A previous post discussed the potential scenarios that Swiss individuals and entities, including foreign subsidiaries located in Switzerland, could face should new sanctions target specific Russian Federation individuals and entities. Last Monday, the Swiss Government adopted, with immediate effect, a new sanction regime against certain Russian Federation individuals and entities.
Swiss Sanctions Before February 28, 2022
Switzerland has historically decided to remain neutral. It has, however, enacted a Federal Act on the Implementation of International Sanctions (also known as the Embargo Act) in 2002 after the accession of Switzerland to the United Nations. That Act seeks to implement sanctions that have been ordered by the United Nations, by the Organization for Security and Cooperation in Europe, or by Switzerland’s most significant trading partners (e.g., the EU) and which serve to secure compliance with international law and in particular the respect of human rights.
Based on that Act, the Swiss Federal Council (i.e., the Swiss Government) enacted an Ordinance establishing measures to prevent the circumvention of international sanctions about the situation in Ukraine on August 24, 2014. The Ordinance has been revised multiple times since, the latest amendment occurring on February 28, 2022 (see below). Concerning the situation in Ukraine before the Russian Federation’s invasion on February 24, 2022, Switzerland had enacted sanctions in a more “neutral” way, banning, for instance, imports of military weapons from both the Russian Federation and Ukraine.
In addition, in respect of the ban on imports, exports, and investment per Annex 1, the designated territories were limited to Crimea and Sebastopol. Further, the financial restrictions were focused on financial intermediaries and a ban on opening new financial relations with individuals and entities listed in Annex 3 of said Ordinance. In sum, the Ordinance was drafted in a limited way, respecting international law and ensuring that Switzerland maintained its neutral position, as it understood it to be.
On February 25, 2022, the Federal Council amended Annex 3 of the Ordinance by listing several individuals and entities, including, but not limited to, the Members of the Russian Federation’s State Duma who voted in favor of invading Ukraine. The Federal Council did not review the Ordinance itself.
Swiss Sanctions as of February 28, 2022
On February 28, 2022, the Federal Council held an extraordinary meeting during which it decided to align its sanctions measures to those already adopted by the European Union. Key points of the Ordinance as of February 28, 2022 (1800):
- President Vladimir Putin, Prime Minister Mikhail Mishustin, and Foreign Minister Sergey Lavrov are now listed individuals in Annex 3;
- The assets of the individuals and entities listed in Annex 3 are frozen with immediate effect;
- The ban on entering into new business relationships with those listed in Annex 3 remains in force;
- The ban on imports, exports, and investment per Annex 1 was extended to the Ukrainian regions of Donetsk and Luhansk not under the control of the Ukrainian government, in addition to the already designated territories of Crimea and Sebastopol; and
- The obligation to provide information to the Sanctions Department of State Secretariat for Economic Affairs on blocked assets of listed individuals and entities is extended to anyone who holds, manages, or has knowledge of the existence of such assets.
In addition, Switzerland decided to ban its airspace to airplanes with Russian markings (except diplomatic, humanitarian, or medical flights) and partially suspend the 2009 agreement on visa facilitation for Russian nationals.
What to expect going forward?
The Federal Council explained that the newest sanctions respond to the serious violations of international law. This decision to fully adopt the EU sanctions has also reignited the debate regarding Switzerland’s neutrality. This debate is always passionately conducted in Switzerland and will undoubtedly influence further actions of the Federal Council.
While we sincerely hope that the war stops now, we do not pretend to know what will happen in the near future. Yet we anticipate the European Union imposing further and harsher sanctions on Russian Federation individuals and entities. We believe that Switzerland will have to impose the same or similar sanctions. In particular, given the dynamic nature of the war and the advance of the Russian Federation’s armies, the ban on imports, exports, and investment should also be dynamic.
In addition, we anticipate additional sanctions to be imposed on Belarussian individuals and entities as it appears that the Belarussian army has participated in the invasion of Ukraine.
Dr. James F. Reardon, J.D., pictured above left, is a senior associate at MLL, based in Geneva, Switzerland. He focuses on complex international litigation and arbitration, as well as on a variety of regulatory matters, in particular in the fields of competition law, banking and finance, and compliance. He is a lecturer (chargé de cours) at the Institute for International Business Law of the Faculty of Law at the University of Fribourg, Switzerland (LL.M. program), where he teaches anti-corruption and anti-money laundering. He can be contacted here.
Marcel C. Steinegger, above right, is a partner at MLL, based in Zurich, Switzerland. He has over 20 years of litigation and trial experience in a variety of mainly international but also domestic commercial and corporate cases including representing individuals and companies in regulatory enforcement proceedings. He has in-depth experiences in cross-border litigation and international judicial assistance issues in civil and criminal matters, particularly in asset recovery, repatriation of assets and being expert in foreign proceedings. He can be contacted here.