Our earlier briefing (here) outlined key restrictive measures targeting Russia introduced by the EU in early March. In this briefing, we take stock of the current position, highlight further significant EU developments and consider the recent communication from the Central Bank of Ireland (the “CBI”) to business and professional bodies.
The most recent restrictive measures issued by the EU are contained in a sixth package of sanctions issued on 3 June 2022 (here). It is anticipated that a seventh package will issue in due course. The scope of restrictive measures is evolving swiftly and, as highlighted in our previous briefing, notwithstanding the challenging nature of keeping track of developments, risk and compliance frameworks should be updated regularly.
The European Commission has published and keeps updated a list of Q&A on restrictive measures in the context of Ukraine. These Q&A provide helpful guidance on general topics such as due diligence and asset freezing and sectoral topics, such as, insurance, investment funds and transferable securities.
Further EU Developments
1. Asset Freeze List
The EU continues to expand the ‘asset freeze’ list which now also includes further personalities supporting the war, leading businesspersons and family members of listed oligarchs and Kremlin officials and specified companies (including major Russian banks, Otkritie FC Bank, Novikombank, Sovcombank, and VTB)1.
2. Export and Import Restrictions
The EU has expanded export restrictions from the EU to Russia to include goods and technology used for oil refining, liquefaction of natural gas or intended for the Russian energy sector2, further dual use goods and technology, jet fuel and luxury goods.
Import restrictions from Russia to the EU now include a prohibition on the import of coal and other solid fossil fuels, iron and steel. The phasing out of the import of crude oil and certain petroleum products from Russia to the EU has also been introduced.
As a general rule, export and import restrictions also capture the provision of related technical assistance, brokering services, financing and financial assistances. These restrictions are also subject to specific exceptions and derogations may be requested in certain instances.
3. Trust Arrangements
A prohibition on registering, providing a registered office, business or administrative address as well as management services to, a trust or any similar legal arrangement having as a trustee or beneficiary:
- Russian nationals or natural persons residing in Russia;
- legal persons, entities or bodies established in Russia; or
- persons, entities or bodies owned, controlled, acting on behalf of or at the direction of the above, has also been introduced3.
It is also prohibited, as of 5 July 2022, to act as, or arrange for another person to act as, a trustee, nominee shareholder, director, secretary or a similar position, for a trust or similar legal arrangement for those Russian persons or entities.
Exceptions exist for operations that are strictly necessary for the termination by 5 July 2022 of contracts which were concluded before 9 April 2022 or of ancillary contracts necessary for the execution of such contracts. In addition, this prohibition does not apply when the trustor or beneficiary is a national of a Member State or a natural person with a temporary or permanent residence permit in a Member State. Certain derogations from this prohibition may also be requested.
4. Accounting, Public Relations and Consultancy Services
A new prohibition has been introduced in respect of the provision, directly or indirectly, of accounting, auditing, bookkeeping or tax consulting services, or business and management consulting or public relations services to the Government of Russia or legal persons, entities or bodies established in Russia4.
This prohibition does not apply to the provision of services that are strictly necessary for the termination by 5 July 2022 of contracts concluded before 4 June 2022, or of ancillary contracts necessary for the execution of such contracts.
Exceptions include services that are strictly necessary for the exercise of the right of defence in judicial proceedings and the provision of services intended for the exclusive use of legal persons, entities or bodies established in Russia that are owned by, or controlled by, a legal person, entity or body which is incorporated or constituted under the law of a Member State. Derogations may also be requested for humanitarian purposes or certain civil society activities.
The EU has prohibited the provision of crypto-asset wallet, account or custody services to Russian nationals or natural persons residing in Russia, or legal persons, entities or bodies established in Russia, if the total value of crypto-assets per wallet, account or custody provider exceeds €10,0005.
This prohibition does not apply to nationals of a Member State of the EU or of the EEA or to nationals of Switzerland, or to natural persons having a temporary or permanent residence permit in any of those places. This prohibition also does not apply to deposits that are necessary for non-prohibited cross-border trade in goods and services between the EU and Russia. Derogations may also be requested in certain instances.
6. Credit Rating Services
As of 15 April 2022, it is prohibited to provide credit rating services to any Russian national or natural person residing in Russia or any legal person, entity or body established in Russia6. It also is prohibited to provide access to any subscription services in relation to credit rating activities to those persons or entities. This prohibition does not apply to nationals of a Member State or natural persons having a temporary or permanent residence permit in a Member State.
7. Further Restrictive Measures
Further restrictive measures have also been introduced, including:
- the ‘de-SWIFTing’ of additional Russian and Belarusian banks;
- a prohibition on the award and continued execution of public or concession contracts with Russian nationals and entities or bodies established in Russia;
- a prohibition on transportation of goods by road transport undertakings established in Russia;
- a prohibition on access to ports by Russian vessels;
- a prohibition on engaging in transactions with Russian entities under public control;
- the list of legal persons, entities and bodies subject to the prohibitions related to investment services, transferable securities, money market instruments and loans has been expanded; and
- references to ‘eurodenominated’ in the existing prohibitions relating to banknotes7 and transferable securities8 have been revised to refer to ‘any official currency of a Member State’.
CBI Letter to Business and Professional Groups
On 16 June 2022, the CBI wrote to business and professional groups to advise those groups of information resources that are available to support Irish businesses and citizens in understanding their obligations under the sanctions, to request those groups to advise their members of certain key messages with respect to sanctions and to provide information on applying to the CBI for a derogation request.
Comment and Next Steps
The CBI’s letter to business and professional groups states that “it is important that all individuals and entities fully understand their obligations under sanctions regulations and their role in effective implementation”. Given the fast-paced nature of developments, effective implementation of sanctions targeting Russia continues to be a complex and challenging area.