Background

Following Danone, Carlsberg, Heineken and other companies, Nestlé's Russian subsidiary has also been placed under Russian temporary administration.

Russia uses temporary administration to seize control of assets belonging to companies from designated "unfriendly states", causing substantial losses to foreign parent entities. Danone sold its Russian business in 2024, booking a loss of over a billion; Carlsberg was forced to conclude a management buyout; and Heineken sold its subsidiary for the symbolic price of one euro, recording a nine-figure loss.

As the risk of Russian temporary administration (forced management) may persist or escalate, Swiss parent companies should proactively prepare for this contingency.

Such state-mandated takeovers trigger complex legal and operational challenges. Being prepared before such a scenario materializes is essential. Because every situation is unique, any response must be tailored to the specific facts at hand; no checklist can be entirely exhaustive. Accordingly, a Swiss parent company must assess not only sanctions-related risks, but also broader legal implications and critical non-legal, operational factors. Establishing a contingency plan in advance ensures that key immediate questions can be identified and addressed without delay.

The non-exhaustive overview below outlines key sanctions, legal, and operational issues to consider from a Swiss law perspective:

Sanctions-related issues

The Swiss parent company should assess:

• whether newly appointed managers, supervisory bodies, parent entities, or beneficial owners are listed in Annex 8 of the Ukraine-Ordinance or controlled by sanctioned parties. If so, Art. 15 Ukraine-Ordinance prohibits making assets available, requiring an immediate termination of all direct or indirect transfers of funds, goods, or economic resources to the Russian entity;
• whether existing delivery authorizations (e.g., under Art. 4 or 5 Ukraine-Ordinance for listed goods) or shipments under general exemptions must be modified or discontinued;
• whether intra-group privileges under Art. 28e Ukraine-Ordinance lapse due to the loss of control. The parent company must determine whether to terminate contracts for IT, management consulting, accounting, auditing and enterprise software (such as ERP systems), and cut access to cloud infrastructure and shared service centers. In case of doubt, it should consult the State Secretariat for Economic Affairs (SECO);
• whether divesting assets or shares under a wind-down or complete market exit requires SECO authorization under Art. 30a et seqq. Ukraine-Ordinance. Feasibility must be verified with SECO if intra-group privileges no longer apply. Companies must also navigate conflicting obligations between Western sanctions restricting Russian activities and Russian counter-sanctions designed to impede corporate exits.

Broader legal implications

Beyond sanctions considerations, the Swiss parent company should assess:

• whether existing exceptional general export licenses for dual-use goods to the Russian entity under the Swiss Goods Control Ordinance remain valid or require modification;
• the merits of initiating investment arbitration proceedings against the Russian Federation under the 1990 Switzerland–USSR Bilateral Investment Treaty (BIT) for indirect or creeping expropriation, including the prospects of enforcing a potential award against Russian state assets under the 1958 New York Convention;
• whether to file damages claims before Swiss civil courts against Russian state entities or beneficiaries of the administration under Art. 30f Ukraine-Ordinance, while preparing defenses against parallel Russian proceedings (relying on Art. 29d Ukraine-Ordinance, which bars Swiss recognition and enforcement of such Russian judgments);
• whether to formally recall seconded board members and directors to mitigate individual liability and criminal exposure, alongside evaluating employee repatriation or local dismissals;
• whether to terminate license, franchise, and trademark agreements with the Russian entity, while monitoring for trademark dilution, infringement, and unauthorized parallel imports;
• whether to deconsolidate the Russian subsidiary from its consolidated financial statements due to a loss of control, and determine any resulting balance-sheet adjustments.

Further practical implications

Finally, the Swiss parent company should take certain practical issues into consideration:

• The exact timing and operational scope of the loss of control should be comprehensively documented to defend the Swiss parent company and its officers and personnel against potential future claims.
• It should assess additional safety measures for personnel in Russia, mindful of potential legal constraints under the Federal Act on Private Security Services provided Abroad.
• The company should assess whether the technical decoupling of shared systems of the Russian subsidiary can be prepared in advance, ensuring it can be executed seamlessly and without delay should the need arise.
• The company may consider contacting SECO or the Federal Department of Foreign Affairs (FDFA) to request diplomatic support and further guidance.

Conclusion and recommendations

Companies should conduct proactive contingency assessments to evaluate these risks and map out viable strategic options before an administrative takeover occurs.

Affected Swiss parent companies face a difficult choice between pursuing a structured exit and attempting to maintain ongoing operations while balancing competing legal and sanctions risks.

It is advisable to retain legal counsel as soon as possible and to closely analyse the complex legal framework across all affected jurisdictions.