SWITZERLAND Trends and Developments Contributed by: Philippe M. Reich, Kaspar Projer, Samantha Salsench and Anna Zellweger, Baker McKenzie Switzerland AG
ing: To ring-fence a Russian subsidiary means that the (Swiss) parent company does not, in any way, influ - ence, direct or exert control (strategically and opera - tionally) over the subsidiary and its activities, and the subsidiary may therefore be considered independent from the parent company not only on a legal, but also on an operational and factual basis. In other words: ring-fencing a Russian entity means that its autonomy from the (Swiss) parent entity is established to such an extent that the Russian entity may be considered legally and operationally autonomous. Efforts to ring-fence a Russian subsidiary are primarily motivated by the fact that Swiss sanctions also apply to foreign group entities of Swiss companies which are “directed or instructed out of Switzerland”. Ring- fencing means that (any) direction or instruction of the Swiss parent company towards the Russian subsidi - ary is ceased, in order to avoid the Russian subsidiary being considered to be “directed or instructed” by its parent company, which would extend the applica - tion of Swiss sanctions to the Russian entity and its business operations. In turn, if the Russian subsidi - ary is considered sufficiently ring-fenced, there is an argument that the Swiss sanctions regime, including especially it financial and product-related restrictions, does not apply to the Russian entity, its activities and the business relationships it entertains. For example, a fully ring-fenced Russian entity is not legally required to comply with the ban on dealings with sanctioned parties and may, as such, maintain a banking relation - ship with a Russian financial institution designated by Switzerland. It is important to note that there is no definitive answer to the question whether a Russian subsidiary may be considered “ring-fenced” or not. Rather, in daily prac - tice, the authors rely on certain elements and indica - tions which either support the “ring-fencing character” of the Russian entity or erode the same. These ele - ments (as well as their absence) must be considered and assessed on a case-by-case basis and with the support of an experienced Swiss sanctions practi - tioner. With ring-fencing efforts and, more generally, efforts to strengthen the independence of Russian subsidiar - ies from Swiss influence and other western sanctions
jurisdiction increasing, SECO is further increasing its focus on circumvention efforts and their prevention. The circumvention of sanctions – and related prosecu - tion – continues to be one of SECO’s key priorities on its enforcement agenda. Unlike the EU, SECO has so far not issued a legal definition of what is considered circumvention of sanctions, in general, or circumvention of the vari - ous restrictions included in the Ukraine Ordinance, in particular. However, in Swiss sanctions practice, a circumvention of sanctions restrictions (or rather an attempt to circumvent sanctions) may be considered as the following action: • the (re-)structuring of a business relationship or a specific transaction (eg, involving the sale of cer - tain items, the provision of certain services, etc); • whereby this business relationship or specific transaction currently violates sanctions applicable to the relationship or transaction; and • whereby the (re-)structuring is primarily or solely aimed at the avoidance of sanctions jurisdiction in the country or countries affected or, more gener - ally, at the concealment of such relationship or transaction. Whether or not a circumvention of sanctions is pre - sent (or an attempt to circumvent sanctions), and thus whether SECO may identify a sanctions violation, must be assessed in consideration of all elements of the individual case. The authors suggest involv - ing sanctions experts at an early stage to discuss the implications of the transactions concerned, any efforts to restructure such transactions and the implementa - tion of mitigating measures (if at all available). In daily practice, the following elements or circum - stances have been identified, which may indicate an attempt to circumvent (Swiss) sanctions or, at least, should lead to an enhanced sanctions compliance assessment. • When confronted with sanctions considerations (eg, existing sanctions restrictions affecting a specific transaction or business relationship), the counterparty offers to restructure the transaction,
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