21. April 2026 | Legal Insight
Swiss Federal Supreme Court's Decision
of 13 March 2026 (4A_305/2025) on Effect
of Sanctions on the Enforcement of
Claims in Switzerland
21. April 2026 | Legal Insight
Swiss Federal Supreme Court's Decision
of 13 March 2026 (4A_305/2025) on Effect
of Sanctions on the Enforcement of
Claims in Switzerland
The Swiss Federal Supreme Court (“SFC”), during debt collection proceedings initiated by a party controlled by a sanctioned entity, decided that enforceability of the debt to the enforcing party is suspended as a result of the prohibition to directly or indirectly make funds available to a sanctioned entity under article 15(2) of the Federal Ordinance on Measures in Connection with the Situation in Ukraine (“Ukraine Ordinance”).
Overview of the Case
The Applicant, a limited liability company under the laws of Angola, had been granted reimbursement for costs in an arbitral award rendered under the auspices of the London Court of International Commercial Arbitration (“LCIA-Award”). The Applicant sought to enforce the LCIA-Award in Switzerland and commenced debt collection proceedings (Betreibung). The Respondent objected to the payment summons issued by the competent debt collection agency (Rechtsvorschlag). The Applicant then applied for the removal of the Respondent's objection on the grounds of the LCIA Award, citing it as a definite entitlement to remove the objection to the payment summons (definitiver Rechtsöffnungstitel) under article 80 of the Federal Debt Enforcement Act (“DEBA”).
The Applicant prevailed in the first instance, but the judgment was overturned on the Respondent's appeal in the second instance. The second instance's core finding was that because of the Ukraine Ordinance the Respondent's payment obligation had become legally impossible to perform and thus had been extinguished (article 119 Swiss Code of Obligations). The Applicant then appealed to the SFC which rejected the Applicant's appeal, holding that while the question of impossibility could be left open, the Respondent's payment obligation was suspended, and therefore not enforceable, for as long as payment is not allowed under the Ukraine Ordinance.
Reasoning of the Swiss Federal Supreme Court
Facts
The SFC first adopted the second instance's factual finding in that the Applicant was controlled by an entity sanctioned under the Ukraine Ordinance and therefore the ordinance's prohibition to directly or indirectly make available funds or economic resources to that sanctioned entity (article 15(2) Ukraine Ordinance) was applicable.
Legal Merits
The SFC stated that it did not have to decide whether the Respondent's payment obligation had been extinguished on the grounds of legal impossibility, as in any event the enforceability of the Applicant's claim was suspended.
The SFC held that the payment prohibition under article 15(2) Ukraine Ordinance must impact the enforceability of a claim, as otherwise a debtor would be placed in the legally contradictory position that on the one hand it was prohibited from paying but on the other could be forced by enforcement authorities to do so.
The SFC acknowledged that under the current Ukraine Ordinance and the (non-binding) interpretation guidelines published by the competent regulator, the Swiss State Secretariat for Economic Affairs (“SECO”) it is permitted to credit certain payments to (frozen) accounts of sanctioned individuals and entities. This includes payments based on arbitral awards. However, the SFC found that the wording of these permissions only allows financial institutions to credit incoming payments but does not state that debtors are permitted to make payments in the first place. The SFC expressed doubts that debtors could indeed benefit from these permissions but explicitly left the question open because, in any event, these permissions would not provide guidance on whether a payment claim prohibited in principle could still be enforced through the competent enforcement authorities.
The SFC then noted that, irrespective of the applicable law, the Ukraine Ordinance should be understood as a Swiss foreign policy measure, manifesting mandatory Swiss interests, and was therefore applicable in any event as a mandatory part of Swiss law (article 18 Swiss Private International Law Act).
On that basis, the SFC found that because a sanctioned creditor could not demand a debtor to make payment, as such would be prohibited under the Ukraine Ordinance, the situation at hand was close to a statutory suspension of debt. In the Court's view, using the concept of statutory suspension of debt in the case before it was in the interest of both parties, as it would interrupt applicable limitation periods (favours Applicant) while removing delay of payment and therefore preventing accrual of delay interest (favours Respondent). Consequently, the Court concluded that, for the duration of the sanctions, it is a fair solution for the relationship between the parties to assume a statutory suspension of the Applicant's claim. As a result, the Court held that the second instance was correct in refusing the removal of the Respondent's objection to the payment summons and dismissed the appeal.
Evidentiary Aspects
As one of the final points, the SFC addressed an evidentiary aspect. The Applicant had argued that under article 81(1) DEBA any suspension of the payment claim being enforced had to be proven by the debtor with documentary evidence which the Respondent had failed to provide.
The Court confirmed that in general these principles were applicable but that in the present case, because of the Ukraine Ordinance, there were extraordinary circumstances relieving the Respondent from its burden to demonstrate suspension of debt with documents.
Rather, in the Court's view, it follows from the mandatory governmental nature of sanctions legislation that the fact of whether sanctions are respected cannot be part of the adversarial system of producing evidence generally applicable in civil enforcement proceedings. Otherwise, parties could simply circumvent sanctions legislation by not raising sanctions issues in civil enforcement proceedings. On these grounds, the SFC held that courts may ex officio and without restriction examine violations of the Ukraine Ordinance. The Court explicitly recognised that this approach conflicts with the procedural principles applicable in civil enforcement proceedings but found the interest manifested in the Ukraine Ordinance to take priority. In essence, this means that for courts to assume statutory suspension of debt, it is not necessary for the debtor to have raised and proved that defence, but courts must examine it ex officio.
Conclusion
The outlined decision of the SFC settles certain questions relating to the enforcement of payment claims by sanctioned individuals and entities or those owned or controlled by sanctioned individuals and entities. Such claims are now suspended for as long as payment is prohibited under the applicable sanctions legislation. Whether a creditor is sanctioned and / or owned or controlled by a sanctioned individual or entity is a question of fact. The suspension of debt is statutory in nature and courts may use that concept, even if not raised by a debtor during enforcement proceedings. Sanctions legislation takes priority over the adversarial system in this respect.
Overview of the Case
The Applicant, a limited liability company under the laws of Angola, had been granted reimbursement for costs in an arbitral award rendered under the auspices of the London Court of International Commercial Arbitration (“LCIA-Award”). The Applicant sought to enforce the LCIA-Award in Switzerland and commenced debt collection proceedings (Betreibung). The Respondent objected to the payment summons issued by the competent debt collection agency (Rechtsvorschlag). The Applicant then applied for the removal of the Respondent's objection on the grounds of the LCIA Award, citing it as a definite entitlement to remove the objection to the payment summons (definitiver Rechtsöffnungstitel) under article 80 of the Federal Debt Enforcement Act (“DEBA”).
The Applicant prevailed in the first instance, but the judgment was overturned on the Respondent's appeal in the second instance. The second instance's core finding was that because of the Ukraine Ordinance the Respondent's payment obligation had become legally impossible to perform and thus had been extinguished (article 119 Swiss Code of Obligations). The Applicant then appealed to the SFC which rejected the Applicant's appeal, holding that while the question of impossibility could be left open, the Respondent's payment obligation was suspended, and therefore not enforceable, for as long as payment is not allowed under the Ukraine Ordinance.
Reasoning of the Swiss Federal Supreme Court
Facts
The SFC first adopted the second instance's factual finding in that the Applicant was controlled by an entity sanctioned under the Ukraine Ordinance and therefore the ordinance's prohibition to directly or indirectly make available funds or economic resources to that sanctioned entity (article 15(2) Ukraine Ordinance) was applicable.
Legal Merits
The SFC stated that it did not have to decide whether the Respondent's payment obligation had been extinguished on the grounds of legal impossibility, as in any event the enforceability of the Applicant's claim was suspended.
The SFC held that the payment prohibition under article 15(2) Ukraine Ordinance must impact the enforceability of a claim, as otherwise a debtor would be placed in the legally contradictory position that on the one hand it was prohibited from paying but on the other could be forced by enforcement authorities to do so.
The SFC acknowledged that under the current Ukraine Ordinance and the (non-binding) interpretation guidelines published by the competent regulator, the Swiss State Secretariat for Economic Affairs (“SECO”) it is permitted to credit certain payments to (frozen) accounts of sanctioned individuals and entities. This includes payments based on arbitral awards. However, the SFC found that the wording of these permissions only allows financial institutions to credit incoming payments but does not state that debtors are permitted to make payments in the first place. The SFC expressed doubts that debtors could indeed benefit from these permissions but explicitly left the question open because, in any event, these permissions would not provide guidance on whether a payment claim prohibited in principle could still be enforced through the competent enforcement authorities.
The SFC then noted that, irrespective of the applicable law, the Ukraine Ordinance should be understood as a Swiss foreign policy measure, manifesting mandatory Swiss interests, and was therefore applicable in any event as a mandatory part of Swiss law (article 18 Swiss Private International Law Act).
On that basis, the SFC found that because a sanctioned creditor could not demand a debtor to make payment, as such would be prohibited under the Ukraine Ordinance, the situation at hand was close to a statutory suspension of debt. In the Court's view, using the concept of statutory suspension of debt in the case before it was in the interest of both parties, as it would interrupt applicable limitation periods (favours Applicant) while removing delay of payment and therefore preventing accrual of delay interest (favours Respondent). Consequently, the Court concluded that, for the duration of the sanctions, it is a fair solution for the relationship between the parties to assume a statutory suspension of the Applicant's claim. As a result, the Court held that the second instance was correct in refusing the removal of the Respondent's objection to the payment summons and dismissed the appeal.
Evidentiary Aspects
As one of the final points, the SFC addressed an evidentiary aspect. The Applicant had argued that under article 81(1) DEBA any suspension of the payment claim being enforced had to be proven by the debtor with documentary evidence which the Respondent had failed to provide.
The Court confirmed that in general these principles were applicable but that in the present case, because of the Ukraine Ordinance, there were extraordinary circumstances relieving the Respondent from its burden to demonstrate suspension of debt with documents.
Rather, in the Court's view, it follows from the mandatory governmental nature of sanctions legislation that the fact of whether sanctions are respected cannot be part of the adversarial system of producing evidence generally applicable in civil enforcement proceedings. Otherwise, parties could simply circumvent sanctions legislation by not raising sanctions issues in civil enforcement proceedings. On these grounds, the SFC held that courts may ex officio and without restriction examine violations of the Ukraine Ordinance. The Court explicitly recognised that this approach conflicts with the procedural principles applicable in civil enforcement proceedings but found the interest manifested in the Ukraine Ordinance to take priority. In essence, this means that for courts to assume statutory suspension of debt, it is not necessary for the debtor to have raised and proved that defence, but courts must examine it ex officio.
Conclusion
The outlined decision of the SFC settles certain questions relating to the enforcement of payment claims by sanctioned individuals and entities or those owned or controlled by sanctioned individuals and entities. Such claims are now suspended for as long as payment is prohibited under the applicable sanctions legislation. Whether a creditor is sanctioned and / or owned or controlled by a sanctioned individual or entity is a question of fact. The suspension of debt is statutory in nature and courts may use that concept, even if not raised by a debtor during enforcement proceedings. Sanctions legislation takes priority over the adversarial system in this respect.
