On 1 September the Australian Government announced additional autonomous sanctions relating to Russia (in coordination with sanctions being imposed in the United States, Canada and Europe).
The new sanctions expand the list of designated persons and entities subject to targeted financial and travel sanctions. On 2 September 2014, a total of 113 Russian and Ukraine individuals and 32 entities became subject to Australia’s targeted financial and travel sanctions.
In addition, the Autonomous Sanctions Regulations 2011 will be amended to:
- restrict arms exports to Russia;
- prevent the export of goods and services for use in Russia’s oil exploration or production;
- restrict access of Russian state-owned banks to Australian capital markets; and
- restrict Australian trade and investment in Crimea.
The Australian Government has indicated it may take a couple of months to amend the Regulations to include the new Russian sanctions. Based on the current Regulations, we expect to see the new Russian sanctions implemented as sanctioned supplies / exports, sanctioned services and sanctioned commercial activities.
These new sanctions will significantly broaden the scope of sanctioned activities relating to Russia and, accordingly, expand the screening processes businesses need for their Russian business dealings. In particular, businesses need to be aware that sanctioned services and sanctioned commercial activities for a country are usually given a very broad meaning by the Regulations. By way of example, "sanctioned service" for a country typically includes technical advice, assistance or training, financial assistance, a financial service or another service, if that service assists with, or is provided in relation to the relevant sanctioned subject-matter.
Australia's initial designated persons and entities sanctions relating to Russia commenced on 19 June 2014. Our earlier alerts concerning the background to these sanctions are available here and here.
Baker & McKenzie has set up a unique blog concerning the broader sanctions being applied in other jurisdictions, which can be accessed here.
Extra-territorial effect and responsibility for controlled entities
As with the existing designated person and entity sanctions, the new sanctions will apply to conduct engaged in by Australian citizens and Australian incorporated entities no matter where in the world they are located (as well as to conduct relating to Australia).
The prohibitions in the Regulations for sanctioned exports, services, imports and commercial activities all contain a provision making a body corporate liable for sanctioned conduct engaged in by entities in its effective control. This increases the potential exposure of entities if they control special purpose vehicles or subsidiaries that could engage in activities that falling within the new sanctions. The current designated persons and entities sanctions do not contain this extended reach to controlled entities.