Client Alert 10 Jul. 2024

EU Adopts New Restrictive Measures Against Belarus

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On June 29, 2024, the EU adopted a new set of restrictive measures (sanctions) against Belarus through Council Regulation (EU) 2024/1865 of 29 June 2024 amending Regulation (EC) No 765/2006,mirroring some of the measures already in place against Russia. The Council of the EU and the European Commission have issued press releases explaining the new measures.

We outline below the main elements of the sanctions package.

Energy sector

EU operators are now prohibited to (i) acquire any new or extend any existing participation in; (ii) grant any new loan or credit or otherwise provide financing to; (iii) create any new joint venture with; or (iv) provide investment services directly related to the above listed activities to any entity incorporated or constituted under the law of Belarus or any other third country and operating in the energy sector in Belarus. Similar to the Russian sanctions program, the definition of the energy sector is rather broad and leaves room for interpretation (e.g., it also covers “the provision of services, equipment or technology for activities related to power generation or electricity production”).

Trade-related measures

Derogations

Until December 31, 2024, EU operators can apply for authorizations with national competent authorities of an EU Member State to conduct transactions otherwise prohibited by certain export and import bans provided that such transactions are strictly necessary for the divestment from Belarus or the wind-down of business activities in Belarus.

Export

The list of dual-use and advanced goods and technologies subject to export bans to Belarus has been expanded.

Further restrictions on exports to Belarus have been introduced in relation to (i) goods which could contribute to the enhancement of Belarusian industrial capacities; (ii) maritime navigation goods and technology; (iii) luxury goods; (iv) goods and technology suitable for use in oil refining and liquefaction of natural gas; and (v) goods and technology suited for use in aviation or the space industry.

New prohibitions have been added on transit via the territory of Belarus of dual-use goods and technology, goods and technology which might contribute to Belarus’ military and technological enhancement or Belarusian industrial capacities or to the development of its defense and security sector, goods and technology suited for use in aviation or the space industry, and firearms, their parts and essential components and ammunition exported from the Union.

Import

Direct or indirect purchase, transfer or import of diamonds and gold originating in Belarus, and/or exported from Belarus has been prohibited. Similarly, purchase, import or transfer into the Union of goods which allow Belarus to diversify its sources of revenue (i.e., helium, coal and mineral products including crude oil) has been restricted.

Transport measures

Transport of goods by road in the Union by trailers and semi-trailers registered in Belarus, including when hauled by trucks registered outside of Belarus, has been prohibited.

EU road transport undertakings in which Belarusian persons or entities have a 25% ownership stake are no longer allowed to transport goods within the EU, even in transit. In addition, companies owned 25% or more by Belarusian persons or entities will no longer be allowed to become EU road transport undertakings.


Provision of services and software

The prohibition to provide, directly or indirectly, certain services (as well as the related financial and technical assistance) to the Republic of Belarus, its Government, its public bodies, corporations or agencies or to any natural person or entity acting on their behalf or at their direction.

As opposed to the Russian sanctions program, the prohibition targets the provision of services to certain individual and public entities, but does not extend to any legal entity incorporated in Belarus.

The restricted services include (i) accounting, auditing, including statutory audit, bookkeeping or tax consulting services, or business and management consulting or public relations services; (ii) architectural and engineering services, legal advisory services and IT consultancy services; and (iii) market research and public opinion polling services, technical testing and analysis services and advertising services.

Prohibition to sell and supply certain software for the management of enterprises and software for industrial design and manufacture.

Exemptions

A wind-down period for provision of services strictly necessary for the termination by 2 October 2024 of contracts concluded before 1 July 2024.

Persons subject to EU jurisdiction can continue to provide until 2 January 2025 the restricted services and software intended for the exclusive use of entities established in Belarus owned by, or solely or jointly controlled by, an entity incorporated or constituted under the law of a Member State, a country member of the European Economic Area, Switzerland or an EU partner country.

New designation criterion

A new designation criterion, mirroring the criterion already in place from June 2023 for the Russian sanction program, has been added in order to target with asset freeze measures those circumventing EU sanctions or significantly undermining their purpose as well as natural or legal persons associated with them.

Firewall derogation

The provision of restricted services or lifting of asset freeze measures can be authorized if necessary for the setting-up, certification or evaluation of a firewall removing the control exercised by a listed person over the assets of a non-listed Union entity which the listed person owns or controls.

Anti-circumvention

The anti-circumvention clause has been amended to clarify that circumvention includes not only the cases where a person deliberately seeks to circumvent restrictive measures, but also where a person participates in an activity without having as an object the circumvention of the sanctions, yet it can be demonstrated that such person was aware that his/her actions could have had the effect of circumventing the sanctions, and accepted that as a possibility. There is no specific definition of the level of intent, although it would appear that a lower standard than deliberate knowledge (i.e., negligence) would be applicable.

EU parent companies are now obliged to make their “best efforts” to ensure that their subsidiaries in third countries do not take part in any activities that could undermine EU sanctions.

The term “best efforts”, as already referenced in the recently adopted 14th package of sanctions against Russia, is defined as taking all possible steps that are feasible for the EU operator in view of its nature, its size and the relevant factual circumstances, in particular the degree of effective control over the entity established outside the EU.

No-Belarus clause” - EU exporters are requested to prohibit in their contracts the re-exportation to Belarus or for use in Belarus of sensitive goods and technology (i.e., goods and technology suited for use in aviation or the space industry, firearms and other arms and common high-priority items).

  • EU exporters should now also perform due diligence to prevent the re-export of common high-priority items to Belarus or for use in Belarus, and to ensure that their foreign subsidiaries do the same.

Protection of EU operators

The regulation introduces a provision enabling EU operators to obtain compensation in EU Member States’ courts from Belarusian individuals and entities that caused damages to them. That includes damages caused to companies owned by EU operators in connection with a contract or transaction the performance of which was affected by the measures imposed against Belarus provided that such EU operator does not have effective access to other remedies, e.g., under a bilateral investment treaty.


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