Client Alert 20 Dec. 2023

EU Adopts 12th Sanctions Package

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On December 18, the EU adopted the 12th package of sanctions regulations and decisions regarding the situation in Ukraine.

The EU has updated both instruments, (i) the Council Regulation (EU) No. 269/2014 imposing asset freezes, and (ii) Council Regulation (EU) No. 833/2014 imposing sectoral, trade-related and financial restrictions.

i) Asset freezes

  • Additional individuals and companies have been added to the list of designated persons, including, LLC MirTelecom, JSC Special design Bureau of Transport Mechanical Engineering (Spetsmash), Perm Powder Plant, Moscow Research Institute Agat, JSC Design Office for Shipbuilding Vympel, Ural Plant of Transport and Mechanical Engineering, LLC CST (ZALA Aero), LLC Shipping Company Lyukstrans, AlfaStrakhovaniye Group, JSC AVIASTAR-SP and certain other entities and individuals.
  • The EU has expanded its listing criteria to natural or legal persons entities or bodies benefitting from compulsory transfer of ownership of, or control over, entities established in Russia that were previously owned or controlled by entities established in the EU.
  • EU has added conditions under which a name of a deceased person can be retained on the list of persons subject to an asset freeze after that person’s death. The name of the person would be retained to continue blocking the assets which could otherwise be used to finance Russia’s war against Ukraine.
  • Additional derogations have been introduced to authorize the release frozen assets or funds subject to an authorization issued by national competent authorities of EU Member States. This includes wind-down mechanisms with newly listed entities, instances where the release of an asset freeze is necessary to “allow for the sale or use of shares in, or assets of, an entity established in Russia where the ownership or control by a Union legal person of that entity has been compulsorily transferred by the Russian Government”.
  • A new temporary derogation was introduced to transfer proprietary rights of certain listed entities aimed to benefit EU companies.
  • The EU has also introduced a derogation to allow the sale of EU companies owned by certain listed individuals or entities.
  • Another new derogation was introduced to allow for cases in which Member States decide to deprive in the public interest a listed person of funds or economic resources.
  • The EU has also made certain amendments clarifying reporting requirements under the Council Regulation (EU) No. 269/2014, particularly in connection with the applicability of confidentiality rules.
  • Member States shall designate by 31 October 2024 national authorities competent to identify and trace, where appropriate, the funds and economic resources belonging to, or owned, held or controlled by, any natural or legal persons, entities or bodies listed in Annex I and that are located in their jurisdiction, with a view to preventing or detecting instances of a breach or circumvention, or attempts at a breach or circumvention.

ii) Sectoral restrictions

  • The EU added 29 Russian and third country entities to the list of entities associated with Russia's military-industrial complex (including entities registered in Uzbekistan and Singapore), such as Grant Instrument (Russia); Streloy (Russia); LLC Research and Production Enterprise Itelma (Russia); TTK Kammarket LLC (Russia); JSC Kompel (Russia); LLC MBR-AVIA (Russia); LLC NeoTech (Russia); JSC Sozvezdie Concern (Russia); Serov Machine-Building Plant JSC (Russia); Mvizion LLC (Uzbekistan); Design Bureau of Navigation Sytems (NAVIS) (Russia); Deflog Technologies PTE LTD (Singapore)’, and others.
  • New items have been added on the list of dual-use goods subject to export restrictions including items used in the development and production of military systems, chemicals, lithium batteries, thermostats, DC monitors, servomotors for unmanned aerial vehicles (UAVs), machine tools, machinery parts.
  • The EU imposed an import ban on raw materials for steel production, processed aluminium products and other metal goods. In addition, the EU has introduced a list of partner countries applying restrictions on imports of iron and steel similar to the ones laid out in Council Regulation (EU) No. 833/2014 and extended the wind-down period for the import of certain steel products.
  • The EU imposed further restrictions on the exports of goods which may contribute to Russia’s industrial capabilities and prohibited transit via Russia to avoid circumvention, including machinery and parts, construction-related goods, processed steel, copper and aluminum goods, lasers, and batteries, subject to a wind-down period.
  • The EU expressly authorized the import of personal items, which have recently become subject to import restrictions. It alsoauthorized entry into the EU of vehicles with diplomatic numberplates and made entry of vehicles with Russian numberplates for personal use subject to an authorization by national competent authorities. The authorization can be obtained if the vehicle is used for travelling and for personal use and is not for sale.
  • The EU imposed prohibitions on the import, purchase and transfer of diamonds originating from Russia, exported from Russia, transiting Russia and processed in third countries. These proposed sanctions are part of an internationally coordinated G7 diamond ban, aiming to deprive Russia of this important revenue stream estimated at €4 billion per year.
  • The EU introduced a prohibition to provide enterprise and design-related software to the Russian government or Russian companies. The aim is to further hamper Russia's capacities in its industrial sector.
  • Derogations from the prohibition on imports of crude oil and petroleum products have been prolongued for an additional year.
  • The EU adopted a derogation authorizing the provision of loans and credits to entities operating in the energy sector, under certain conditions.
  • In relation to price cap mechanism, the EU has introduced a requirement itemizing the information related to ancillary costs such as insurance and freight, in order to avoid circumvention. Traders and charterers are considered to have access to such information and are under an obligation to share it. Vessel owners and insurers are under an obligation to collect itemized information and share it. Competent authorities have the authority to request such information from any actor in the supply chain. A transitional period has been accorded to allow for the adaptation to the new mechanism.
  • Enforcement of the price cap mechanism was strengthened through the information sharing between Commission and European maritime Safety Agency and EU Member States.
  • The EU introduced a derogation from the sale of tankers to a person in Russia or for use in Russia, but imposed an obligation to notify the sale of tankers (in particular, second-hand carriers).
  • The EU exempted certain projects such as Sakhalin-2 from the price cap obligations, to ensure Japan’s energy security needs.
  • The EU imposed a new import ban on liquified petroleum gas (LPG), impacting annual imports worth over €1 billion, with grandfathering of existing contracts for a period of maximum 12 months.
  • The EU clarified that the exemptions and derogations concerning civil nuclear projects apply fully to Paks II project in Hungary.
  • The EU imposed a prohibition on Russian nationals or residents from owning, controlling or holding posts in the governing bodies of legal entities providing crypto-asset wallet account and custody services.
  • EU exporters are now obligated to contractually prohibit reexportation to Russia or for use in Russia of sensitive items listed in certain annexes to Council Regulation (EU) No. 833/2014, including goods related to aviation, jet fuel, firearms and goods on the Common High Priority list.
  • As part of the anti-circumvention measures, the EU has broadened the scope of the transit prohibition through Russia by adding certain economically critical goods when these are intended for export to third countries.
  • The EU introduced a new measure that will require the notification of certain transfers of funds out of the EU from EU entities directly or indirectly owned by more than 40% by Russian nationals or residents or entities established in Russia.

Curtis will continue to monitor developments in this rapidly changing area.

About Curtis

Curtis, Mallet-Prevost, Colt & Mosle LLP is a leading international law firm. Headquartered in New York, Curtis has 19 offices in the United States, Latin America, Europe, the Middle East and Asia. Curtis represents a wide range of clients, including multinational corporations and financial institutions, governments and state-owned companies, money managers, sovereign wealth funds, family-owned businesses, individuals and entrepreneurs.

Attorney advertising. The material contained in this Client Alert is only a general review of the subjects covered and does not constitute legal advice. No legal or business decision should be based on its contents.

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