A cross-border acquisition closes. The target is a Swiss-incorporated holding company with EU-based operating subsidiaries. The seller insists on a narrow, knowledge-qualified warranty. The buyer's counsel – sitting across two regimes – needs to know whether that formulation actually transfers risk, or merely redescribes it. The answer turns on the divergence between the EU's mandatory prohibitions and Switzerland's SECO regime, and that divergence is sharper than most transaction teams appreciate.
Sanctions representations and warranties (contractual statements by a party that it is not a designated person, that its counterparties are not designated, and that the transaction will not breach applicable sanctions) are mandatory protective provisions in any cross-border deal touching the EU or Swiss perimeter. Under EU Council regulations, performance of a contract that involves a designated person or entity can itself constitute a prohibited act, regardless of the parties' knowledge. Under the SECO regime – Switzerland's State Secretariat for Economic Affairs – the analytical structure is similar but enforcement posture and the interaction with the EU Blocking Regulation create distinct drafting tensions. As of January 2026, no single contractual formulation satisfies both regimes without careful calibration.
This analysis maps the two regimes side by side: the governing authority, the ownership-and-control test that defines who a representation must cover, the drafting standards each demands, where the two regimes diverge most sharply, the risk flags that recur in our practice, and the point at which a cross-border team should bring in specialist counsel.
What authority governs each regime, and why does it matter for drafting?
The governing authority determines the legal consequence of a false or incomplete representation, and that consequence shapes how the warranty must be drafted. Under EU law, sanctions obligations flow from Council regulations adopted pursuant to the Treaty on the Functioning of the European Union. These regulations are directly applicable in all EU member states without domestic transposition. Breach triggers consequences under the regulation itself, and member-state criminal enforcement can follow under national implementing legislation. The warranty in a deal document does not create the obligation – it allocates the contractual risk of a pre-existing legal obligation. A buyer who takes a weak warranty still faces the regulatory prohibition; it simply has no contractual remedy against the seller if that prohibition bites.
Under the SECO regime, Switzerland's sanctions ordinances are issued under its embargo legislation and the broader foreign-trade framework. SECO administers the Consolidated Sanctions List and the relevant thematic ordinances, which are updated by the Federal Council. Switzerland is not an EU member, but it has adopted measures that are largely aligned with UN Security Council-mandated regimes. For autonomous measures – those adopted without a UN Security Council foundation – Switzerland's alignment with EU positions is a matter of policy, not legal obligation, and the alignment has at times diverged.
For the transaction lawyer, this creates a foundational drafting problem. An EU-law warranty covers obligations under directly applicable EU regulations. A SECO-law warranty covers obligations under Swiss ordinances that may or may not mirror EU measures in scope, timing, or licensing exceptions. Where there is divergence, a single integrated representation that conflates the two regimes will either under-include SECO obligations or over-include them relative to EU law. In our cross-border practice, we routinely see warranties that import EU language verbatim into Swiss-law governed agreements without mapping whether the SECO ordinance actually contains the same prohibition. That mismatch is a source of real exposure.
How does each regime define the persons and entities a representation must cover?
The EU applies an ownership and control test: an entity that is owned or controlled by a designated person is itself subject to the asset-freeze and dealing prohibitions, even if that entity is not itself listed. The test has two limbs. The ownership limb mirrors OFAC's 50 percent aggregate rule. The control limb goes further: an entity can be caught even where ownership is below 50 percent, if a designated person exercises control through board composition, veto rights, or contractual means. This control-limb is broader than the OFAC test and has been clarified through EU General Court practice.
Under SECO, the relevant ordinances incorporate the UN Consolidated List and autonomous Swiss lists. The ownership-and-control concept is present in Swiss ordinances that implement UN-mandated measures. For autonomous Swiss measures, the language varies by ordinance. Some track EU formulations closely; others are narrower. A representation that sweeps in "all entities owned or controlled by designated persons" may therefore be accurate for EU purposes but potentially wider than what Swiss law actually requires under a given ordinance – or narrower, if the specific ordinance captures a category that the EU measure does not.
What does this mean for the transaction team? A warranty must be calibrated to the specific list or lists that are live under the relevant regime on the date of signing. It cannot be drafted by reference to "applicable sanctions" as a single undifferentiated category and then assumed to be satisfied by a search of one consolidated list. The EU Consolidated List, the SECO Consolidated Sanctions List, and the UN Consolidated List are distinct instruments. In our experience, due-diligence reports that check only one of these frequently return false comfort.
Where do the regimes diverge most sharply on sanctions representations and warranties?
Five divergences recur in practice, each of which demands a distinct drafting response.
First: knowledge qualification. EU regulations impose strict-liability prohibitions. You either deal with a blocked person or you do not. A warranty qualified "to the best of the warrantor's knowledge" does not align with the legal standard: the regulation prohibits the conduct regardless of knowledge, so a knowledge-qualified warranty misrepresents the risk profile. SECO ordinances vary, but for UN-mandated measures, the obligation is similarly strict on the face of the instrument. A seller who insists on a knowledge qualification is essentially declining to warrant compliance with the regulation – which is a material position the buyer must price into the deal.
Second: the EU Blocking Regulation. Switzerland is not subject to the EU Blocking Regulation, which prohibits EU persons from complying with certain third-country extraterritorial sanctions measures and imposes a duty to notify and a potential duty to recover damages paid under such measures. A Swiss party to a deal may therefore be willing to give – or to require – representations touching US secondary-sanctions exposure that an EU party cannot lawfully give or act upon in the same way. Where a deal has both EU and Swiss parties, the warranty structure must address this asymmetry explicitly.
Third: licensing exceptions. EU regulations provide for specific and general licences. SECO issues derogations and special authorisations. The scope of available exceptions is not identical. A representation that a transaction "is authorised under all applicable licences" must identify which regime's licence is in play and confirm it has actually been obtained or that a self-executing general authorisation applies. Representations that refer to licences generically, without specifying the issuing authority, are operationally deficient.
Fourth: timing of list changes. Designations under EU Council regulations take effect on publication in the Official Journal of the European Union. SECO list updates are published in the Federal Gazette and take effect on publication or on a date specified in the relevant ordinance. The gap between an EU designation event and the corresponding SECO list update – if any – can be hours, days, or, for autonomous measures, indefinite. A representation given on day one may be accurate under one regime and inaccurate under the other by day two. Bring-down mechanics in the warranty must address this explicitly, including the point in time at which the representation is repeated.
Fifth: corporate groups and subsidiaries. The EU ownership-and-control test captures subsidiaries of listed entities. Whether a given SECO ordinance captures subsidiaries in the same way depends on the text of that specific ordinance. A deal involving a target with subsidiaries in multiple jurisdictions requires a jurisdiction-by-jurisdiction mapping of the ownership-and-control standard, not a single group-level representation.
What is the drafting standard each regime demands, and how should they be reconciled?
The practical goal is a warranty structure that is accurate under both regimes without being so broadly drafted that the seller cannot make it without an unpinnable liability. Three drafting approaches are in use in the market.
The first is a regime-specific schedule. The main agreement carries a generic representation that the party is not in breach of "applicable sanctions as defined in Schedule [X]". The schedule lists the specific instruments by regime and the specific lists that have been searched. This approach gives both parties a clear view of what was covered and when. It is also easier to bring down at closing by reference to a defined search as of a specified date and time.
The second is a layered warranty with asymmetric knowledge qualification. The parties agree that the seller gives a strict warranty as to its own status (not listed, not owned or controlled by a listed person) and a knowledge-qualified warranty as to the status of its own counterparties and supply chain. This structure reflects the legal reality: a seller can confirm its own status to a strict standard; it cannot guarantee the compliance of its suppliers. The buyer must then decide whether to conduct its own independent screening of the supply chain or to price the residual risk.
The third is a condition precedent structure. Rather than rely on a representation, the parties condition completion on receipt of a legal opinion or a compliance certificate from a qualified sanctions lawyer confirming that no prohibition would be breached. This is more common in high-value or high-risk transactions and creates a cleaner allocation: if the certificate cannot be given, the deal does not close rather than closing with an arguable breach.
In our cross-border practice, we advise that no single approach is universally correct. The right structure depends on the sectors involved, the identity of the contracting parties, and the specific regimes in play. What we consistently advise against is a single generic representation that attempts to cover all regimes simultaneously without specifying what was actually searched.
What risk flags should compliance counsel watch for in a cross-border EU-SECO transaction?
A deal involving parties or assets in both EU and Swiss perimeters tends to produce a recognisable set of risk concentrations. The following are the flags that most frequently require specialist review before signing.
The first flag is a Swiss holding company with EU-operating subsidiaries. The Swiss parent may not itself be on the SECO list or the EU Consolidated List. But its subsidiaries are directly caught by EU regulations under the ownership-and-control test if a relevant person controls the parent. The warranty must address the subsidiaries specifically, not just the counterparty entity.
The second flag is a financing structure involving an EU bank. EU credit institutions are subject to EU Council regulations in their own right. A deal financed by an EU bank will require the bank to satisfy itself as to sanctions compliance independently of whatever warranty the transaction parties give each other. If the bank's own screening identifies an issue that the parties' representations did not, the financing may be withheld even if the deal itself is structured consistently with the representations given.
The third flag is divergence on autonomous measures. As noted above, Swiss autonomous measures do not automatically track EU autonomous measures. A representation that covers "all EU sanctions programmes" says nothing about whether a particular SECO autonomous measure is in scope. And vice versa. Where the commercial deal involves goods, services, or payments that fall within a sector targeted by EU autonomous measures, counsel must specifically confirm the status of the equivalent Swiss measure.
The fourth flag is a change-of-control trigger. Acquisitions that result in an EU entity coming under the control of a non-EU person trigger fresh sanctions-compliance obligations for the acquired EU entity immediately on completion. The warranty structure should include a forward-looking covenant addressing post-closing compliance, not merely a pre-closing representation.
The fifth flag is an unclear bring-down mechanism. A representation given at signing is of limited value if it is not repeated at closing, and of even more limited value if the bring-down procedure does not specify the date, time, and lists against which the search is conducted. Designations can occur between signing and closing. The bring-down must be timed to a moment as close to closing as is operationally practicable, and both the EU Consolidated List and the SECO Consolidated Sanctions List must be searched.
If a transaction has already been flagged by a financing bank, a regulator, or an internal escalation process, the window for corrective action narrows quickly. An early review can preserve options that a delayed review forecloses.
For a confidential review of a potential breach or a sanctions issue in a live transaction, contact Calder & Vance at info@caldervance.com.
When does the EU Blocking Regulation change the analysis?
The EU Blocking Regulation (the EU instrument that prohibits compliance with certain designated extraterritorial measures by third countries, and requires notification and potential recovery of losses) introduces a category of complexity that is routinely underestimated in EU-SECO deal contexts. The Regulation operates as a counter-measure against specific extraterritorial sanctions regimes. It does not affect obligations under EU Council sanctions regulations themselves.
Where does this create tension? Consider a deal in which an EU party and a Swiss party jointly contract with a third-country buyer. The EU party cannot comply with certain US-origin extraterritorial measures without risking a breach of the EU Blocking Regulation. The Swiss party faces no equivalent constraint. The contractual representation structure must therefore address not only whether each party is compliant with the sanctions applicable to it, but whether the conduct required of the EU party under the transaction is consistent with the EU Blocking Regulation.
In practice, this means that warranties in deals with a US nexus – US-incorporated parties, US-dollar payments, goods with a US-origin component – require a specific analysis of whether any requested representation or covenant would require the EU party to act in a manner the EU Blocking Regulation prohibits. A warranty given in a US-law governed agreement that obliges the EU party to comply with US secondary-sanctions measures may be unenforceable against that EU party as a matter of EU law, and may additionally expose that party to liability in its home jurisdiction.
Switzerland, as noted, is not an EU member and is not subject to the EU Blocking Regulation. A Swiss party can therefore agree to comply with certain third-country measures that an EU party cannot. This creates an asymmetry in the warranty structure that must be mapped explicitly, particularly where the deal is financed by an EU bank or involves assets held through EU-incorporated intermediaries.
A practical scenario: drafting the warranty in a Swiss-EU joint venture
In a recent matter, a Swiss financial institution and an EU-based asset manager were structuring a joint-venture vehicle to hold a portfolio of trade receivables from several third-country markets. The EU party's external counsel had drafted a single integrated sanctions warranty, governed by Swiss law, under which both parties represented that neither was a designated person and that the transaction would not violate "applicable sanctions". The warranty made no reference to the EU Consolidated List, the SECO Consolidated Sanctions List, or the EU Blocking Regulation.
The issue was identified at the review stage. The portfolio included receivables from originators in a jurisdiction subject to EU autonomous measures that had been extended in the period between the terms sheet and the draft agreement. The SECO position on the same measures was not yet aligned. The EU asset manager faced a potential prohibition on acquiring those receivables; the Swiss institution did not. The warranty as drafted would have given each party a representation from the other that was, at best, accurate under one regime and potentially misleading under the other.
We advised on a restructuring of the warranty. The revised version used a regime-specific schedule identifying the EU Consolidated List and the SECO Consolidated Sanctions List separately, confirmed compliance with each under its own standard, and addressed the EU Blocking Regulation exposure with a specific carve-out limiting the EU party's obligation to comply with third-country extraterritorial measures. The bring-down mechanism was tied to a confirmed search within 24 hours of the closing date.
The matter did not produce a breach. But the point is that the exposure would not have been visible on the face of the original warranty – and would only have surfaced on a post-closing regulatory review. That is precisely the risk that a carefully calibrated representation is designed to prevent.
A common misconception: one warranty covers all regimes
The most persistent myth we encounter in EU-SECO transactions is the belief that a generic "no sanctions breach" representation – drafted by reference to "applicable law" – is adequate because the two regimes are substantially aligned. They are not substantially aligned for autonomous measures, for Blocking Regulation purposes, or for the control limb of the ownership-and-control test.
Alignment at the level of UN-mandated measures is real, and for a deal whose only sanctions exposure is to UN-consolidated designations, a simplified approach may be defensible. But most transactions of meaningful size will have exposure to EU autonomous measures, to SECO-specific ordinances, or to both. In those cases, a single unqualified representation is not conservative – it is inaccurate. It fails to identify which lists were searched, fails to allocate the risk of divergence between the regimes, and fails to address the Blocking Regulation tension that is intrinsic to any deal with an EU party and a US nexus.
Compliance counsel who inherit a draft from the other side with a single generic warranty should treat that as a structural problem, not a drafting style. The starting point for negotiation is a regime-specific schedule. The outcome of that negotiation will determine where the residual risk sits after closing.
Related practices
- Correspondent banking and de-risking – managing OFAC-driven de-risking risk in financial institution relationships
- Sanctions representations and warranties: OFAC vs Canada – comparing OFAC and Canadian sanctions warranty obligations in cross-border deals
- Sanctions representations and warranties: OFAC and Canada – further analysis – extended treatment of OFAC-Canada warranty divergence and drafting approaches