity that they own or control and the resulting resources and profits. Ring-fencing measures enable the affected entity to continue operating (ie, having access to funds and economic resources as well as receiving services), under the new conditions, free from the ownership or control of a designated person. The ultimate goal of such measures is to refute the presumption of ownership or control of the designated person.

Provisions with licensing grounds to enable the establishment of ring-fencing in the Ukraine Ordinance

In a situation of presumed ownership or control of an entity by a designated person, the relevant restrictive measures would also apply to the non-designated entity. The Ukraine Ordinance provides for licensing grounds in Articles 15 paragraph 10 and 28e paragraph 13, in the event that the establishment, certification or evaluation of ring-fencing measures is hindered by such restrictive measures.

Beneficiaries of the ring-fencing measures

SECO requires that the beneficiaries of ring-fencing measures are companies or organisations established in Switzerland, significant both in terms of their market position and their employment volume, active in the sectors of food production, pharmaceuticals, fertilizers, chemicals, water management and wastewater treatment or nuclear power, for being regarded as “essential” (SECO FAQ, question 1.13). This coincides with the criteria of the EU, which take into account the positioning and significance of the entity on a national market or the European market, both in terms of market positioning and employment volume, as well as its activity in any of those “essential” sectors (see EU Guidance Note – Implementation of Firewalls in cases of EU entities owned or controlled by a designated person or entity, p. 3).

Types of measures

The measures must prevent designated individuals or entities from exercising their rights in relation to their ownership or control and ensure that no funds or economic resources are made available directly or indirectly to the designated person (SECO FAQ, question 1.13).

Such measures should accordingly:

• hinder the involvement of the designated person in the day-to-day and business decisions of the entity in question;
• ensure that no funds or economic resources from the entity are accrued directly or indirectly by the designated person;
• ensure that the designated person cannot assert influence over the entity; and
• remove the designated person from any responsibility in the entity, including any executive activities like those of a director or member of the board of directors or any decision-making role or any other role that entails any responsibility in the entity.

Criteria to assess the ring-fencing measures

SECO follows the criteria for ring-fencing measures provided in the EU “Guidance Note – Implementation of Firewalls in cases of EU entities owned or controlled by a designated person or entity” and particularly its Annex 2 (see SECO FAQ, question 1.13).

Accordingly, the entity that establishes ring-fencing measures has to resort to an external auditor that implements and/or certifies the effectiveness of the changes to the entity’s corporate governance. The audit must be able to confirm that the designated person does not exercise influence or has any responsibility in the entity or benefit from the assets of the entity (eg, via dividends). It is central that this external auditor acts in full independence. The audit process shall be based at least on the following information:

• articles of association, by-laws, shareholder structure and a description of the changes that have taken place to remove the control by the designated person (eg, board minutes attesting to management changes in the entity);
• interviews with the entity’s executives other than the designated person; and
• written undertakings given by the non-designated chief executive, engaging their responsibility on the ring-fencing measures.

Procedure followed by SECO

In case of presumption of ownership or control, the establishment of ring-fencing measures is necessary to rebut this presumption and benefit from an authorisation – eg, to release the entity’s frozen assets. The process will generally include the following steps:

• filing of an application before SECO for the implementation of the proposed ring-fencing measures and provision of information on the significance of the entity and the compliance with the other requirements to benefit from such measures, as presented above;
• SECO will examine applications and may authorise such measures after examining the significance of the entity;
• SECO may, if necessary, grant an authorisation under Article 15 paragraph 10 and/or Article 28e paragraph 4 of the Ukraine Ordinance if it is necessary for the implementation of ring-fencing measures;
• implementation of the relevant ring-fencing measures;
• independent external audit as stated above;
• submission to SECO of assurances that the designated person is no longer involved in the entity; and
• SECO will officially confirm the successful implementation of ring-fencing measures by entities on a case-by-case basis. For confirming this successful implementation, SECO will take into account the above-mentioned criteria.