A European company and a Swiss partner agree terms on a joint venture. The deal is genuinely commercial, the sector is legitimate, and neither principal appears on any list. Then the compliance team asks the harder question: does one of the proposed JV entities hold an interest in an asset that a listed person controls in another chain? The answer changes the entire structure.
Structuring a joint venture under EU sanctions and SECO (Switzerland's State Secretariat for Economic Affairs) rules requires a careful comparison of two regimes that share a common UN baseline yet diverge sharply on ownership thresholds, the control test, asset-freeze mechanics, and the licensing route available to preserve a deal. As of January 2026, neither regime is a simple mirror of the other, and the stricter prohibition governs in every cross-regime scenario.
This analysis sets out where the two regimes align, where they split, and what structuring decisions follow from those differences.
What governs joint-venture structuring under EU sanctions?
EU sanctions derive their legal force from Council regulations adopted under the Treaty on the Functioning of the European Union, implementing Council decisions and, where applicable, UN Security Council resolutions. The primary prohibitions are asset freezes and the prohibition on making funds or economic resources available to a designated person. Those two instruments together reach further than many JV structurers expect.
The designated persons and entities appear on the EU Consolidated List, maintained by the Council and published on the EU's official sanctions map. The list covers multiple thematic programmes – geographic, sector-based, and issue-based – and a JV transaction can trigger more than one simultaneously.
EU sanctions bind all natural and legal persons established, incorporated, or constituted under the law of a member state. They also bind EU nationals wherever they are located, and all persons conducting business within the EU. That last category reaches a Swiss-based JV if it processes euro payments, uses EU counterparties, or has EU-national directors. In our cross-border practice, the most common structural error is assuming a non-EU entity sits entirely outside the EU regime simply because it is Swiss-domiciled.
The EU Blocking Regulation adds a further layer for JV parties with US connections. Where a transaction is caught by certain US secondary-sanctions measures, EU persons may be required under the Blocking Regulation to notify their relevant authority and are permitted to recover damages for harm caused by those US measures. The Blocking Regulation does not create a safe harbour from US law, but it does mean that a JV partner subject to both EU and US obligations can face a genuine regulatory conflict. That conflict must be identified and managed at the structuring stage, not after signing.
How does SECO's regime operate, and where does it derive its authority?
SECO administers Swiss autonomous sanctions under federal ordinances enacted on the basis of the Federal Act on the Implementation of International Sanctions (the Embargo Act). Switzerland is not an EU member state. Its sanctions ordinances are adopted through a distinct domestic process, and, while Switzerland has aligned a large portion of its measures with EU programmes, that alignment is neither automatic nor complete.
The practical consequence is that SECO publishes its own consolidated sanctions list, which is derived in part from UN Security Council lists and in part from Swiss autonomous measures. Where Switzerland has adopted an EU-equivalent measure, the wording of the Swiss ordinance governs – and differences in wording produce differences in scope. In our practice, we regularly advise clients who assume that Swiss alignment with EU measures is word-for-word and symmetric; it is not, and those differences matter in JV structuring.
Swiss sanctions apply to persons domiciled or resident in Switzerland, to Swiss nationals abroad, and to any conduct that takes place on Swiss territory. They apply to transactions executed through Swiss banks and, importantly, to transactions denominated in Swiss francs, which extends the reach of Swiss rules to non-Swiss parties who choose to clear in CHF. A JV that settles in Swiss francs, holds a Swiss bank account, or uses a Swiss clearing agent is within scope of the SECO regime regardless of where the JV is incorporated.
Switzerland also implements UN Security Council mandatory measures, which sit above both the EU and SECO autonomous regimes. Where a JV counterparty is subject to a Chapter VII Security Council designation, both the EU and Swiss rules carry the UN obligation. In those cases the prohibition is concurrent and reinforcing.
Where do the ownership and control tests diverge?
The ownership and control test is the most operationally consequential divergence between the EU and SECO regimes, and it is the question that most frequently stalls JV negotiations. Under the EU regime, ownership and control (the test for whether a non-listed entity is caught through a listed person) operates through a combined ownership-and-control analysis set out in guidance issued by the Council and the European Commission. A non-listed entity is generally caught where a listed person owns it at more than 50 percent, directly or indirectly. However, the EU control test goes further: effective control exercised through means other than formal ownership – such as board appointment rights, veto powers, or contractual rights over commercial decisions – can also engage the prohibition, even where the ownership threshold is not met.
This creates a structuring risk that pure share-register analysis will not detect. A JV in which a listed person holds 40 percent of the equity but has the contractual right to appoint a majority of the board, or to block distributions and asset disposals, may still be caught under EU rules. Compliance counsel advising on JV structuring must examine the governance architecture – the shareholders' agreement, the constitutional documents, any side letters – not only the cap table.
Under SECO's Swiss regime, the ownership test follows a broadly similar logic, with a 50 percent ownership trigger. Swiss ordinances have largely replicated the EU approach to aggregation. However, the Swiss control test has been developed in SECO guidance and administrative practice rather than in judicial decisions of the kind produced by the EU General Court. That means the precise edges of the Swiss control test carry somewhat more interpretive uncertainty. SECO's published guidance is the primary reference, and it should be read alongside the relevant ordinance text rather than assumed to track EU General Court jurisprudence.
Aggregation operates in both regimes. Two listed persons each holding 30 percent of the same JV entity reach the 50 percent threshold together under both EU and Swiss rules. A structuring analysis that examines each listed shareholder in isolation will miss the aggregation issue. Have you mapped every listed person's stake across the full ownership chain, including stakes held through nominees and intermediate holding vehicles?
How do the asset-freeze mechanics differ in a JV context?
An asset freeze under EU sanctions prohibits both the holding of frozen assets and the making of funds or economic resources available – directly or indirectly – to a designated person. In a JV context, this has specific structural implications. Distributions from a JV entity to a listed shareholder are caught. So is the provision of services, the sharing of intellectual property, and the granting of access to infrastructure that the listed party could use to obtain an economic benefit.
The prohibition on making economic resources available is broader than many clients initially appreciate. Under EU rules, economic resources include anything that could be used to obtain funds, goods, or services. An exclusive supply agreement granted by the JV to a listed affiliate is not a cash payment, but it may constitute the making available of an economic resource. In our experience, supply-chain rights, IP licences, and off-take arrangements embedded in JV documentation regularly require specific review against this prohibition.
Under SECO rules, the corresponding prohibition tracks the same structure: assets of designated persons must be frozen, and no funds or economic resources may be made available to them. The Swiss ordinances use equivalent language for the purposes of most JV scenarios. However, SECO's administrative guidance on the concept of "economic resources" has been less extensively elaborated than the EU's. Where a structuring question turns on the edge of this concept – for instance, where the JV proposes to grant a listed party a right of first refusal on future asset sales – the Swiss position requires direct engagement with SECO or careful analysis of the ordinance text.
One divergence that matters in cross-border JV work is the treatment of pre-existing contractual commitments. The EU regime has a framework for authorising payments due under contracts concluded before a designation, subject to specific conditions. The Swiss regime has a broadly parallel mechanism under the relevant ordinances. But the conditions are not identical, the procedural steps differ, and reliance on one regime's authorisation will not satisfy the other. A JV with obligations running across both EU and Swiss law must obtain separate clearance in each system.
What licensing routes exist, and how do they compare?
Both the EU and SECO regimes permit derogations from the asset-freeze prohibition by way of licence, though the terminology, the administering authority, and the criteria differ. Under EU rules, member state competent authorities (the relevant national authority in each EU state, often the treasury or finance ministry) issue licences under the relevant Council regulation. The EU regime distinguishes between mandatory derogations – situations where the competent authority must grant a licence, such as for humanitarian purposes or to satisfy certain pre-designation obligations – and discretionary derogations, where the authority may grant a licence on defined criteria.
For JV structuring, the most commonly sought derogation is a licence to proceed with a transaction that would otherwise be prohibited because of a listed JV partner's stake, or to allow the ordinary-course commercial activities of a JV entity whose assets have been frozen because a listed person is a shareholder. The criteria typically include a public-interest or proportionality assessment, and the process is conducted by the competent authority of the relevant member state, not by the Council centrally. Timelines vary by member state. In our practice we see substantial variation – some authorities respond within a matter of weeks, others take considerably longer – and applicants should not plan a transaction timetable without first assessing the practical processing time in the relevant jurisdiction.
Under SECO, licence applications for derogations from the freeze prohibition are submitted directly to SECO as the federal competent authority. Switzerland has a single-authority system for sanctions licensing, which simplifies the procedural path compared with the multi-member-state EU system. SECO has published guidance on the general conditions for licences, which broadly mirrors the structure of the EU criteria: the proposed activity must serve a legitimate purpose, must not circumvent the prohibition, and must be proportionate to the objective. However, the Swiss process is distinct, and an EU licence does not carry any force in Switzerland. Conversely, a SECO authorisation provides no protection from EU enforcement.
Is the EU licensing route faster or more predictable than SECO's? The honest answer is: it depends on which member state's competent authority is the relevant one. The German, French, and Dutch authorities have well-established licensing practices with published guidance; smaller member states may have fewer precedents and longer turnaround periods. SECO, as a single federal authority with a developed licensing track record, often offers a more consistent procedural experience, though processing times are not guaranteed.
What are the principal risk flags in cross-border JV structuring?
Several structuring patterns create heightened risk under one or both regimes and should be identified early in the negotiation. The following risk flags arise regularly in the JV transactions we review.
- Layered ownership chains. Where equity interests are held through multiple intermediate vehicles, a listed person's economic interest may not appear at the first level of the cap table. Screening only the direct shareholders of the proposed JV entity is not adequate. The analysis must follow the chain upward until it terminates in natural persons or entities with no further listed exposure.
- Governance rights disproportionate to equity. A listed person holding a minority equity stake but retaining board representation, veto rights over distributions, or approval rights over material contracts may still engage the control test under EU rules. SECO guidance follows a similar logic. The shareholders' agreement is as important as the share register.
- Euro or CHF settlement. A non-EU, non-Swiss JV that settles in euros clears through the EU financial system and brings EU-nexus banks within scope. A JV that settles in Swiss francs engages SECO-supervised banks. Either settlement route can independently engage the relevant regime regardless of the JV's place of incorporation.
- Pre-designation assets and contracts. Where the JV owns assets or holds contracts that were in place before a co-venturer's designation, the treatment of those assets and the continued performance of those contracts must be assessed against the specific pre-designation derogation criteria in each regime.
- Dual-use goods and export-control nexus. Where the JV's commercial purpose involves goods or technology that are subject to EU dual-use controls or Swiss export-control ordinances, the sanctions analysis and the export-control analysis must be conducted in parallel. A transaction that is licenced under sanctions rules may still require a separate export authorisation.
- Conflict with the EU Blocking Regulation. Where one of the JV parties is also subject to US secondary-sanctions measures, the EU Blocking Regulation may require notification and restrict the party's ability to comply with US demands. This can create a structural conflict that affects how the JV documentation allocates liability and termination rights.
The position above covers the standard case. Your facts – the sector, the counterparties, the governance structure, the settlement currency, and the regimes in play – change the analysis materially.
For an assessment of your JV exposure under EU and SECO rules, contact Calder & Vance at info@caldervance.com.
A common misconception: Swiss neutrality as a sanctions safe harbour
A persistent assumption in cross-border M&A and JV work is that structuring through a Swiss holding company provides a degree of insulation from sanctions exposure. That assumption is incorrect, and acting on it can expose the entire JV to risk. Switzerland is not neutral with respect to international sanctions in the operational sense. SECO administers a comprehensive autonomous-sanctions regime and implements all UN Security Council mandatory measures. Swiss banks, which process a very large share of cross-border transactions, are subject to the full scope of Swiss sanctions law and conduct their own screening accordingly.
The misconception typically arises because Switzerland has not adopted every EU autonomous programme in full. Where Switzerland has not replicated a particular EU measure, a Swiss entity may indeed have greater freedom of action with respect to that specific programme than an EU-based counterparty. But the gap analysis is always programme-specific and requires a line-by-line comparison of the relevant EU Council regulation and the relevant Swiss ordinance. It is never a blanket exemption.
In our practice, we regularly advise clients who have structured a holding layer in Switzerland on the assumption that Swiss rules are materially lighter than EU rules across the board. That assumption does not survive a proper gap analysis for the major EU programmes, most of which Switzerland has adopted in substantially equivalent form. The question to ask is not "is Switzerland lighter than the EU?" but "for this specific programme and this specific transaction, what does each regime require, and which is stricter?"
If a transaction has already been flagged under either regime, or if a JV filing or registration has been refused, an early review can preserve structuring options that narrow with time.
Contact Calder & Vance at info@caldervance.com to discuss the position on your matter.
Practical structuring steps: a decision sequence
A structured approach to JV sanctions analysis should follow a defined sequence, applied before the term sheet is signed and revisited at each closing condition.
- Programme identification. Identify which EU and SECO programmes are potentially engaged by the subject matter of the JV, the geographic footprint of its proposed operations, and the nationality and domicile of each co-venturer.
- List screening. Screen all direct and indirect shareholders, directors, and key commercial counterparties of the proposed JV against the EU Consolidated List, the SECO list, and the UN Consolidated List. Confirm that screening tools aggregate across all listed persons when applying the 50 percent test.
- Ownership and control mapping. Map the full ownership chain of each co-venturer. Identify all listed persons at any level. Apply the aggregation test. Review governance documents for control rights that could engage the control limb of the test independently of equity stakes.
- Economic-resources review. Examine all commercial arrangements embedded in the JV documentation – supply agreements, IP licences, off-take rights, management service agreements – for any right or benefit that a listed party could use to obtain an economic advantage.
- Settlement-currency and nexus analysis. Confirm the settlement currency and clearing route for all JV transactions. Assess whether euro or CHF clearing independently engages EU or Swiss nexus.
- Export-control parallel check. Where the JV involves goods, technology, or software, confirm whether EU dual-use controls or Swiss export-control ordinances apply alongside the sanctions analysis.
- Licence or derogation assessment. Where a prohibition is engaged, assess whether a derogation is available under the relevant regime, identify the competent authority, and build the realistic processing timeline into the transaction schedule.
- Documentation and record-keeping. Document the analysis, the conclusions, and the basis for any reliance on a derogation. Sanctions law requires that records be maintained for defined periods; verify the applicable retention requirement under each regime before reliance.
A micro-scenario illustrates how this sequence operates in practice. In a recent matter, a Swiss industrial group proposed to establish a JV with a European co-venturer in a third-country market. Screening of the Swiss group's upstream ownership chain identified a listed person holding a sub-50-percent stake but with board-appointment rights under the shareholders' agreement. The economic-resources review identified an existing off-take agreement between the JV and an affiliate of that listed person. We assessed the ownership and control position under both EU and SECO rules, reviewed the scope of the off-take arrangement against the prohibition on making economic resources available, and identified the applicable derogation route under each regime. The matter was restructured at the term-sheet stage to remove the governance rights and to re-route the off-take arrangement through an unlisted entity, allowing the JV to proceed without a licence application under either regime.
Related practices
- Correspondent banking and de-risking under OFAC – sanctions due diligence for financial institutions in cross-border payment flows
- OFAC vs Canada: JV sanctions structuring – key divergences – practitioner comparison of the US and Canadian regimes for joint-venture transactions
- OFAC vs OFSI: JV sanctions structuring – key divergences – how the US and UK ownership and control tests diverge in cross-border JV work