SWITZERLAND Trends and Developments Contributed by: Philippe Reich, Meera Rolaz, Kaspar Projer, Samantha Salsench and Anna Zellweger, Baker McKenzie Switzerland AG
tionate investigative measures. Now, in 13 out of the 15 decisions published, SECO referred to Article 7 paragraph 1 ACLA and fined the legal entity instead of the individual committing the sanctions violation. This is consistent with SECO’s tendency of the past few years, which the authors have also experienced in practice, to rely, whenever possible, on this excep - tion in non-serious and non-intentional cases. SECO is thus able to issue a fine against a legal person for organisational compliance failure rather than issuing penalties against individuals. Usually, when launching a sanctions investigation, SECO initially focuses on the determination of the individual responsible for the violation but later (as the identification of the individual proves disproportionate) switches relatively quickly to the establishment of corporate criminal liability instead. Thus, in all cases (with one exception), the fine issued against the legal person did not exceed CHF5,000, which is in line with the requirements imposed by Arti - cle 7 paragraph 1 ACLA. In addition to the fines, the legal persons were also charged considerable proce - dural costs in some cases. Not surprisingly, in all 15 cases, an export or import of (restricted) goods led to the issuance of fines. In practice, relevant transactions are brought to SECO’s attention by the customs authorities which scrutinise shipments into and out of Switzerland and then alert SECO of a suspected sanctions violation. With the Swiss sanctions framework expand - ing almost on a monthly basis by now and SECO’s announcement to not only target the flows of goods out of Switzerland, but also attempts to circumvent Swiss sanctions by involving companies outside of “Western” sanctions jurisdictions, it is expected that SECO’s activities around the enforcement in particular of Switzerland’s sanctions against Russia will increase further. Ring-Fencing and Circumvention Further topics which have been widely discussed by both Swiss legal scholars and the Swiss enforcement authority and are expected to gain even more impor - tance are (i) ring-fencing efforts by Swiss companies,
as well as (ii) attempts to ban circumvention of Swiss sanctions by SECO. Swiss sanctions laws do not provide for a definition of the terms “to ring-fence”, “ring-fencing” or “ring- fenced”, which are usually used in the context of Rus - sian group entities (typically subsidiaries) of Swiss parent companies (or of parent companies of “West - ern” sanctions jurisdictions). However, the following meaning of ring-fencing has been established among Swiss sanctions laws practitioners: To ring-fence a Russian subsidiary means that the Swiss parent com - pany does not, in any way, influence or exert control (strategically and operationally) over the subsidiary, and the subsidiary may be considered independent from the parent company not only on a legal, but par - ticularly 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 strength - ened so that the Russian entity may be considered legally and operationally autonomous. Efforts to ring-fence a Russian subsidiary take into account the fact that Swiss sanctions apply to foreign entities of Swiss group 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 subsidiary is ceased in order to avoid that the Russian subsidiary is being considered “directed or instructed” by its parent com - pany, which would extend the application of Swiss sanctions to the Russian entity and its business oper - ations. In turn, if the Russian subsidiary is consid - ered ring-fenced, there is an argument that the Swiss sanctions regime with its various prohibitions (such as financial or product-related restrictions) do not apply to the Russian entity and the business relationships it entertains. For example, and purely from the perspec - tive of Swiss sanctions, a fully ring-fenced Russian entity is not required to comply with the ban on deal - ings with designated parties and may, eg, maintain a banking relationship with a Russian financial institu - tion designated by Switzerland. It is important to note that there is no black-or-white answer to the question whether a Russian subsidiary may be considered “ring-fenced” or not. Rather, in daily practice, the authors rely on certain elements
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