Switzerland implements further sanctions in connection with the situation in Ukraine

Authored by our Global Sanctions, Export Controls and Customs Teams

Since July 2022, Switzerland has expanded existing sanctions and implemented new measures in response to ongoing Ukrainian conflict. Currently, packages six and seven of the EU measures have been implemented to a large extent. The latest modification of the Ordinance on Measures Connected with the Situation in Ukraine (the "Ordinance") entered into force at 18:00 CET on November 1, 2022. In this note, we summarize new sanctions and amendments to the Ordinance implemented between July 1 and November 1, 2022.

Dual-use goods and goods for military and technological enforcement

On August 31, 2022, the exemption for goods and services intended to ensure cybersecurity and information security from the ban on the sale, supply, transit and transportation of dual-use goods (Article 4 of the Ordinance) and goods of military and technological enforcement (Article 5 of the Ordinance) was removed and those goods and services are now subject to an exceptional license granted by the State Secretariat for Economic Affairs ("SECO"), which can, in any event, only serve civilian purposes and civilian end-users. 

Several goods were added to Annex 1 of the Ordinance, notably various software, chemical agents, equipment and vaccines. 

Ban on goods for Industrial strengthening 

In accordance with Article 11a of the Ordinance, the ban on the sale, supply, export, import, transit and transport of goods for industrial strengthening now includes three exceptions, according to which SECO may grant a license if the situation is absolutely essential:

• For medical or pharmaceutical purposes with a non-military end use
• For humanitarian or evacuation purposes
• For the exclusive use by Switzerland to meet its maintenance obligations in areas subject to a long-term lease agreement between Switzerland and the Russian Federation

Annex 23, which lists the goods referred to in Article 11a, has some minor amendments. A certain number of chemicals, such as sulfites, chlorates and hydroxides, have been added.

Ban on luxury goods including gold and gold products

In early August, Switzerland implemented new measures concerning the ban on buying, exporting, importing or transporting gold and gold-related products (Article 14d of the Ordinance). 

Article 14b, however, expands its exemption to the ban on jewelry and gold that are owned and carried by individuals leaving Switzerland and that are solely destined for private use, excluding sales (Art.14b lit.c of the Ordinance).

Annex 18 of Article 14b of the Ordinance has also seen minor amendments to its list of luxury goods. 

Ban on public procurements

The Ordinance's new Article 29c prohibits the awarding of public contracts to Russian nationals or Russian residents and to legal persons, entities or organizations domiciled in Russia. This prohibition extends to entities in which the above persons hold more than 50 percent of the shares (directly or indirectly) or entities acting on behalf of or under the instruction of those persons. The conclusion of procurement contracts with any person or entity pertaining to any of the above-mentioned categories is also prohibited. Some exceptions apply and derogations are possible in limited cases.

All procurement contracts whose performance is incomplete must be terminated by February 28, 2023.

Reinforcement of existing sanctions

Addition to asset freeze/transit restrictions of Russian individuals and companies 

In connection with Russia's annexation of Ukrainian territory, the Federal Councilor approved the addition of some 33 individuals and eight entities to Switzerland's sanctions list (Annex 8) between October 12 and November 1, 2022. This amounts to more than 89 new individuals and 18 new entities added since July 1. As per November 1, the Swiss list is in line with that of the EU. 

With the amendments introduced in late August, Article 15 of the Ordinance clarifies the language as to what asset freeze implies and expressly requires the freezing of funds and economic resources directly or indirectly owned or controlled by the individuals or entities listed in Annex 8.

Among the newly listed entities are: Shahed Aviation Industries; AVLITA Stevedoring Company; JSC Research and Production Association Kvant; Forss Group of Companies; JSC Goznak; OJSC V.A. Degtyarev Plant; MKB Fakel; JSC Irkut Corporation; MMZ Avangard; Central Election Commission (CEC); and JSC A.N. Ganichev Scientific Production Association – SPLAV. 

The largest Russian bank, Sberbank, was also added to the list and had its assets frozen. Sberbank is subsequently banned from providing funds, economic resources or technical services. New derogations are being introduced to ensure the orderly wind-down of transactions and the sale of Sberbank subsidiaries. 

Ban on accepting deposits and crypto-assets

The Federal Department of Economic Affairs, Education and Research ("EAER") decided to align with the EU and amend Article 20 of the Ordinance so as to extend its deposit restrictions to banks, companies and organizations established outside of Switzerland or the EEA in which more than 50 percent of the shares are held directly or indirectly by Russian nationals or Russian residents. 

The exemption to the restriction for deposits and crypto-assets used for non-prohibited cross-border trade in goods and services between Switzerland, the EEA and Russia was removed and replaced by an exceptional license to be granted by SECO on an individual basis.

Addition to the areas under restriction

The EAER also amended Annex 6 to the Ordinance so the restrictions already applicable to the Ukrainian regions of Donetsk and Luhansk would now also apply to the Ukrainian regions of Zaporizhzhia and Kherson, which Russia recently annexed. The restrictions notably include the importation and exportation of goods from and to the designated territories (Article 13 and 14 of the Ordinance) and the prohibition on financings, investments and services in the designated territories (Article 25 of the Ordinance). 

Addition to goods destined for petroleum refining and natural gas liquefaction 

Backflow cooling equipment and devices have been added to Annex 4 of the Ordinance. 

What to expect next? 

The EU adopted package number eight of sanctions on October 6. This package lays the basis for the required legal framework to implement an oil price cap and also extends the list of goods subject to restrictions. The Federal Council will decide on whether to adopt these new measures. Following the Federal Council's announcement, we anticipate the implementation of further sanctions in the upcoming weeks.

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