EU and US Sanctions Against Russia Due to the Situation in Ukraine
Both the EU and US, in addition to Canada and Japan, have yesterday (17 March 2014) imposed sanctions against certain Russian and Ukrainian individuals and companies controlled by them. These sanctions include freezing of assets and prohibitions of EU and US nationals to conduct business with the relevant persons and their companies. In this news bulletin we discuss the reach of the EU and the US sanctions and what we believe are their consequences for companies doing business in or with Russia or Ukraine.
The EU Sanctions contain an obligation to freeze all assets and funds of a total of 21 Russian and Ukrainian persons. See a list of these in fact box 1. There is also a general ban on satisfying any contractual claim by the listed persons or companies controlled by them. This in practice means that there is an overall prohibition to conduct any business with these persons or their companies. In addition, there is an obligation to provide information relating to the compliance with the sanctions to the relevant authorities of the EU member states. The provisions setting out the EU sanctions apply to companies registered in the EU and to all other companies in respect of any business done at least partly within the EU.
The EU sanctions are set out in Council Regulation (EU) 269/214 of 17 March 2014.
The US sanctions have broadly the same effect as the EU sanctions, but they target a partly different list of persons. See fact box 2. The US sanctions may also apply to a broader range of persons or entities than those specifically listed, if so determined by U.S. officials. The US sanctions apply to any property or property interests within the US or within the possession of a US person (including any companies registered under US laws and their foreign branches).
The US sanctions are set out in an Executive Order by the President of 17 March 2014.
Consequences and Actions that you need to take to ensure compliance
The exact consequences of the EU and US sanctions are difficult to estimate very precisely at this stage, as it is uncertain how extensive assets or business interests the listed persons have in the EU or the US. According to comments in the media, it seems that at least a part of the relevant persons have no assets or business interests outside of Russia. If further sanctions or Russian counter measures are implemented, there may be wider consequences.
If you are an EU company or any other company that does business within the EU you have to:
- verify whether any of your clients or business partners are among the 21 listed persons or whether your clients and partners include companies beneficially owned by these persons;
- freeze any assets that you possibly have in possession that belong to the listed 21 persons, or their companies;
- refrain from satisfying any contractual claim by the listed 21 persons or their companies; and
- inform the relevant authorities in your home country (typically the ministry for foreign affairs) about any sanctioned assets that you may possess or be aware of.
If you are a US company, you have to do basically the same as what EU companies have to do, but in relation to the 11 persons covered by the US sanctions and in relation to any other persons or entities which may be added in the future:
US companies may also be well advised to seek further guidance on the application of the US sanctions from US authorities.
Possible Russian counter measures
It is possible that Russia will impose some sanctions on EU and US persons and companies, but none such have yet been announced, but they were briefly referred to on a general level by President Putin in his speech today to a joint session of the Russian Federal Assembly. We continue to follow any developments on this and will issue an update when more information is available.
HS Sanctions task force
Hannes Snellman has established a task force to monitor the development and implementation of various EU, US and possible Russian sanctions relating to the situation in Ukraine. We will especially focus on the practical implications of the sanctions and guide affected companies in how to be compliant and on the handling of any consequences of these. This task force includes senior EU lawyers, Russian lawyers and lawyers trained in US law. We welcome you to contact us at any time with questions relating to the imposed sanctions.
Fact box 1: Persons subject to the EU sanctions
- Sergey Valeryevich Aksyonov, Prime Minister of Crimea
- Vladimir Andreevich Konstantinov, Speaker of the Supreme Council of the Autonomous Republic of Crimea
- Rustam Ilmirovich Temirgaliev, Deputy Chairman of the Council of Ministers of Crimea
- Deniz Valentinovich Berezovskiy, Commander of the Ukrainian Navy
- Aleksei Mikhailovich Chaliy, Mayor of Sevastopol
- Pyotr Anatoliyovych Zima, Head of the Crimean Security Service (SBU)
- Yuriy Zherebtsov, Counsellor of the Speaker of the Verkhovna Rada of Crimea
- Sergey Pavlovych Tsekov, Vice Speaker of the Verkhovna Rada
- Viktor Alekseevich Ozerov, Chairman of the Security and Defense Committee of the Federation Council of the Russian Federation
- Vladimir Michailovich Dzhabarov, First Deputy-Chairman of the International Affairs Committee of the Federation Council of the Russian Federation
- Andrei Aleksandrovich Klishas, Chairman of the Committee on Constitutional Law of the Federation Council of the Russian Federation
- Nikolai Ivanovich Ryzhkov, Member of the Committee for federal issues, regional politics and the North of the Federation Council of the Russian Federation
- Evgeni Viktorovich Bushmin, Deputy Speaker of the Federation Council of the Russian Federation
- Aleksandr Borisovich Totoonov, Member of the Committee on culture, science, and information of the Federation Council of the Russian Federation
- Oleg Evgenevich Panteleev, First Deputy Chairman of the Committee on Parliamentary Issues
- Sergei Mikhailovich Mironov, Member of the Council of the State Duma; Leader of Fair Russia faction in the Duma of the Russian Federation
- Sergei Vladimirovich Zheleznyak, Deputy Speaker of the State Duma of the Russian Federation
- Leonid Eduardovich Slutski, Chairman of the Commonwealth of Independent States (CIS) Committee of the State Duma of the Russian Federation
- Aleksandr Viktorovich Vitko, Commander of the Black Sea Fleet, Vice-Admiral
- Anatoliy Alekseevich Sidorov, Commander, Russia's Western Military District
- Galkin, Aleksandr, Commander of Russia's Southern Military District
Fact Box 2: Persons subject to the US sanctions
- Vladislav Surkov, Presidential Aide to Russian President
- Sergey Glazyev, Presidential Adviser to Russian President
- Leonid Slutsky, Chairman of the Duma Committee on CIS Affairs, Eurasian Integration, and Relations with Compatriots
- Andrei Klishas, Member of the Council of Federation of the Federal Assembly of the Russian Federation
- Valentina Matviyenko, Head of the Federation Council
- Dmitry Rogozin, Deputy Prime Minister of the Russian Federation
- Yelena Mizulina, State Duma Deputy
- Sergey Aksyonov, Prime Minister of Crimea
- Vladimir Konstantinov, Speaker of the Crimean parliament
- Viktor Medvedchuk, Leader of Ukrainian Choice
- Viktor Yanukovych, Former Ukrainian President