LIECHTENSTEIN Trends and Developments Contributed by: Lukas-Florian Gilhofer and Mathias Bitschnau, Ospelt & Partner Attorneys at Law Ltd
• According to the Liechtenstein government, sev - eral hundred foundations and establishments are currently affected. What makes this situation particularly acute is its apparent legal intractability. The formal liquidation procedure cannot be conducted because no trustee is willing to accept the corresponding mandate. Even court appointment as liquidator is widely declined by trustees, as that role is equally perceived as carrying the risk of attracting OFAC scrutiny. The result is a structural impasse in which the normal mechanisms of Liechtenstein law – resignation, replacement, court appointment, liquidation – are rendered inoperative by the shadow of a foreign legal regime that is not itself directly applicable. Regulatory responses The FMA and the Liechtenstein Chamber of Trustees have responded to the situation with warnings and a binding guidance note for their members. The FMA emphasises on the one hand that foreign sanctions are formally inapplicable, while on the other recom - mending the immediate termination of business relationships with OFAC exposure as the only viable risk-mitigation measure. This contradictory message – formally non-binding, but to be observed in practice – places trustees in a legal grey zone from which they seek to extricate themselves through pre-emptive mandate resignation, thereby contributing to the very problem the guidance is intended to address. The government has identified the need for action and is examining a range of solutions, including the fol - lowing. • Providing legal certainty to lawyers willing to wind up affected foundations, so as to protect them from the risk of themselves being listed by OFAC. • Initiating direct contact with OFAC on this point, with a view to obtaining clarification or comfort let - ters that would enable Liechtenstein-based profes - sionals to act as liquidators without fear of second - ary sanctions exposure. • Strengthening the FMA’s supervisory powers, so that the authority may in future actively order the termination of business relationships and provide
a regulatory basis for the orderly wind-down of affected structures. The outcome of these efforts remains uncertain. Direct engagement with OFAC is a complex undertaking, and the United States sanctions authority has not historically been forthcoming with blanket comfort to third-country advisers seeking to wind down sanc - tioned structures. Nevertheless, the government’s willingness to engage directly with Washington on this issue reflects an understanding that a purely domestic This crisis strikes at a sensitive point for the Liech - tenstein financial centre, which in recent years has made considerable efforts to strengthen its reputation as a transparent, rule-of-law-based centre for asset management and foundation law. The threat of OFAC secondary sanctions and the resulting paralysis of hundreds of legal entities represent a serious stress test for that reputation. The United States sanctions authority has already warned Liechtenstein on sev - eral occasions regarding possible violations and has openly threatened secondary sanctions should trusts with Russia-related connections continue to be main - tained. This illustrates a broader dynamic in which small financial centres can become mere enforcement objects of competing foreign legal regimes, without having participated in the formulation of those rules or having any meaningful avenue of objection. Outlook : between sovereignty and sanctions pressure For Liechtenstein, the strategic question is how to pre - serve its reputation as a clean, legally secure finan - cial centre without becoming a mere instrument for the implementation of competing foreign sanctions regimes. The answer does not lie in national legislation alone; it requires constructive dialogue with the United States, the EU and the international sanctions authori - ties – a dialogue that Liechtenstein must be prepared to conduct with the self-confidence of a small but legally sovereign state. The Principality’s track record of consistent and rapid autonomous adoption of EU sanctions packages provides a strong foundation for that dialogue, demonstrating that Liechtenstein takes legal solution is unlikely to be sufficient. Reputational risk for the financial centre
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