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On July 21, 2022, the EU Council adopted new measures intended to both tighten and relax existing economic sanctions targeting Russia. We detail the main measures below:
Ban on imports of gold: The package introduces a new prohibition against the purchase, import, or transfer, directly or indirectly, of gold, if it originates in Russia and it has been exported from Russia into the EU or any third country after 22 July 2022. This prohibition extends to gold in any form including unwrought gold, gold coins and gold jewelry. Ancillary services such as brokering, technical assistance, financing, financial assistance and “other services” are also prohibited.
Export control on goods which may enhance Russia’s military and technological capacities: The package extends the list of controlled items, which may contribute to Russia’s military and technological enhancement or the development of its defence and security sector.
Extension of the port access ban: The prohibition on port access is extended to locks in order to avoid circumvention of sanctions.
Extension of the prohibition on deposits: The prohibition against accepting new deposits in excess of €100,000 has been extended to deposits from legal persons, entities or bodies established in third countries and directly or indirectly majority-owned by Russian nationals or natural persons residing in Russia (unless they are also EU or EEA nationals). In addition, the acceptance of deposits from non-prohibited cross-border trade will be subject to prior authorization by national competent authorities. How this prior authorization process will work in practice has not been explained.
Prohibition against providing credit rating services: the regulation includes a prohibition against providing credit rating services to any “legal person, entity or body established in Russia” as well as to Russian nationals or those residing in Russia.
Clarification of the scope of the prohibition on public procurement : The package introduces a limited exception to the prohibition against entering into any transactions with Russian public entities. The exception applies where the transaction is necessary to ensure access to judicial, administrative or arbitral proceedings in an EU member state, or the enforcement of such proceedings in a member state.
Exception to the prohibition against engaging in transactions with certain State-owned-enterprises: The exception applies to transactions for agricultural products and the supply of oil / petroleum products to third countries and was adopted to combat food and energy insecurity.
Exemption on technical assistance for aviation goods: The package allows the sharing of technical assistance with Russia for aviation goods and technology insofar as it is needed to safeguard the technical industrial standard setting work of the International Civil Aviation Organization.
Sanctions which might lead to food insecurity in the world: One of the recitals to the new Regulation 2022/1269, albeit not an operative provision of the regulation, contains the policy statement that the EU was committed to avoiding measures that target in any way the trade in agricultural and food products, including wheat and fertilizer, between third countries and Russia. The recital added that this policy includes the earlier regulations adopted in view of Russia’s actions destabilizing the situation in Ukraine.
Extension of the geographic scope of the exceptions to the prohibition to engage with certain SOEs: exception to the prohibition against transacting with SOEs for transactions necessary to satisfy the needs in certain commodities in the EU, such as natural gas, certain non-ferrous metals, aluminum and iron ore, was extended to include Switzerland, EEA and Western Balkans.
Additional listings of Russian individuals and entities: The new sanctions package adds 48 people and 9 entities to the EU’s Russia sanctions list. The designations include members from President Putin’s inner cycle. Entities designated include Sberbank, FORSS (a Russian company providing engineering services to the shipbuilding industry), JSC Research and Production association (company operating in the electronics sector supplying the Russian Armed forces); the Federal Agency for the Commonwealth of Independent State Affairs Compatriots living abroad and International Humanitarian Cooperation.
Designations of Syrian mercenaries: In response to the Syrian provision of support (including military support) to Russia’s aggression against Ukraine, the EU has added 4 people and 1 entity to its Syria sanctions list and 6 people and 1 entity to its Russia sanctions list. The entity sanctioned is Al-Sayyad Company for Guarding and Protection Services Ltd (also known as ISIS Hunters). The CEO of the company, Fawaz Mikhail Gerges, and co-owner Yasar Hussein Ibrahim have also been designated. The private security company is believed to have participated in the recruitment of Syrian mercenaries for the benefit of Russia forces.
New derogations from asset freezes: The package introduces the following derogations to asset freezes subject to authorization by the relevant National Competent Authority:
New reporting obligations for EU persons: EU persons were required to supply immediately any information which would facilitate compliance with the Council Regulation No. 269/2014, such as information on accounts and amounts frozen to the competent authority of the Member State where they are resident or located. Now, Council Regulation (EU) 2022/1273 extends this obligation to report information about “funds and economic resources within Union territory belonging to, owned, held or controlled by [designated] natural or legal persons, entities or bodies… and which have not been treated as frozen by the natural and legal persons entities and bodies obliged to do so”. As drafted the reporting obligation does not extend to all frozen assets, but only to those not being treated as frozen by the designated person/entity in question. It will not always be easy for the EU person with the reporting obligation to know how a particular asset is being treated.
New reporting obligations for listed individuals and entities: The sanctions package finally imposes the obligation on listed persons to report before 1 September 2022 or within 6 weeks from the date of listing in Annex I, whichever is latest, funds or economic resources within the jurisdiction of a Member State belonging to, owned, held or controlled by them, to the competent authority of the Member State where those funds or economic resources are located. The failure to comply with such obligation is stated to be an offence as it will be considered as circumvention of the asset freeze measures.
Protections as to the processing of confidential data: The Council Regulation (EU) 2022/1273, finally introduces an obligation on competent authorities of Member States, including enforcement authorities and administrators to process and exchange information including personal data with other competent authorities of the Member States and the Commission. Any processing of personal data shall be carried out in line with the protections provided under Regulations (EU) 2016/679 and (EU) 2018/1725 and only in so far as necessary for the application of the Council Regulation (EU) No. 269/2014 and to ensure cooperation between Member states and the Commission.
We note that on July 27, 2022, the EU Commission further updated its FAQs guidance. Some of these have already been dealt with, but others include:
Aviation: The EU Commission clarifies the exemption for the sharing of technical information in the framework of International Civil Aviation Organization. In accordance with the Guidance, technical data pertaining to EU manufactured products and components listed in Annexes XI and XX can be shared to contribute to the technical standard setting work within ICAO groups and panels even in cases where Russia is, among other countries, a member of these groups and panels. This measure does not amount to technical assistance to Russia. The provision of direct or indirect technical assistance to any natural or legal person, entity or body in Russia or for use in Russia remains otherwise prohibited.
Curtis is closely monitoring any legislative development. We will keep our clients and friends abreast of any new updates.
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