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Sanctions & Export Control

Navigating EU Sanctions: How Investment Funds and Corporates Can Meet the ‘Best Efforts’ Standard

by Raminta Dereskeviciute, Sabine Naugès, Renate Prinz, Michal Chajdukowski and Ludovica Rabitti | Nov 29, 2024 | Foreign Investment, Sanctions & Export Control

With the introduction of the 14th sanctions package, entities established in the European Union are required to ‘undertake their best efforts to ensure’ that non-EU subsidiaries they own or control do not undermine EU Regulation 833/2014 imposing EU sanctions against Russia, or EU Regulation 765/2006 imposing EU sanctions against Belarus. This obligation stretches to EU citizens, including those located outside the European Union, who control corporate and fund structures around the world.

The term ‘best efforts’ is not explicitly defined within the EU regulations. On November 22, 2024, the European Commission issued guidance on how to comply with this obligation in its Frequently Asked Questions on Russia sanctions (FAQ). The clarifications, however, largely reiterate obligations set out in the Preamble to the EU Regulation 2024/1745 which introduced the ‘best efforts’ requirement in June 2024.

In this alert, we summarize the key features of this provision, with a focus on how investment funds and other global corporates can meet the ‘best efforts’ standard. In response to the Commission’s overriding emphasis on awareness of one’s operations, existing structures and ongoing activities should be reviewed, and robust sanctions compliance policies should be put into place to efficiently navigate the increasingly turbulent EU sanctions [...]

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New US Sanctions Against Gazprombank and Several Russian Financial Institutions

by Sabine Naugès, Raminta Dereskeviciute and Michal Chajdukowski | Nov 25, 2024 | Sanctions & Export Control, Energy

The US Treasury’s Office of Foreign Assets Control (OFAC) has implemented sanctions on additional Russian financial institutions, notably Russia’s Gazprombank and several foreign subsidiaries. These blocking sanctions prohibit US persons and entities from transacting with Gazprombank or its listed subsidiaries, as well as any entity owned 50% or more by Gazprombank or any other sanctioned entity. OFAC additionally designated more than 50 smaller Russian banks, as well as more than 40 securities registrars, and a list of Russian nationals operating in the financial services sector.

Understanding French Export and Re-Export Prohibitions: Ministry of Armed Forces Releases FAQ on Non Re-Exportation Certificates

by Sabine Naugès and Michal Chajdukowski | Nov 22, 2024 | France, Sanctions & Export Control

On October 10, 2024, the French Ministry of Armed Forces released an FAQ relating to a Non-Re-Exportation Certificate (NRC), available in French here (FAQ). This document provides practical guidance to military companies exporting equipment covered by the prohibition on export or re-export to sanctioned countries. The FAQ complements the existing guidelines for completing certificates required by French authorities (see here).

Concerned companies should be mindful of consulting the FAQ when preparing their NRCs. It is crucial to closely follow the guidance from the French Ministry of Armed Forces in order to avoid any follow-up questions which may delay the transaction or trigger any further investigation from the French authorities. This is particularly important in circumstances where sanctions regimes, notably against Russia, are becoming increasingly significant and more strictly enforced (read our latest update here).

Quarterly Sanctions Update | Q3 2024

by Raminta Dereskeviciute, Sabine Naugès and Michal Chajdukowski | Oct 8, 2024 | Sanctions & Export Control

Although the European Union and the United Kingdom did not introduce new sanctions against Russia over the summer, they extensively focused on the implementation of the existing measures and their enforcement. This week, however, a new package of sanctions aimed at tackling hybrid operations by the Russian government has been agreed upon, and is expected to be published in the coming weeks. In the same period, the Court of Justice of the European Union (CJEU) issued a number of landmark judgments clarifying certain aspects of the EU sanctions regime and has, in one instance, openly disagreed with the interpretation of the regime by the European Commission.

Furthermore, in line with the overarching goal of EU sanctions against Russia, which is to support Ukraine, for the first time, the European Union has transferred profits from frozen assets of the Russian Central Bank to the European Peace Facility and the Ukraine Facility, which will used the monies in support of Ukraine’s military and reconstruction needs.

Finally, acknowledging the current geopolitical situation in the Middle East, the European Union and United Kingdom continued to issue new sanctions against Hamas and Iran. The United Kingdom has also revoked certain licences allowing the sale of [...]

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EU Member States Implement Additional Measures to Regulate Export of Non-Listed Dual-Use Items

by Raminta Dereskeviciute, Sabine Naugès and Michal Chajdukowski | Oct 4, 2024 | Sanctions & Export Control

Member States in the European Union have taken additional measures beyond Regulation (EU) 2021/821 to control exports of dual-use items. More than half have extended authorization requirements for non-listed dual-use items suspected of being intended for military “end-use.” Additionally, five Member States have imposed export authorization for cyber-surveillance items linked to internal repression and serious human rights violations. The official publication of these additional national measures has just been released.

EU Court of Justice Upholds Confiscation of Proceeds from Brokering Services Relating to Russian Goods

by Sabine Naugès and Michal Chajdukowski | Sep 13, 2024 | Sanctions & Export Control

Highlights

In a recent ruling, the Court of Justice of the European Union (CJEU) upheld the legality of confiscating the proceeds from brokering services relating to military equipment manufactured in Russia and sold from Ukraine to India, without entering the European Union. This decision highlights the increasingly broad reach of EU sanctions and the EU’s dedication to enforcing sanctions and preventing circumvention.

This is also a clear sign to all EU operators providing brokering services to implement robust due diligence mechanisms to ensure that they are not captured by prohibitions under EU sanctions should underlying goods be in any way linked to Russia. In addition, the CJEU gave a clear signal of support to the European Commission and the relevant authorities of EU Member States prosecuting violations of EU sanctions, assuring them of a pro-enforcement line of CJEU case law.

Would the Transfer of a Sanctioned Entity’s Shares to a Trust be Effective Enough to Ensure an EU Company’s Shares are No Longer Under the Control of, or Related to, a Sanctioned Shareholder?

by Sabine Naugès and Fabio Cozzi | Sep 5, 2024 | Sanctions & Export Control

Given the depth of the Russian sanctions, some EU companies that are directly or indirectly owned by sanctioned entities have considered transferring the company’s shares to a trust. This divestment mechanism allows for a temporary transfer of ownership, with the trust assets isolated in an autonomous entity, separate from the settlor’s own assets. The overall objective is that the company’s shares are no longer under the control of, or related to, a sanctioned shareholder.

An Italian court has just requested a preliminary ruling from the Court of Justice of the European Union (CJEU) on the ownership/control of assets in discretionary trusts. Without anticipating on the ruling, but based on previous Italian case law, the ownership/control may exist not only in cases of “formal or direct” ownership/control of the asset by designated persons, but also in cases of “substantial or indirect” ownership/control. Thus, the vesting of the assets in the trust would not break the substantial ownership link.

This is the second time that an Italian court has referred the interpretation of Article 2(1) of Regulation (EU) No 269/2014 to the ECJ. On April 2023, the Tribunale Amministrativo Regionale per il Lazio (Case No. C-483/23, not yet decided by the Court) [...]

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Quarterly Sanctions Update | Q2 2024

by Sabine Naugès, Raminta Dereskeviciute and Michal Chajdukowski | Jul 8, 2024 | Sanctions & Export Control

On June 24, 2024, the European Union adopted its 14th sanctions package.

While the focus of this package was to curb the violation and circumvention of sanctions through the introduction of due diligence obligations for non-EU subsidiaries, or the expansion of “no re-export to Russia” clause requirement, ample other amendments were also introduced, such as those relating to transfer of IP rights, or divestment. The list of restricted goods has also been significantly expanded and additional persons and entities have been added to the list of sanctioned persons.

On June 29, 2024, the EU also expanded its sanctions against Belarus in order to align with the goals of the 14th sanctions package. Additional sanctions under the Hamas and Palestinian Islamic Jihad and Sudan regimes were also published.

In this Quarterly Sanctions Update, we summarise the most recent and significant amendments introduced, or proposed, by the EU and the United Kingdom between April and July 2024.

Click here to read the full [...]

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Export Controls in the Aeronautics, Space and Defense Sector | Conference Key Takeaways

by Sabine Naugès | Jun 20, 2024 | Sanctions & Export Control, Transport & Logistics

Export control in the aerospace and defense (ASD) sector is a critical and complex issue.

At the European level, one of the main standards for export control in the ASD sector is the regulation governing dual-use goods. However, within the European Union, regulations can vary significantly between Member States.

This regulatory landscape indicates the necessity for businesses in the ASD sector to navigate a “manifold control” environment, where multiple authorizations may be required, reflecting the sector’s strategic complexity and the importance of compliance with diverse export control regime.

In our latest event, organized in partnership with the French Compliance Society, we discussed these issues and more with Philippe Clerc, Emmanuel Dupic and Edouard Leeleea.

Click here to download our key takeaways for a full overview of the session. [...]

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Spotlight on the “Partner Countries” Exemption from Sanctions against Russia

by Raminta Dereskeviciute, Fabio Cozzi, Sabine Naugès, Dr. Alexa Ningelgen, Renate Prinz, Michal Chajdukowski, Benoit Feroldi, Kai Grandpierre and Dr. Tim Oliver Weill | Jun 7, 2024 | Sanctions & Export Control

From June 20, 2024, EU companies with a presence in Russia will no longer be able to rely on the “partner countries” exemption and will be required to obtain, or rely on, a licence to provide business services and/or software to their Russian entities.

Competent authorities of the EU Member States responsible for granting licences required pursuant to EU sanctions have taken markedly different approaches in implementing this change.

At the same time, UK sanctions against Russia never contained the “partner countries” exemption and UK companies providing business services to their Russian entities were always required to apply for a licence. In this article, we analyse how the German, French, Italian and the UK regimes are addressing this issue.

Click here to read our full article.

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