A Swiss-incorporated distribution company signs a term sheet with a buyer in a third market. Its general counsel inserts a standard sanctions clause copied from a prior contract governed by English law. The clause references OFSI and OFAC. SECO – the State Secretariat for Economic Affairs, Switzerland's primary sanctions authority – is nowhere in the text. The error is silent, invisible at signing, and potentially decisive if the transaction is ever reviewed by Swiss authorities or by a counterparty that requires Swiss-law compliance.
Sanctions representations and warranties under the SECO regime require express reference to Switzerland's autonomous sanctions ordinances, the UN-aligned measures that SECO administers, and the ownership-and-control tests applicable under Swiss law. As of January 2026, Switzerland maintains its own sanctions programme that is not automatically identical to EU measures, and the gap between the two regimes is material for drafting purposes.
This guide works through each stage of drafting, negotiating, and maintaining sanctions reps and warranties when SECO is the governing or co-governing regime – from identifying which prohibitions apply, to structuring the representation, to managing ongoing warranty obligations through a deal's lifecycle.
Step 1: Identify which SECO prohibitions govern your transaction
The first step in any SECO-connected transaction is mapping the specific Swiss ordinances that apply, because Switzerland operates a tiered system of autonomous and UN-derived measures that do not map one-to-one onto EU or UK equivalents.
Switzerland is not a member of the European Union. Its sanctions ordinances are adopted under domestic statutory authority, principally the Embargo Act (Embargogesetz). SECO administers and enforces these measures. In practice, Switzerland often aligns with EU measures shortly after their adoption by the EU Council – but alignment is neither automatic nor always complete. There are timing gaps, scope differences, and areas where Switzerland's autonomous measures diverge from the EU position. A representation drafted only by reference to EU regulations may therefore be technically accurate under EU law but materially insufficient for a counterparty or regulator examining Swiss-law compliance.
The core questions at this step are: Which Swiss ordinances are listed as applicable to the counterparty's sector, the destination country, or the goods in question? Has Switzerland adopted measures equivalent to the relevant EU regime, and if so, when did they enter into force? Are there goods or services covered by Swiss autonomous measures that are not caught by the EU rules the contract already references?
We regularly advise cross-border businesses that treat Swiss sanctions as a carbon copy of EU measures. The assumption saves drafting time and introduces material risk. The verification exercise is not long, but it is not optional.
Step 2: Determine the applicable ownership-and-control test under Swiss law
Swiss sanctions ordinances use an ownership and control test – the principle that a non-listed entity is caught by sanctions prohibitions if a listed person owns or controls it – but the precise formulation differs from the OFAC 50 percent rule (OFAC's rule treating entities owned 50 percent or more by blocked persons as themselves blocked) and from the EU and UK positions.
Under OFAC, the ownership test is mechanical: aggregate ownership of 50 percent or more by one or more blocked persons triggers the prohibition, regardless of control. Under Swiss practice, consistent with the position of many civil-law jurisdictions, the test encompasses both ownership above the relevant threshold and actual control through other means – including contractual arrangements, board dominance, or operational decision-making authority. This means that a counterparty that falls below the OFAC threshold may still be caught under SECO's analysis if a listed person exercises de facto control.
For representations and warranties, this has a direct drafting consequence. A warranty that the counterparty is "not owned 50 percent or more by a sanctioned person" is drawn from OFAC practice. It does not cover control. A SECO-compliant warranty must also cover the control limb. In our experience, this distinction is the single most frequently missed drafting point in cross-border transactions involving Swiss parties or Swiss-law governing clauses.
The practical step here is to build a warranty that explicitly covers both limbs: neither direct nor indirect ownership above the relevant threshold, and no actual control by a listed person, whether through equity, contractual rights, or other means.
Step 3: Draft the representation – structure, scope, and cross-regime alignment
A well-drafted sanctions representation under SECO names the regime, states the relevant prohibitions, addresses ownership and control, and is aligned – without being identical – to the representations required by OFAC, OFSI, and EU rules when those regimes are also in play.
The basic structure of a SECO sanctions representation should include the following elements.
First, a statement that the representing party is not itself designated under any applicable Swiss sanctions ordinance or the UN Consolidated List as maintained by SECO.
Second, a warranty that no person who owns or controls the representing party (applying both the ownership-threshold and the control limb) is so designated.
Third, where the transaction involves goods, technology, or financial flows subject to Swiss export controls or financial-sanctions prohibitions, a representation that the transaction does not involve any prohibited destination, end-user, or end-use under the applicable Swiss ordinance.
Fourth, in transactions where EU, UK, or US sanctions are also relevant, a cross-regime alignment clause confirming that the representations are given in respect of each applicable regime, without relying on one regime's definition to satisfy another's distinct requirements.
The fourth element is critical for the cross-border transactions we most commonly work on. A transaction between a Swiss seller and an English buyer governed by English law, involving goods that could trigger both SECO and OFSI controls, requires representations under both regimes. Collapsing them into a single generic formulation risks leaving gaps that satisfy neither authority.
Is the representation limited to the date of signing, or does it extend to the duration of the contract? The answer shapes the entire warranty structure and is considered in Step 4.
Step 4: Distinguish representations (point-in-time) from warranties (continuing obligations)
Under Swiss contract law, as under English and most civil-law systems, there is a meaningful distinction between a representation – a statement of fact that is true as of the date it is made – and a warranty – a continuing contractual commitment that the stated condition remains true throughout a defined period.
Sanctions exposure does not stop at signing. A counterparty may be designated after the contract is executed. A beneficial owner's status may change. New Swiss ordinances may come into force that catch a previously unrestricted party or activity. For long-term supply agreements, joint ventures, and financing structures, the question of whether the sanctions clause is a point-in-time representation or a continuing warranty with notification and termination mechanics is therefore not merely technical – it determines whether the non-breaching party can exit a prohibited relationship without itself incurring liability.
In our cross-border practice, we advise clients to include three connected elements in the warranty structure: a point-in-time representation at signing, a continuing warranty for the duration of the contract, and a notification obligation requiring prompt disclosure if the warranting party becomes aware of a change in circumstances that would cause the representation to be false. The notification obligation is particularly important under the SECO regime because Switzerland maintains its own sanctions-update cycle, and a change that occurs between EU adoption and Swiss ordinance entry into force can create a window of non-compliance that a continuing warranty captures but a static representation does not.
Remedies should also be addressed expressly. If the warranty is breached, does the non-breaching party have a right to terminate immediately? To seek indemnification for costs incurred in unwinding the transaction? To require the warranting party to obtain a licence where one is available? Each of these outcomes has different implications under SECO, and the contract should address them directly.
Step 5: Address re-export controls and end-use undertakings in SECO transactions
Swiss export-control and sanctions rules impose obligations not only at the point of first transaction but also in respect of onward movement of goods, technology, and services. A sanctions warranty that covers the immediate counterparty but says nothing about re-export or end-use will not protect a Swiss exporter whose goods reach a prohibited destination through an intermediary.
SECO's export-control rules apply to goods and technology that appear on Switzerland's control list, which is maintained in alignment – though not always identical – with the EU dual-use regulation and the Wassenaar Arrangement lists. Where controlled goods are involved, a comprehensive sanctions representation should include: a warranty that the buyer will not re-export to a destination subject to Swiss sanctions or export controls without first obtaining the necessary authorisation; a commitment to maintain records sufficient to demonstrate compliance with end-use undertakings; and a right for the Swiss exporter to audit those records or obtain written confirmation of final destination in cases where the risk profile warrants it.
The re-export dimension also creates a cross-regime issue. Goods exported from Switzerland may subsequently be subject to US re-export controls under the EAR (Export Administration Regulations, administered by BIS) if they contain a sufficient proportion of US-origin content or US technology. A transaction involving such goods requires the warranty to address Swiss, US, and potentially EU controls simultaneously. Omitting the US-origin analysis because the contract is governed by Swiss law is a recurring error in cross-border supply agreements.
Step 6: Manage the ongoing warranty through the transaction lifecycle
Drafting the representation is the beginning, not the end, of the compliance task. Ongoing management of the warranty obligation requires a process – a set of steps the warranting party and the beneficiary party each take to monitor, verify, and if necessary act on changes in sanctions status during the life of the contract.
The warranting party should maintain a periodic re-screening programme. Under SECO practice, as under OFAC, OFSI, and EU Council procedures, designations can be made at any time and take effect immediately on publication in the relevant official channels. A party that screened its counterparty at signing but not since may find that a designation made months later now renders ongoing performance a prohibited transaction. The frequency of re-screening should be proportionate to the risk profile of the counterparty, the sector, and the destination – but in our experience, annual re-screening is the minimum for higher-risk relationships, and quarterly or event-driven screening is more appropriate for relationships in elevated-risk sectors.
The beneficiary of the warranty should have a clear escalation path. When a re-screening produces a potential match, who within the organisation reviews it? What is the timeline for escalation to legal counsel? Is there a protocol for notifying the counterparty and seeking clarification before treating the result as a confirmed breach? These questions should be answered in a documented procedure, not improvised at the moment of a hit.
SECO's enforcement posture is less publicly prominent than OFAC's or OFSI's, but Swiss law provides for civil and criminal consequences for sanctions breaches, including where a party has continued performance under a contract after becoming aware of a sanctions issue. The cost of a well-maintained warranty-management process is small compared to the exposure that arises from ignored hits or undocumented escalations.
Step 7: Know when to involve counsel – risk flags and escalation triggers
Not every sanctions clause in a cross-border contract requires specialist external counsel. But certain patterns in SECO-connected transactions should trigger an early call to a compliance counsel before the representation is given or the warranty is tested.
The risk flags most commonly encountered include the following. The counterparty is incorporated in a jurisdiction where SECO maintains autonomous measures, and the Swiss ordinances have entered into force on a different timeline from the EU equivalent – creating a potential gap in the cross-regime warranty. The beneficial ownership chain includes interests held through trusts, foundations, or nominee arrangements that make the ownership-and-control analysis genuinely uncertain. The goods or services in the transaction are dual-use or otherwise require individual export authorisation under SECO's control list, but the parties have not confirmed the classification before signing. The transaction is a financing structure rather than a direct sale, and the flow of funds passes through a Swiss financial institution that will apply its own SECO-driven screening independently of what the contract says.
In a recent matter, a technology business in the manufacturing sector entered a multi-year supply agreement with a distributor whose ultimate beneficial ownership included a passive minority interest held through a holding structure. The minority interest was below the OFAC threshold. Under the Swiss control analysis, however, the holder's voting rights in certain corporate decisions reached a level that raised a control question. We mapped the ownership and control chain, reviewed the applicable Swiss ordinance, and drafted representations that accurately reflected the position while also satisfying the counterparty's OFAC-compliant template. The matter reached a clean closing without amendment of the commercial terms.
The question of when to call counsel is ultimately a risk-management decision. The earlier the involvement, the more options remain available. Once a representation has been given and a transaction has closed on the basis of it, correcting a drafting gap becomes significantly more complex.
Related practices
- Correspondent banking and de-risking under OFAC – screening obligations and relationship-exit analysis for financial institutions
- Sanctions representations and warranties under Singapore law – MAS regime analysis and cross-regime warranty drafting for Singapore-connected transactions
- Sanctions representations and warranties under UAE law – CBUAE and MOEC obligations for cross-border deals with UAE parties