The situation in Ukraine and the sanctions regimes imposed against Russia are developing rapidly. Numerous Russian individuals and entities have been added to EU, UK and US sanctions lists over the last few days, with a particular focus on Russian banks and financial institutions.
EU and UK sanctions
he scope of the EU and UK sanctions regimes are very similar in how they apply in their respective jurisdictions. Specifically, both apply:
- Within the territory of the EU / UK respectively, including their airspace;
- On board any aircraft or any vessel under the jurisdiction of an EU Member State / the UK;
- To any person inside or outside the territory of the EU / UK, who is a national of an EU Member State / the UK;
- To any legal person, entity or body which is incorporated or constituted under the law of an EU Member State / the UK;
- To any legal person, entity or body in respect of any business done in whole or in part within the EU / UK.
This will include Owners, Managers, Operators, Charterers and even vessels which are registered, incorporated, constituted or do business in whole or in part within the EU / UK.
The sanctions do not apply to non-EU / non-UK companies. However, if those companies take any action that is in breach of sanctions, associated EU / UK companies and employees who are EU / UK citizens may face penalties under the EU and UK regimes.
In addition, non-EU / non-UK companies may face sanctions in respect of any business they conduct that is done in whole or in part within the EU / UK. The sanctions would be limited to that particular business, and would not extend to exclusively non-EU / non-UK business carried out by those companies.
What are the prohibitions
- Asset freezes: Under EU and UK regulations, all funds and economic resources belonging to, owned, held or controlled by listed parties are to be frozen. In addition, no funds or economic resources shall be made available, directly or indirectly, to or for the benefit of listed parties. The prohibition on making available funds and economic resources goes beyond prohibiting direct payments to listed parties. Indirect payments, such as payment to a non-listed party who then in turn pays the money to a listed party, are prohibited.
- Territorial sanctions: Territorial sanctions on financing, trade in key sectors and investment in Crimea and Sevastopol.
- Sectoral sanctions: Sectoral sanctions, specifically targeting the energy, oil exploration and production, dual use and arms sectors.
- Financial sanctions: Financial sanctions aimed at restricting the access of certain Russian entities and key companies to EU and UK capital markets.
The legal framework for the US Ukraine/Russia-related sanctions includes executive orders issued by the President, and public laws passed by Congress:
- Blocking Property of Certain Persons Contributing to the Situation in Ukraine (March 6, 2014).
- Blocking Property of Additional Persons Contributing to the Situation in Ukraine (March 17, 2014).
- Blocking Property of Additional Persons Contributing to the Situation in Ukraine (March 20, 2014).
- Blocking Property of Certain Persons and Prohibiting Certain Transactions with Respect to the Crimea Region of Ukraine (December 19, 2014).
- Administration of Proliferation Sanctions and Amendment of Executive Order 12851 (August 1, 2019).
- Blocking Property With Respect to Specified Harmful Foreign Activities Of The Government Of The Russian Federation (Effective Date – April 15, 2021).
- Blocking Property With Respect to Certain Russian Energy Export Pipelines (August 20, 2021).
- Blocking Property of Certain Persons and Prohibiting Certain Transactions With Respect to Continued Russian Efforts to Undermine the Sovereignty and Territorial Integrity of Ukraine (February 21, 2022).
Donetsk and Luhansk Embargo
Upon the February 2022 Russian offensive on Ukraine, the U.S. has imposed the same type of comprehensive sanctions we saw in the Crimea context. Namely, US persons are prohibited from engaging in nearly all commercial transactions in these two regions including:
- New investment;
- Importation into the US of goods, services or technology from Donetsk/Luhansk;
- Exporting or reexporting, directly or indirectly, any goods, services or technology to Donetsk/Luhansk;
- Facilitating any transaction with Donetsk/Luhansk;
- Donating humanitarian goods to Donetsk/Luhansk.