The right and duty to refuse compliance with instructions from the mandator in the context of sanctions

In the context of a mandate, the mandatee is required to perform the business entrusted to him in a diligent and faithful manner (Art. 398 para. 2 of the Swiss Code of Obligations, CO). The extent to which a mandatee may or must refuse to perform a mandate where there are grounds to suspect that the mandator is subject to sanctions was recently considered by the Swiss Federal Tribunal.

Swiss Federal Tribunal, Decision 4A_537/2025 of 28 April 2026

The mandator in the case was an investment company providing legal, financial and IT services. The former Chief Operating Officer (COO) and husband of the company’s founder is the nephew of a person who has been subject to sanctions imposed by the United States since 2018 and by the EU, the United Kingdom and Switzerland since 2022.

In November 2021, the investment company (the mandator) and a securities firm authorised by FINMA (the mandatee) entered into a broker- and storage agreement for the trading and custody of cryptocurrencies.

After the nephew himself was placed on the US sanctions list a year later, the securities firm froze the investment company’s assets. Following several unsuccessful attempts to have the asset freeze lifted, the investment company terminated the agreement in February 2023 and instructed the securities firm to transfer its crypto assets to various wallets. The securities firm refused to make the transfer.

The investment company subsequently brought an action for performance of the mandate, relying on Art. 397 CO, pursuant to which the mandatee is required to comply with the mandator’s instructions concerning the conduct of the business entrusted to him.

Limitation of the Duty to Comply with Instructions

With regard to the mandatee’s duty to comply with instructions, the Federal Supreme Tribunal held that this duty reaches its limits where the instructions are unlawful (Art. 20 para. 1 CO). This includes mandatory provisions of public law, such as those contained in the Ukraine-Ordinance. The Federal Supreme Tribunal held that the asset-freezing obligation under Art. 15 para. 1 of the Ukraine Ordinance, as well as the reporting obligation under Art. 16 of the Ukraine Ordinance, does not arise only once it has been established with certainty that the conditions for an asset freeze are met. Rather, these obligations already apply where it is to be assumed that the assets in question fall within the scope of the sanctions. This means that a financial institution, such as the mandatee in the present case, does not have to wait for an order from a public authority imposing an asset freeze. Where there are reasonable grounds for suspicion, i.e. where there are concrete indications, it is already required to block the assets concerned, including cryptocurrencies, and to report to the State Secretariat for Economic Affairs (SECO) (Art. 16 para. 1 of the Ukraine Ordinance). In the present case, the relevant indications included both the family relationship with a sanctioned person and further information arising from an order issued by the Office of the Attorney General of Switzerland requiring the production of documents. The mandatee therefore did not breach its duty to comply with the mandator’s instructions. Rather, it was entitled to rely on its legal right to refuse performance.

Conclusion

For financial institutions and financial intermediaries, this judgment does not merely confirm, at the highest judicial level, their right to refuse performance where carrying out an instruction could, on the basis of concrete indications, result in a violation of sanctions law, but rather it imposes a legal duty to refuse performance in such cases. Compliance checks are therefore of particular importance. Even indirect or more remote family relationships with sanctioned persons must be carefully examined and taken into account.