A Swiss-headquartered trading firm has a long-standing distribution arrangement with a counterparty in a market now subject to both EU and Swiss sanctions. New Council regulations enter into force on a Monday. The SECO ordinance follows within days. The firm has open invoices, goods in transit, and contractual commitments that pre-date the listings. Can it complete those transactions lawfully? For how long? Under which authority? The answer differs by regime – and the differences carry real legal exposure.
Wind-down authorisations are time-limited permissions that allow businesses to complete, settle, or terminate pre-existing contractual obligations that became prohibited when a sanctions measure entered into force. Under the EU regime, these authorisations are embedded in the relevant Council regulations and administered at Member State level. Under SECO, the Swiss authority administers comparable but structurally distinct provisions through its sanctions ordinances. The two regimes diverge on scope, duration, the permissible categories of transaction, and – critically – the procedural route a business must follow to obtain protection.
This analysis maps those divergences criterion by criterion, identifies the practical risk flags that cross-border businesses most frequently overlook, and sets out when specialist counsel should be involved before – not after – a prohibited transaction occurs.
What are wind-down authorisations and who administers them?
A wind-down authorisation – sometimes called a close-out licence (a specific permission to perform acts that would otherwise be prohibited, solely to close an existing contractual position) – serves a narrow purpose: it permits a business to honour obligations that pre-dated a sanctions measure without treating every open contract as an immediate breach. The authorisation does not re-open the relationship; it allows an orderly exit.
Under the EU regime, the legal basis sits in the relevant Council regulation applicable to the programme in question. The regulation sets the outer limits – what may and may not be authorised, the categories of contract covered, and any monetary or temporal caps. Competent authorities at Member State level then administer the authorisation process. In practice, this means a business must approach the authority of the Member State in which it is established or in which the relevant assets are held. A German company approaches the competent German authority; a Belgian subsidiary approaches its Belgian counterpart. The Council sets the law; the Member States give the permissions.
SECO – the State Secretariat for Economic Affairs – administers Switzerland's autonomous sanctions ordinances directly. Unlike the EU model, there is no sub-national layer. SECO is both the rule-setter and the licensing authority for wind-down purposes. A business seeking a Swiss wind-down authorisation files directly with SECO, in Bern, regardless of where in Switzerland the applicant is based. That structural difference – central versus distributed administration – creates the first and most consequential practical divergence.
In our experience, businesses operating across both jurisdictions frequently assume that one authorisation will suffice. It will not. A business incorporated in an EU Member State with a Swiss holding company may need parallel applications, filed on different timelines, with different supporting documentation, to different authorities, operating under different legal tests.
How does each regime define what a wind-down can cover?
The scope of permissible wind-down activity determines whether a specific transaction – payment, goods delivery, service completion, contract termination payment – can be covered at all. Both regimes impose limits; the limits are not the same.
EU Council regulations typically confine wind-down authorisations to contracts or obligations that were entered into before a specified date – generally the date of the designation or the entry into force of the relevant measure. This is a strict prior-contract requirement. A transaction initiated after that date, even if commercially related to a pre-existing arrangement, is ordinarily outside scope. The authorisation covers performance, not extension.
The categories of permissible act under EU wind-down provisions commonly include receipt of funds already owed under the pre-existing contract, delivery of goods already shipped or in transit at the relevant date, and payment of termination costs or break fees expressly provided for in the contract. They do not, in the EU context, generally extend to renewal, variation, or novation of the contract, even if the business has a commercial reason to seek one.
SECO's approach to scope is functionally similar but drafted with some textual differences that matter in practice. Swiss ordinances typically frame the wind-down permission around acts necessary to terminate or complete an existing legal obligation. The emphasis on necessity introduces a proportionality element that the EU text does not always carry expressly. SECO's published guidance indicates that applicants must demonstrate that the act in question is genuinely required to fulfil or close the pre-existing obligation – not merely convenient or commercially preferable.
What does this mean concretely? If a business has a choice between two routes to settle an obligation and one route does not touch sanctioned persons or property, SECO may decline to authorise the route that does. The EU competent authority may reach the same result, but the textual basis for that outcome differs. Cross-border counsel must assess both legs separately.
Where do the timelines and procedural requirements diverge most sharply?
The timeline question is where businesses most frequently come unstuck. A wind-down authorisation has no value if it is granted after the goods have already moved, the payment has already been made, or the statutory deadline for a report has passed.
EU Council regulations typically specify the wind-down window – the period during which otherwise-prohibited acts may be performed – as a matter of days or weeks from the entry into force of the measure. The window varies by programme and by the type of transaction. It is not uncommon for an EU wind-down window to be short enough that a business cannot obtain a formal Member State authorisation before the window closes. In those cases, the regulation may provide that the act may be performed without a prior authorisation, subject to notification or reporting to the competent authority within a specified period after the transaction. The distinction between acts requiring prior authorisation and acts subject only to post-act reporting is one of the most practically significant features of the EU regime – and one that many businesses do not identify until it is too late.
SECO operates on a prior-authorisation model for most wind-down transactions of any materiality. A business should not assume it can act and report afterwards under Swiss law with the same latitude that some EU programmes allow. SECO expects an application before the prohibited act is performed. Processing times at SECO are not codified in the ordinances; in our practice, applicants should allow meaningful lead time and should not treat a filing as equivalent to a permission.
Both regimes require that the application include: a description of the pre-existing contract, evidence of the date on which the obligation arose, the nature of the act for which authorisation is sought, the counterparty's identity, and confirmation that no proceeds will flow to a designated person beyond what is strictly required to settle the obligation. SECO applications frequently also require a demonstration that the business has explored whether the obligation can be settled without engaging the sanctioned person or entity at all.
Is your legal team tracking the applicable wind-down window from the date of the measure, or from the date your compliance team flagged it internally? Those two dates are often not the same – and only one of them matters to the regulator.
What are the extraterritorial and cross-regime risk flags?
A business that obtains an EU wind-down authorisation from a competent Member State authority is protected under EU law. It is not, by that fact alone, protected under Swiss law, US law, or UK law. This is a point that generates real enforcement risk and that practitioners encounter regularly in multi-regime matters.
The EU regime applies to: any legal person or entity incorporated in a Member State, any conduct in whole or in part within EU territory, and any person who is a national of a Member State, wherever located. A Swiss subsidiary of an EU parent is not directly bound by the EU regulation solely by reason of its ownership. But if that subsidiary routes payments through an EU bank, clears in euros, or uses EU-based service providers, the EU regime bites on those specific acts.
Switzerland's autonomous sanctions regime applies to persons and entities in Switzerland and to acts performed from Swiss territory. SECO's authorisation covers those acts. It does not licence conduct governed by another jurisdiction's rules.
The practical consequence: a trading group with EU and Swiss entities involved in the same wind-down transaction may need to structure the transaction so that each leg is covered by the relevant regime's authorisation. Failure to map this correctly can leave the Swiss leg exposed even where the EU leg is authorised, or vice versa.
We regularly advise clients on exactly this mapping exercise – identifying which legal entity performs which act, which regime governs that act, and whether the applicable authorisation is in place before anything moves. The risk of proceeding on the assumption that one authorisation covers both regimes is one of the most common and most costly errors we see in practice.
There is a further extraterritorial dimension. Where the underlying contract involves US-origin goods, US-person involvement, or dollar-denominated settlement, OFAC's rules may apply concurrently. An EU or Swiss wind-down authorisation has no legal effect on OFAC's jurisdiction. A business in that position may need to consider whether a US general licence covers the transaction or whether a specific licence application to OFAC is required in parallel. For further analysis of the OFAC-Canada comparison on wind-down questions, see our analysis of wind-down authorisations under OFAC and Canadian law and the follow-up discussion of those issues.
If a transaction has already been flagged, or a filing has been refused, an early review can preserve options that narrow with time. Contact Calder & Vance at info@caldervance.com to discuss the position before the window closes.
How does the ownership and control test interact with wind-down scope?
Both regimes treat entities that are owned or controlled by a designated person as themselves caught by the prohibitions. The practical question for wind-down purposes is: who is the actual counterparty to the pre-existing contract, and is that counterparty caught?
Under the EU regime, ownership and control (the test by which a non-listed entity is treated as subject to the prohibitions because a designated person owns or controls it) extends the prohibition to entities that a designated person owns at 50 percent or more, or which a designated person otherwise controls. Control is assessed by reference to corporate governance, voting rights, decision-making power, and dependency. The EU test is therefore a dual-limb analysis: ownership and, separately, control.
SECO applies a comparable ownership and control analysis under the relevant Swiss ordinance. The structure of the test is functionally similar; the administrative guidance SECO has published tracks, broadly, the EU position. One practical difference is that SECO's licensing practice has historically been somewhat more receptive to factual submissions that demonstrate genuine operational independence of the counterparty from the designated person, even where formal ownership thresholds are approached. That observation is drawn from our practice and should not be treated as a statement of the law; the legal test is the governing instrument.
Why does this matter for wind-down authorisations? Because if the counterparty is itself owned or controlled by a designated person, the pre-existing contract may be caught by the prohibitions even without a separate listing. And if the pre-existing contract is caught, the wind-down authorisation must cover not merely the act (delivering goods, receiving payment) but also the counterparty. Both regimes require the applicant to identify the beneficial ownership chain of the counterparty as part of the application. A business that has not mapped that chain before applying will face delays – and if it transacts without confirming the position first, it may transact in breach.
What mistakes do businesses most commonly make in practice?
In our cross-border practice, the errors that generate the most serious compliance consequences cluster around four recurring patterns.
Treating the notification deadline as the transaction deadline. Some EU programme regulations provide that an act may be performed within the wind-down window without prior authorisation, subject to notification to the competent authority within a defined period after the act. Businesses sometimes read this as permission to act at any point, provided they notify eventually. It is not. The act must fall within the wind-down window; the notification deadline is a separate obligation, not a substitute for compliance with the window.
The second error is assuming that one regime's authorisation covers all exposure. As discussed above, an EU Member State authorisation does not licence conduct under SECO's rules, OFAC's rules, or OFSI's rules. A business with multi-jurisdictional exposure needs multi-jurisdictional analysis before it transacts.
Third, businesses frequently underestimate the documentation burden. Both the EU competent authorities and SECO expect contemporaneous evidence of the pre-existing contract – not reconstructed summaries, not correspondence that post-dates the measure, but the original instrument and evidence of its performance history. A business that has not assembled this documentation before applying will extend its processing time materially.
Fourth – and perhaps the subtlest – is the myth that wind-down authorisations are routinely granted and that the application is a formality. They are not. Both EU competent authorities and SECO assess applications on their merits. An application that does not address the legal test clearly, or that seeks to cover activity that extends beyond the genuine wind-down of a pre-existing obligation, will be refused. In our experience, applicants who prepare applications with the rigour of a licensing submission – not a compliance notification – achieve materially better outcomes.
Have you reviewed your standard commercial contract terms to assess which obligations survive a sanctions trigger and which terminate automatically? That analysis is a prerequisite to any wind-down authorisation application and is often overlooked until after the measure has entered into force.
When should a business involve counsel, and what does that engagement cover?
The threshold for involving specialist sanctions counsel is earlier than most businesses recognise. By the time a firm has identified a potential breach, mapped its counterparty's ownership chain, and located the relevant wind-down provision in the applicable regulation, the window may have narrowed substantially.
In a recent matter, a logistics business with EU and Swiss operating entities held open freight contracts with a counterparty whose parent company was designated within hours of a new sanctions package. The business contacted us within two days of the designation. We assessed the pre-existing contracts, mapped the ownership chain of the counterparty to confirm the captured status of the designated parent, identified the applicable EU wind-down provision for the specific programme, confirmed that SECO's ordinance required a prior authorisation, and prepared parallel submissions to the relevant Member State authority and to SECO. The matter reached an orderly outcome. Businesses that wait longer face a diminished set of options.
Engagement at the outset covers: identifying the applicable wind-down provision across each relevant regime, assessing whether the pre-existing contract qualifies, mapping the counterparty's ownership and control structure, preparing the application or notification, and managing the authority's queries. For businesses with EU and Swiss exposure, that is a co-ordinated exercise, not two sequential ones.
For guidance on managing frozen or restricted accounts alongside a wind-down process, our frozen account management service page sets out how that engagement operates in the US context – relevant where OFAC exposure is concurrent.
The position above covers the standard case. Your facts – the counterparty, the goods, the route, the regime in play – change the analysis. Contact Calder & Vance at info@caldervance.com for an assessment of your exposure before the window closes.
Myth: a wind-down authorisation is the same as a general licence
A persistent misconception in compliance practice is that wind-down authorisations under EU and Swiss law function like OFAC general licences (standing authorisations that permit a defined category of transactions for all eligible parties without a separate application). They do not.
Some EU programme regulations do provide self-executing wind-down permissions – that is, provisions that permit defined acts for a defined period without requiring the business to obtain a prior individual authorisation. Those provisions are sometimes loosely described as general licences by practitioners familiar with the US regime. The analogy is imprecise and can mislead.
The critical differences are three. First, EU self-executing wind-down permissions are programme-specific and time-limited; they apply to a defined category of act within a defined window and are not transferable to other programmes or later periods. Second, they are subject to reporting or notification obligations that a US general licence does not always carry. Third, SECO does not operate a general-licence mechanism in the US sense. Swiss wind-down permissions are case-specific authorisations from SECO, and a business that proceeds on the assumption that a self-executing EU provision covers its Swiss exposure is making an error with real enforcement consequences.
In our cross-border practice, we encounter this confusion most often in businesses whose compliance programmes were originally designed around the US regime and then extended to cover EU and Swiss exposure without a fundamental rethink of the authorisation model. The architecture of authorisation under EU and Swiss law is different enough to warrant a dedicated compliance procedure, not an adapted US-centric one.
Related practices
- Frozen account management (BIS / EAR) – managing restricted and blocked accounts under US export-control rules.
- Wind-down authorisations: OFAC vs Canada – comparative analysis of the US and Canadian approaches to close-out licensing.
- Wind-down authorisations: OFAC vs Canada (Part 2) – follow-up analysis on procedural divergences and multi-regime structuring.