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The full alert is available for download with footnotes here
The European Union, in tandem with the United States, UK, Japan and Australia has approved the first round of sanctions against Russia in response to the decision by the Russian Federation to proceed with the recognition of the sovereignty of two Russia-backed regions in eastern Ukraine: the Donetsk and Luhansk People’s Republics, and the subsequent decision to deploy troops in the two regions. Other countries (i.e. Switzerland) said they will not act immediately.
Asset freeze on designated individuals and entities
The EU has adopted Council Regulation (EU) 2022/259 imposing sanctions in the form of an asset freeze on individuals and entities which have been added on the list of Annex I of Council Regulation (EU) 269/2014. The new designations include all 351 members of the Russian State Duma, who voted on February 15, 2022 in favor of the appeal to President Putin to recognize the independence of Donetsk and Luhansk. Additionally the Eu regulation designates 27 individuals and entities who are considered to play a role in “undermining or threatening the territorial integrity, sovereignty and independence of Ukraine”. These include members of the government, banks, including VEB Bank, Promsvyazbank, and Bank Rossiya, as well as business people who are considered to be providing financial or material support to Russian operations in the Donetsk and Luhansk territories. The list of designated persons and entities was published in the Official Journal of the European Union. With the new designations, the restrictive measures imposed pursuant to Council Regulation (EU) 269/2014 now reach 555 persons and 52 entities.
Import and export bans, restrictions on trade and investments related to the Donetsk and Luhansk areas
The EU has also adopted Council Regulation (EU) 2022/263 imposing import and export bans and trade and investment-related restrictions targeting certain sectors of the economies of the Donetsk and Luhansk territories. In particular, the said Regulation (EU) 2022/263 imposed the following prohibitions which very closely track the trade sanctions imposed in relation to the Russian annexation of Crimea in 2014:
The EU’s third regulation is Council Regulation (EU) 2022/262 amending Council Regulation (EU) 833/2014 and introducing a sectorial prohibition to deal with transferable securities and money-making instruments issued after March 9, 2022 by the Russian Federation, its government or Central Bank or any legal person acting on their behalf and provide to them any new loans or credit. These restrictions mirror those imposed on a specified list of Russian state owned banks and corporations imposed after the Russian occupation of Crimea. Certain loans and credits that have a specific and documented objective to provide financing for non-prohibited imports or exports of goods and non-financial services, including the expenditure of goods and services from another third State may be exempt from this prohibition.
In parallel, on February 21, 2022, the EU listed five persons, including three members of the State Duma of the Russian Federation, who were elected to represent the annexed Crimean peninsula and the city of Sevastopol, and two senior officials of the Sevastopol electoral commission.
On February 24, 2022, further to the announcement by Russia of a special military operation in Ukraine, the President of the European Council urgently convened a special meeting. It is expected that during the meeting a second round of sanctions may be presented for approval. The new sanctions package may potentially target strategic sectors of the Russian economy by blocking their access to technologies and markets that are key for Russia. According to the President of the European Commission, Ursula von der Leyen, the EU “will freeze Russian assets in the European Union and stop the access of Russian banks to European financial markets”. This package of sanctions will also be discussed in close coordination with the EU allies. We will report on those sanctions when they are published.
On Tuesday February 22, 2022 the UK froze the assets and imposed travel bans on 3 Russian nationals connected to the Kremlin, Gennady Timchenko, Boris Rotenberg and Igor Rotenberg. In addition, the UK has designated 5 Russian banks including Bank Rossiya, Black Sea Bank for Development and Reconstruction, IS Bank, Genbank and Promsvyazbank. As with any such designation it is now prohibited for a British national or permanent resident of the UK, or for foreign nationals or entities within the UK, to conduct business with these banks and individuals.
In addition, UK has announced that it will (i) sanction those members of the Russian Duma and Federation Council who voted to recognize the independence of Donetsk and Luhansk; (ii) extend the trade ban imposed on Crimea to the Donetsk and Luhansk territories. The UK has declared to have prepared an “unprecedented package of further sanctions” “designed in time to hobble the Russian economy”, in the event of further aggressive acts.
Today, following the escalation of events in Ukraine, the second round has been announced but not all of it has been put into legal effect.
Effective today, an additional set of individuals and entities have been subjected to an asset freeze. These are: Denis Alexandrovich Bortnikov, Petr Fradkov, Elena Alexandrovna Georgieva, Kirill Nikolaevich Shamalov, Yury Slyusar, UralVagonZavod, PJSC United Aircraft Corporation, PJSC United Shipbuilding Corporation, Rostec, JSC Tactical Missiles Corporation, and VTB Bank.
Announced but not yet put into law are the following measures, with legislation expected to be laid before Parliament next week for these measures:
The UK has also stated that similar sanctions to those imposed on Russia will be imposed upon Belarus for permitting Russia to stage forces in its territory, but the detail of who might be effected is yet to be published.
In addition new legislation has been promised which will prohibit the export of dual-use goods to Russia, and also the export of certain categories of technical communications and electronic equipment, aerospace equipment and machinery and equipment for the refining of oil and gas.
The British government has further announced that it is working with other governments towards excluding Russia from the SWIFT banking system.
It has also been announced that in the next few weeks an Economic Crime Bill will be put before parliament which is intended to target the assets of Russian nationals held in the UK. This will include expanded “Unexplained Wealth Orders” which enable the British government to confiscate funds the source for which a defendant cannot legitimately explain.
Lastly, the creation of a new enforcement unit for Russian sanctions has been announced to form part of the National Crime Agency. This is a significant change as previously all sanctions enforcement was done by the Office of Financial Sanctions Implementation. We will provide details on the many upcoming sanctions measures as and when they are published.
Canada’s Prime Minister Justin Trudeau, announced on February 22, 2022 that Canada will be imposing new sanctions under the Special Economic Measures (Russia) Regulations and the Special Economic Measures (Ukraine) Regulations. The new measures mirror the actions of Canada’s partners and international allies and consist of:
On February 23, 2022, the Japanese Prime Minister Fumio Kishida announced the first package of sanctions consisting of three parts:
These sanctions will be imposed as soon as the “procedures” are established. The Japanese Prime Minister has further announced that it will keep on working with its G7 partners to take further actions in the future. This would include discussing security of energy supply and soaring of oil prices.
The Prime Minister of Australia has announced the “first tranche” of sanctions against Russia in coordination with its allies. Under this first phase, Australia is imposing the following sanctions:
In addition to the above, Australia will amend the Autonomous Sanctions Regulations 2011 to extend the scope of the persons and entities that can be listed to include those of ““strategic and economic significance to Russia”.
Australia is also expediting the approval of Australian visas to Ukrainian citizens. Australia has further welcomed the decision by Germany to suspend the Nord Stream 2 gas pipeline project.
So far, Switzerland has condemned Russia’s recognition of two breakaway regions earlier this week. Switzerland however has not announced the imposition of sanctions. In a statement of the Federal Council, Switzerland declared it “may adopt compulsory measures to enforce sanctions adopted by the United Nations, the OSCE or Switzerland's main trading partners in order to ensure compliance with international law, in particular in respect for human rights.”
Switzerland has also declared that it must not be used “as a platform to circumnavigate EU sanctions”.
Switzerland often pursues this policy while not imposing its own asset freeze for assets already in Switzerland, it prohibits transfers into Switzerland by people designated under EU sanctions.
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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