The armed conflict in Ukraine has provoked an unprecedented wave of European and Swiss sanctions, which are updated on an almost monthly basis. As a reminder, between 24 February 2022 and today, nine packages of sanctions have been implemented in Switzerland, the latter following the measures taken by the European Union (“EU”), probably in a spirit of solidarity and in order to maximise the impact of the sanctions. The sanctions had a significant impact not only on companies and individuals directly sanctioned through the listing, but also on lawyers, particularly following the adoption of the 8th EU sanctions package.
This package was implemented by the Federal Council and entered into force on 23 November 2022. Based on the EU Council Regulation 2022/1904 of 6 October 2022 “amending Regulation (EU) No 833/2014 on restrictive measures in view of destabilising actions by Russia in Ukraine”, the Federal Council amended, inter alia, Article 28e para. 1bis of the Ordinance on measures in connection with the situation in Ukraine (RS 946.231.176.72) (“Ordinance“) in the sense that it is now prohibited to “provide, directly or indirectly, legal advisory services to the Government of the Russian Federation or to legal persons, companies or entities established in that country”.
Paragraph 2 of the same article provides that the prohibitions in para. 1bis do not apply to services which are necessary for the exercise of the rights of defence in legal proceedings or the right to an effective legal remedy (lit. a); to services intended for the exclusive use of legal persons, undertakings or entities established in the Russian Federation which are owned or controlled exclusively or jointly by legal persons, undertakings or entities organised under the laws of Switzerland, of a Member State of the EEA or of the United Kingdom (lit. b); and to services which are necessary to ensure access to legal, administrative or arbitral proceedings in Switzerland, an EEA Member State or the United Kingdom, or for the recognition or enforcement of a judgment or arbitral award rendered in Switzerland, an EEA Member State or the United Kingdom (lit. c).
In our view, this is a flawed version – assuming that the European version would be considered comprehensive – of Article 5n of Regulation (EU) No 833/2014 prohibiting the provision of legal advisory to the Russian government and to legal persons, entities and bodies established in Russia. Indeed, it is common practice to refer to European legal provisions on sanctions by analogy to clarify the ambiguities of the Ordinance.
Thus, Article 5n para. 5 and 6 of Regulation (EU) No 833/2014 specify that the prohibition does not concern « services that are strictly necessary for the exercise of the right of defence in judicial proceedings and the right to an effective legal remedy » (para. 5), or « to ensure access to judicial, administrative or arbitral proceedings in a Member State, or for the recognition or enforcement of a judgment or an arbitration award rendered in a Member State, provided that such provision of services is consistent with the objectives of this Regulation and of Council Regulation (EU) No 269/2014 ».
However, this wording raises more questions than answers. Indeed, the notion of « strict necessity » is not defined – to what extent does a legal service passes from the category of « necessary » to that of « strictly necessary » and vice versa?
Furthermore, the distinction made between legal representation services (since access to administrative court proceedings and arbitration is open, as is the exercise of the right of defence) and legal advisory – the former being allowed and the latter prohibited – raises another problem insofar as the prohibition of legal advice contravenes the principle of the right to be heard, enshrined in Art. 29 para. 2 of the Constitution. Thus, the Federal Council found itself torn between respecting two fundamental rights, i.e. the guarantee of access to the courts (art. 29a Cst) and the general procedural guarantees (art. 29 Cst). Unfortunately, the Federal Council was, in our opinion, unable to find a satisfactory solution that would have complied with both European regulations on sanctions and the principles of Swiss law.
This prohibition is also problematic from the point of view of the payment of lawyers. Indeed, as Prof. NIGGLI rightly pointed out, as long as the representation of the interests of sanctioned entities is authorised, the advances and fees relating thereto should logically follow the same fate. From a practical point of view, the lawyer could, for example, receive funds from sanctioned entities in a separate bank account. However, requiring from lawyers to submit detailed invoices to the banks as evidence and thus revealing the various items of their time-sheet would violate both professional secrecy (Art. 321 of the Criminal Code) and lawyer-client privilege (Art. 13 of the Lawyers Act, FMLA, RS 935.61). The tricky question of attorney-client privilege under the Swiss sanctions regime was analysed in detail by Grégoire Mangeat and Sandrine Giroud in their contribution to the Swiss Journal of Jurisprudence (SJZ-RSJ 24/2022 | S. 1222-1229).
The possibility of applying to SECO for authorisations under Art. 15 para. 5 of the Ordinance is also inadequate, since there is doubt as to which provision is to be relied upon: is it always a case of hardship (Art. 15 para. 5 point1)? Point 2 concerns only existing contracts, so a mandate for legal services concluded after 24 February 2022 for the representation of a sanctioned entity does not seem to fall under this provision. Finally, point 3 deals with claims in application of a judicial, administrative or arbitral decision, and thus concerns judicial costs and expenses, not legal fees. Furthermore, such authorisation procedures are excessively lengthy and can take several months to process, given the number of applications that have flooded the SECO since 24 February 2022.
Clarification from the Federal Council and the Federal Department of Economic Affairs, Education and Research is therefore highly expected in order to provide a sustainable solution, which could consist of, for example the setting up of an ad hoc unit – a sort of task force – specialised solely in analysing cases of provision of legal services to sanctioned entities, or else a control system with precise criteria provided by the Federal Council (or SECO), enabling professional legal agents to carry out an internal compliance (a sort of KYT for lawyers) before accepting a mandate.
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Sanctions
Against the backdrop of recent international developments, particularly those related to Ukraine and Russia, complex economic sanctions and new rules governing relations with sanctioned countries and their citizens continue to evolve. Asset freezes, commercial bans, airspace closures, and individuals falling under personal sanctions are all changing rapidly in response to foreign policy developments.
