Swiss Sanctions against Russia are Overriding Mandatory Provisions, Barring Enforcement

This was post was contributed by Dr. Lorène Anthonioz, who is Research and Teaching Assistant in Private International Law at Unidistance.

In judgment 4A_305/2025, the Swiss Federal Supreme Court ruled that the prohibition on transferring funds to sanctioned companies and entities under the Swiss Ordinance on Measures Relating to the Situation in Ukraine (see unofficial translation here) constitutes an overriding mandatory provision, which bars the enforcement of a foreign arbitral award, regardless of the applicable law to the underlying obligation.

Background

An Angolan company, active in the diamond and minerals sector, initiated debt collection proceedings in Switzerland against a Swiss company, relying on an arbitral award issued by the London Court of International Arbitration (LCIA). Despite the objection lodged by the Swiss company, the court of first instance permitted the enforcement procedure to continue (mainlevée définitive).

However, the cantonal appellate court overturned this decision on the basis that the claim had been extinguished by subsequent objective impossibility. The appellate court reasoned that the creditor was subject to the financial sanctions provided for under Art. 15(2) of the Swiss Ordinance on Measures Relating to the Situation in Ukraine (hereafter “the Ukraine Ordinance”), on the ground that it was controlled by a Russian company listed in that Ordinance. Payment of the debt to a sanctioned entity was therefore prohibited.

The Angolan company appealed to the Swiss Federal Supreme Court.

Decision

The Supreme Court left open the question of whether the claim had been extinguished altogether. Instead, it resolved the case on a different ground, namely that the claim was at the very least suspended for the duration of the sanctions.

Regarding the sanctions framework, Art. 15(1)(c) of the Ukraine Ordinance freezes the assets and economic resources of entities that are owned or controlled, directly or indirectly, by a listed person or company. Art. 15(2) further prohibits any transfer of funds to such entities or the provision of funds or economic resources to them, whether directly or indirectly.

The Court confirmed that the Angolan creditor was covered by that provision as it was a company controlled by a Russian entity listed in Annex 8 of the Ordinance. Notably, representatives of the sanctioned Russian company exercised determining influence over the management of the creditor.

The Court then held that the Ukraine Ordinance applied as an overriding mandatory provision within the meaning of Art. 18 of the Swiss Private International Law Act, rendering the question of the applicable law to the underlying obligation irrelevant. The Ordinance contains measures of public authority intended to ensure compliance with international legal norms and obligations, and aims to induce a subject of international law to cease conduct that is contrary to international law. Consequently, the Ukraine Ordinance qualifies as a foreign policy measure that pursues compelling Swiss foreign policy objectives and has both an imperative character and a claim to international application.

With regard to the legal consequences of the claim, the Court ruled that, at the very least, the prohibition prevents the sanctioned creditor from demanding performance from the debtor for the duration of the sanctions, in a manner similar to a statutory deferral of the claim. Since the debtor cannot be compelled to make a prohibited payment on pain of criminal sanctions, the effect of the prohibition is to suspend or postpone the claim’s maturity for as long as the sanctions remain in force. Consequently, debt enforcement proceedings were refused.

Finally, in terms of procedure, the Court held that the mandatory public-law nature of the sanctions means compliance cannot depend solely on the procedural initiative of the parties. Therefore, in contrast to the normal procedural rules in enforcement proceedings, courts may examine of their own motion and without restriction whether a violation of the Ukraine Ordinance has occurred.

Final remarks

This decision clarifies the impact of international sanctions on the enforcement of valid claims between private parties, including those based on arbitral awards. By classifying the Ukraine Ordinance as an overriding mandatory provision, the Supreme Court ensures that the sanctions apply regardless of the law that governs the underlying obligation — thereby preventing parties from circumventing them through a choice of law — and regardless of the pleas raised by the parties. A private international law tool was thus used to reach a result that is consistent with the objectives of the sanctions regime: where payments to a sanctioned entity are prohibited, Swiss enforcement authorities cannot compel such payments.