The Swiss Federal Council took a position on the armed conflict currently taking place in Ukraine and adopts the entire sanctions package against the Russian Federation by the EU. This is a complete novelty in the foreign policy of Switzerland as a neutral state and confirms its commitment to upholding international law and caring for security and peace in the international arena. It is also a clear gesture towards a political rapprochement with its most important trading partner, which is the EU.
The sanctions complex currently in force in Switzerland is regulated by the federal law on the implementation of international sanctions (EmbA). Article 1 of the above-mentioned Federal Law authorizes the Swiss Federal Council to implement the instruments in compliance with international law and with international human rights standards.
From a practical point of view, the Swiss Federal Council has the power to implement the sanctions imposed on Russia and a number of entities related to Kremlin policy by the United Nations (UN). The Swiss Federal Council is also authorized to impose sanctions adopted by the Organization for Security and Cooperation in Europe (OSCE), as well as sanctions against the Kremlin by the European Union (EU).
The State Secretariat for Economic Affairs (SECO) was instructed by executive regulations to monitor and impose sanctions by ordinance.
In order to ensure the highest degree of effectiveness of the imposed restrictions, Switzerland has decided to choose the model of so-called smart sanctions. This model is based on the fact that the sanctions in question target specific persons, entities and organizations, and in a directional manner prevent them from circumventing them. The names of sanctioned individuals, entities, as well as organizations, are listed in the annexes to individual regulations published by SECO on an ongoing basis.
After the annexation of Crimea by the Russian Federation in 2014, the European Union created a system of sanctions (Council Regulation (EU) No. 833/2014), which Switzerland did not accept. The solution that Switzerland then adopted was that it undertook to take all necessary measures to prevent Switzerland from being used to circumvent sanctions imposed by the EU. To this end, SECO published a regulation of 2 April 2014 on measures to avoid the circumvention of international sanctions in connection with the situation in the territory of Ukraine (SR 946.231.176.72).
The sanctioning instruments introduced by Switzerland were aimed at ensuring that the prohibition of commercial relations with entities that were subject to sanctions would be effective and could not be circumvented. Switzerland, however, has not decided to freeze funds.
The European Union, in response to the military intervention of the Russian Federation in Ukraine, adopted a package of new sanctions (Council Regulation (EU) 2022/328) against the Russian Federation. This package orders the absolute freezing of assets and the closure of the EU capital market for some entities and individuals, mainly oligarchs and some Russian politicians. The indicated package of sanctions also covers the ban on the export of dual-use items to the Russian Federation, and introduces, inter alia, visa restrictions.
The Swiss Federal Council decided to accept in full the sanctions imposed by the EU on the Russian Federation and instructed SECO to rename the existing regulation as follows: Order of March 4 on measures in connection with the situation in Ukraine (946.231.176.72), hereinafter "Ukraine ordinance".
The distinction between the adoption of "measures to prevent the circumvention of EU sanctions" and the adoption of sanctions in full has a symbolic, legal as well as practical significance.
From a formal and legal point of view, Switzerland this time did not stop at the prohibition of circumventing sanctions imposed by the EU and decided to freeze assets, thereby departing from the long-cultivated principle of neutrality.
In accordance with the modified Ukrainian regulation, Switzerland currently maintains, among others, the following restrictions on financial services, goods, and freedom of movement.
Financial sanctions - in the narrow sense, i.e. freezing of assets and prohibitions on making economic resources available (§3 of the Ukrainian Ordinance) were introduced as follows:
Goods restrictions and sectorial sanctions (Section 2 of the Ukraine ordinance) have been introduced as follows:
Businesses should scrutinize their upstream and downstream supply chains, the universe of business partners and buyers, including the banks they use to carry out transactions, and make an assessment as to whether any of these expose them to sanctions risks.
The first and most straightforward way of finding out what your 3rd party risk exposure looks like is to perform KYC checks.
Businesses should also analyze the items they manufacture, distribute or import. They should be aware of the correct classification of said goods, origin information, and licensing requirements potentially applicable to said goods.
Navigating the complex matter of international law is time-consuming and requires specialist legal knowledge. Eberhard Advisory provides you with expert knowledge in the presented issues and ensures that your business is always safe.
