Due to the critical political situation in Ukraine, on 17 March 2014 the Council of the European Union, with the Decision 2014/145/PESC followed by the Regulation No. 269/2014 (the “Regulation 269”), introduced certain restrictive measures in respect of persons, entities or bodies that are considered responsible for actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine.
In light of the increasing concerns at international level for the worsening conditions of the conflict in Ukraine, on 12 May 2014 the Council, with the Decision 2014/265/PESC and the Regulation No. 476/2014 (the “Regulation 476”), partially amended the previous Decision and Regulation, expanding, inter alia, the list of persons, entities and bodies subject to the related sanctions.
The sanctions currently in place towards the persons, entities and bodies listed in Annex I of Regulation 269 (as amended by Regulation 476) concern (i) the prohibition to entry into or transit through the territories of the Member States, and (ii) the freezing of funds and economic resources directly or indirectly belonging to, owned, held or controlled by any of such persons, entities or bodies.
Economic and financial restrictions
Article 2 of Regulation 269 (as amended by Regulation 476) states that:
“1. All funds and economic resources belonging to, owned, held or controlled by any natural persons or natural or legal persons, entities or bodies associated with them as listed in Annex I shall be frozen.
2. No funds or economic resources shall be made available, directly or indirectly, to or for the benefit of natural persons or natural or legal persons, entities or bodies associated with them listed in Annex I.”
Regulation 269 also provides for specific exceptions to the above restrictions and the possibility for the competent authorities of the Member States to authorize the release of certain funds or economic resources, or the making available of certain funds or economic resources, under certain conditions.
Obligations of persons, entities and bodies of the Member States
Article 8 of Regulation 269 provides that, without prejudice to the applicable rules concerning reporting, confidentiality and professional secrecy, natural and legal persons, entities and bodies shall (i) supply any relevant information that would facilitate compliance with the Regulation, including any information relating to bank accounts and amounts frozen, and (ii) cooperate with the competent authorities in any verification of such information.
Direct and indirect consequences of the newly introduced sanctions regime
Although the restrictive measures introduced with Regulation 269 are less wide and sophisticated than those adopted by the EU to tackle certain other critical geopolitical situations (such as, for instance, Iran), the economic and financial consequences of the sanction regime at hand may be deeper than it appears at first glance.
In fact, if on one hand the restrictions imposed by Article 2 of Regulation 269 specifically refer to the persons, entities and bodies listed in its Annex I, on the other it cannot be excluded that such restrictions may indirectly hit corporations, entities or bodies of the Member States. For instance, if one of the listed persons holds, directly or indirectly, a participation, or even a controlling participation in an Italian company, the restrictions imposed under Regulation 269 would likely also apply to such Italian company.
Furthermore, if a contractual counterparty of a person, entity or body of a Member State is a company directly or indirectly owned by one of the persons, entities or bodies listed in Annex I to Regulation 269, the contractual relationship and the performance of the contract would be inevitably jeopardized.
It is therefore recommended that Italian companies (like companies resident in any other Member State) run an internal check of their counterparties and clients (particularly if they are resident in Crimea and Sebastopol) to ensure that there are no possible connections with the persons, entities and bodies banned under Regulation 269.
A similar analysis should be carried out by the financial institutions in order to ensure compliance with the disclosure obligations set forth in Article 8 of Regulation 269.
Finally, it cannot be excluded that tighter sanctions may eventually be adopted by the EU in the event that the political situation in Ukraine should further worsen.