
Package 14: The latest EU sanctions package expands export sanctions and places greater emphasis on corporate responsibility and anti-circumvention
Insights|June 26, 2024
On 24 June 2024, the European Union adopted a 14th package of sanctions against Russia in response to its ongoing illegal war against Ukraine. This latest round of sanctions targets the high-value sectors of the Russian economy, particularly the liquefied natural gas (“LNG”) sector, with the aim of minimizing revenue streams from the sale and transport of LNG. The measures reaffirm the necessity for businesses to comply with sanctions and prevent circumvention as well as highlight the heightened responsibilities to avoid indirect support to Russia. We foresee that the new requirements for businesses – even if still mostly targeted at the most critical items – will represent the new standard also for less harmful products. The below list summarizes what is new in the 14th sanctions package.
Besides adding 116 individuals and entities to the sanctions list and expanding the range of controlled items, the package also introduces other significant changes.
Increasing responsibilities for businesses
- Obligation to ensure third-country subsidiaries’ compliance with sanctions. EU undertakings are required to use their “best efforts” to ensure that their third-country subsidiaries (including companies that they control) do not participate in activities that would undermine the restrictive measures imposed by Regulation 833/2014 .
- The requirement underlines the importance of group policies and supervisory systems, sanctions clauses, etc.
- Best efforts should only include actions that are feasible in view of the operator’s nature and size, and the relevant factual circumstances.
- Obligation to implement due diligence procedures with respect to common high-priority items. EU undertakings must implement due diligence mechanisms capable of identifying and assessing risks of exportation to Russia and mitigating such risks. In light of the above, as of 26 December 2024, EU operators must ensure that their third-country subsidiaries trading common high-priority items implement these requirements.
- Obligation to include “no Russia” clause for intellectual property right transfers when dealing with common high-priority items. As of 26 December 2024, undertakings operating in the EU are required to include a clause in their contracts with third-party commercial partners that prohibits the use or disclosure of intellectual property rights, trade secrets, or other information related to common high-priority items that are intended to be sold, supplied or exported, directly or indirectly, to Russia or for use in Russia.
Clarifying the prohibition on circumvention
- Prohibition to participate in any activities with the awareness that such activities may circumvent restrictive measures set out in Regulation 833/2014. The former Article 12 states that it is prohibited to participate, knowingly and intentionally, in activities the object or effect of which is to circumvent prohibitions in Regulation 833/2014. The amended prohibition on circumvention clarifies that the requirements of knowledge and intent are met not only when a person deliberately seeks to circumvent restrictive measures, but also when a person participating in an activity with the object or effect of circumventing restrictive measures is aware that such participation may have that object or effect and accepts that possibility.
Other notable details
- Exit window under Article 12b is extended until 31 December 2024, allowing remaining EU companies seeking to exit the Russian market to apply for licenses for an additional 6-month period.
- Voluntary self-disclosure of sanctions violations may be taken into account as a mitigating factor by Member States (Article 8).
- Measures are introduced to allow EU operators to claim compensation for damage caused by Russian companies due to the implementation and expropriation of sanctions (Articles 11a-b).
- Moving forward, the Commission will assess the possibility of requiring EU operators to ensure that their subsidiaries in third countries also use the “no-Russia clause”.
- Partner countries. Liechtenstein has been added to the list of the EU’s partner countries (having previously consisted of Norway, Switzerland and the UK) for iron and steel imports. Liechtenstein and Iceland have been added to the list of partner countries relevant to a number of articles, e.g., Article 12g (concerning the “no-Russia clause”).
Laundry list of other amendments
- Further restrictions on exports of certain chemicals and other items (Manganese ore, compounds of rare-earth, plastics, excavating machinery, and electrical equipment (e.g. Annexes VII and XXIII).
- Liquefied natural gas restrictions, including services and technology (Articles 3u, 3r and 3t).
- Prohibition on the use of System for Transfer of Financial Messages (SPFS) for EU operators to exchange financial data aimed at neutralizing the impact of the EU sanctions and developed by the Central Bank of Russia (Article 5ac).
- Prohibition on accepting financing from Russia by EU political parties, NGOs etc., whether directly or indirectly (Article 5t).
- Restrictions on importing helium from Russia (Annex XXI).
- Restrictions on the access to, import, purchase, transfer and sale of 27 targeted vessels (Article 3s).
- Prohibitions on dealing with Ukrainian cultural property suspected of having been removed without consent or in breach of law (Article 3v).
- Prohibitions on Russian air carriers and registered aircraft from landing, taking off, or overflying EU territory, with some exceptions (Article 3d).
- EU operators which are owned 25% or more by a Russian natural or legal person are prohibited from becoming a road transport undertaking or from transporting goods by road in the EU, including in transit (Article 3l).
- Clarifications regarding the diamond ban (Article 3p).
- Ban on transactions with targeted credit and financial institutions and crypto assets providers established outside of the EU (Article 5ad).
- Restrictions on EU intellectual property offices accepting applications for registrations in the EU of certain intellectual property rights by Russian nationals and Russian companies (Article 5s).
- Possibility to apply for a derogation from the prohibition on satisfying claims under contracts (Article 11).
We continue to follow closely the development of EU sanctions and the needs of our clients in this space.