A Swiss-registered joint venture looks clean on paper. The foreign co-venturer passes a name-screen. The project sits outside the obvious high-risk sectors. Yet three months after signing, the compliance team discovers that a silent investor in the foreign partner's holding structure appears on a list maintained by the Swiss State Secretariat for Economic Affairs (SECO) – Switzerland's sanctions authority, operating under the Embargo Act and successive implementing ordinances. The deal is live. Payments have moved. The question is no longer whether to structure the JV carefully; it is how to contain a problem that should have been caught at the outset.
Structuring a joint venture for sanctions risk under SECO requires a sequenced process: map the ownership and control of each co-venturer before heads of terms are signed, apply SECO's prohibitions and any implementing ordinances relevant to the counterparties' nexus, layer on the parallel tests of OFAC, OFSI, and the EU where those regimes reach the transaction, build contractual controls that survive a designation event mid-JV, and establish a standing review mechanism so that a future listing triggers an orderly response rather than a crisis. As of January 2026, Switzerland maintains autonomous sanctions measures that track – but do not always mirror – EU measures, and that divergence is where structuring decisions become commercially consequential.
This guide walks through each stage of that process, identifies the points at which SECO's regime diverges from comparable authorities, and explains when external sanctions counsel should be brought in rather than relied on at the back end.
Step 1: Understand the SECO regime and its legal basis before you draft anything
SECO administers Switzerland's financial and trade sanctions under the Federal Act on the Implementation of International Sanctions – commonly called the Embargo Act – together with the ordinances adopted for each programme. Switzerland is not an EU member state, so EU Council regulations do not apply directly; instead, the Federal Council decides, case by case, whether to adopt measures equivalent to EU or UN measures, or to act autonomously. The result is a regime that frequently parallels EU sanctions but contains its own designation lists, its own definitions, and its own licensing procedure.
For a JV structuring exercise, the first question is which SECO ordinances are engaged. The answer turns on the nationalities of the co-venturers, the sectors in which the JV will operate, the countries through which goods or payments will pass, and whether any party has a nexus to a person or entity on SECO's designated lists. Switzerland also applies UN Security Council measures directly, and those flow through SECO as the competent authority. A business that assumes SECO's prohibitions are identical to those of the EU risks structuring around the wrong test.
In our cross-border practice, the early-stage error we encounter most often is treating SECO as a simple EU-equivalent. It is not. Swiss measures may be narrower in scope, or they may carry distinct carve-outs or sector-specific prohibitions that the EU version does not. Starting with a correct mapping of the applicable ordinances is the only way to know which transactions require a licence and which do not.
Step 2: Map ownership and control across all co-venturers
The ownership and control analysis is the structural foundation of any JV sanctions review, and SECO's approach requires that you look through intermediate holding layers to identify any designated person at the ultimate beneficial-owner level. A JV vehicle is not insulated from SECO's prohibitions merely because the vehicle itself is clean; if a designated person owns or controls a co-venturer, the JV's assets, activities, and payment flows may be caught.
Switzerland's implementing ordinances use ownership and control concepts consistent with the international standard. The relevant threshold question is whether a designated person holds a controlling stake or exercises effective control over a co-venturer. Under OFAC's parallel 50 percent rule (OFAC's rule treating entities owned 50 percent or more by blocked persons as themselves blocked), the test is mechanical: aggregate ownership at or above 50 percent triggers deemed blocking regardless of operational independence. SECO and the EU apply a test that also captures control where ownership falls below that line – a point that matters when a foreign partner has a complex capital structure with preferential rights, board-appointment rights, or veto provisions that give a designated person effective control without majority ownership.
The practical mapping exercise should cover: direct shareholding in each co-venturer, indirect holdings through intermediate entities, contractual control mechanisms, trust arrangements, and any nominee relationships. Where the ownership chain runs through opaque jurisdictions, the due diligence burden intensifies. We regularly advise clients to obtain certified ultimate beneficial ownership declarations backed by corporate registry extracts, and to cross-reference those against SECO's lists, the UN Consolidated List, and the EU, UK, and US lists where the parties have a nexus to those regimes.
Does your due diligence process capture all four layers of the ownership chain, or does it stop at the first legal-entity level?
Step 3: Run the cross-regime analysis – where SECO diverges from OFAC, OFSI, and the EU
A JV with Swiss elements almost never sits inside a single regime. A US investor brings OFAC secondary-sanctions risk. A UK bank financing the venture triggers OFSI's obligations. EU-based operating subsidiaries fall within EU Council regulations. The structuring exercise must therefore apply each relevant regime to the same set of facts and identify the point of greatest restriction – because the stricter prohibition governs the conduct of the party subject to it.
SECO and the EU diverge in several ways that are material to JV structuring. First, Switzerland's autonomous sanctions are enacted by Federal Council ordinance; the EU acts by Council regulation and Council decision. The timing of new listings does not always align, meaning a person designated by the EU may not yet appear on SECO's list, and vice versa. A Swiss-entity JV partner that is clean under SECO may still be subject to EU measures if it has EU-nexus operations.
Second, the licensing regime differs. SECO administers its own specific-licence process under the Embargo Act. The EU's licensing authority sits with member-state competent authorities under the relevant Council regulations. OFSI issues licences under UK sanctions regulations. These are separate applications to separate authorities. A transaction that requires authorisation in one regime almost certainly requires independent authorisation in each other regime that applies. In our experience, JV parties frequently underestimate the lead time and documentation burden of parallel licensing applications. Planning should begin well before commercial deadlines are reached.
Third, the enforcement posture differs. SECO may impose administrative penalties and refer criminal matters to the relevant prosecutor. OFAC's civil monetary penalties are capped by statute but can reach substantial amounts for egregious violations. OFSI has its own enforcement framework with increasing penalty bases since the post-2022 legislative changes. A JV agreement that places the sanctions-compliance burden on one party without addressing cross-regime liability may leave that party exposed to enforcement in multiple jurisdictions for conduct over which it had limited control.
For a more detailed treatment of how correspondent banking and payment flows interact with OFAC's extra-territorial reach in cross-border transactions, see our analysis at Correspondent Banking and De-Risking – OFAC Service.
Step 4: Design the contractual architecture for designation risk
A well-structured JV agreement anticipates three scenarios: a co-venturer is designated after signing, a key individual within a co-venturer is designated, or the JV itself becomes the subject of a licensing requirement it cannot readily satisfy. Each scenario requires a different contractual response, and drafting those responses in advance is materially cheaper than litigating them mid-crisis.
The core structural tools are: a sanctions representation and warranty (each party warrants, at signing and on a rolling basis, that it is not a designated person and that no person with control over it is designated); a sanctions event of default (triggering wind-down, exit rights, or forced transfer of the affected party's interest); a licensing covenant (obligating each party to apply for, and to cooperate in obtaining, any licence required for the JV's activities); and a compliance programme covenant (obligating each party to maintain adequate internal controls and to notify the other promptly of any designation or apparent violation).
The exit mechanics deserve particular attention. If a co-venturer becomes a designated person, the remaining party needs the ability to exit the JV without itself committing a violation – which may require a licence to wind down or transfer the interest. Drafting the exit right before a designation event occurs is the time to do it. After designation, the options narrow and the timeline compresses.
In a recent matter, a European manufacturing business entered a JV with a partner whose ultimate parent had operations in a sector subsequently covered by new SECO ordinances. Because the JV agreement included a clear designation event of default and a wind-down protocol referencing the applicable licensing route, the client was able to commence an orderly exit within a defined period, apply for the necessary SECO authorisation, and preserve its commercial relationships with third parties. The matter illustrated that contractual architecture – not due diligence alone – is what converts a crisis into a managed process.
Step 5: Build the standing review mechanism
SECO's lists change. New ordinances are enacted. The UN Security Council amends the Consolidated List. OFAC adds entities; OFSI publishes updated designation notices. A JV agreement that was clean at signing can become problematic within months if no mechanism exists to monitor and respond to those changes.
A standing review mechanism for a JV has four components. The first is a defined screening schedule – at minimum annual, and triggered by any material change in ownership of either co-venturer. The second is a clear internal escalation path that specifies who is responsible for running the review, who receives the results, and who has authority to invoke the contractual sanctions-event provisions. The third is a record-keeping obligation that documents each review, the lists screened, the methodology used, and the outcome. Record-keeping obligations under multiple regimes commonly extend for a period of several years, and audit-readiness matters in any enforcement inquiry. The fourth is an obligation on each party to notify the other promptly if it becomes aware of any designation or apparent violation.
The standing review mechanism is also the vehicle through which emerging regulatory divergence is tracked. Switzerland periodically adjusts its autonomous measures. When SECO adopts measures that differ from an earlier EU position, the JV's activities may need to be reassessed against the new standard. Waiting for an enforcement inquiry to identify that gap is not a viable compliance posture.
For comparative structuring approaches in other jurisdictions, see our guides on JV Sanctions Structuring under Singapore and JV Sanctions Structuring under the UAE.
Step 6: Address the objection – does thorough structuring actually reduce risk, or just document it?
A common view among in-house teams is that sanctions structuring is primarily a documentation exercise – that it records the analysis but does not change the underlying exposure. That view is mistaken, and it is worth addressing directly.
Thorough pre-signing structuring reduces risk in at least three concrete ways. First, it surfaces ownership and control issues that would not be visible from a surface-level name screen, allowing the parties to restructure the vehicle, negotiate different ownership percentages, or exit negotiations before a commitment is made. Second, contractual sanctions provisions change the legal relationship between the parties: they allocate the compliance burden, create enforceable obligations, and establish the licensing and exit routes that would otherwise require litigation to clarify. Third, a documented, methodical compliance process is directly relevant to the penalty calculation in any subsequent enforcement action. Regulators – including SECO, OFAC, and OFSI – treat the existence of an adequate compliance programme as a mitigating factor; its absence as an aggravating one.
Documentation does matter, but it is the record of a substantive process, not a substitute for one. The two are not the same.
If a transaction has already been flagged, or a filing has been refused, an early review can preserve options that narrow with time. For a confidential assessment of your position, contact Calder & Vance at info@caldervance.com.
Risk flags: when to involve external sanctions counsel
Not every JV requires external counsel at each stage. But certain patterns consistently indicate that the analysis has moved beyond routine compliance into territory requiring specialist input.
The first flag is any co-venturer with a beneficial owner or controlling person whose nationality, sector of operation, or geographic nexus intersects with a SECO-designated programme. Proximity to a programme is not itself a violation, but it is an indicator that the ownership mapping requires additional depth and that the applicable ordinances need careful reading against the specific facts.
The second flag is a multi-regime transaction – one where OFAC, OFSI, EU, and SECO obligations all apply simultaneously. The interaction between those regimes is not always consistent, and structuring decisions that solve for one regime can inadvertently create a problem under another. We have acted for clients who structured a transaction to satisfy OFAC's 50 percent rule and then discovered that OFSI's control test caught the same counterparty on different facts. The analysis is not sequential; it is simultaneous.
The third flag is a JV where the activities include goods, technology, or services that may engage export-control rules alongside sanctions rules. Dual-use items under the Swiss export-control regime or the EAR (the US Export Administration Regulations, administered by BIS) add a layer of classification and licensing obligations that interact with, but are legally distinct from, sanctions obligations. The two bodies of law should be analysed together.
The fourth flag is time pressure. Commercial timelines in JV negotiations are rarely generous. A licensing application to SECO – or parallel applications to OFSI and the relevant EU member-state authority – takes a period that is often inconsistent with a typical commercial closing schedule. Identifying the licensing requirement early is what creates the time to satisfy it.
Related practices
- Correspondent Banking and De-Risking – OFAC – managing OFAC extra-territorial reach in payment flows and banking relationships
- JV Sanctions Structuring – Singapore – structuring a JV for MAS and OFAC obligations across the Singapore nexus
- JV Sanctions Structuring – UAE – managing UAE autonomous sanctions and OFAC secondary risk in Gulf-market JVs