EU adopts 14th sanctions package against Russia

With some delay, the EU adopted the fourteenth package of sanctions against Russia on 24 June 2024. With this, the EU has sanctioned further natural persons and legal entities, extended the embargoes and adopted further measures to fight circumvention of the sanctions. However, the anticipated extension of (absolute) liability for foreign subsidiaries has not been included in the new regulations

Sanctioning of 116 additional natural persons and legal entities

The new package includes sanctions against a further 47 companies and 69 individuals.

Introduction of further embargoes

As part of the new sanctions package, the list of goods that contribute to Russia's military and technological development or to the development of its defense and security sector has been expanded. Further dual-use goods and advanced technology (e.g. microwave and antenna amplifiers, flight data recorders and off-road vehicles), chemicals (e.g. manganese), plastics, vehicle parts and machinery are now subject to export, sales and provision restrictions (embargo).

Measures to prevent the circumvention of sanctions

The EU planned to extend the re-export ban of Art. 12g Regulation (EU) No. 833/2014 to all goods and technologies (so-called "No Russia" clause). Ultimately, the extension and the associated liability were removed from the sanctions package, partly at Germany's insistence. In preparation for the 14th sanctions package, there were discussions about obliging subsidiaries of EU companies located in third countries to contractually prohibit the re-export of their goods to Russia. This measure was intended to prevent Russia from sourcing goods from EU production for civil and military use via third countries such as Kazakhstan, Turkey or China. The anticipated measure also provided for absolute liability for the actions of subsidiaries in third countries that violate this obligation - regardless of the degree of control of the parent company over this subsidiary.

According to the final version of the Regulation, companies that export common high priority goods in accordance with the list in Annex XL ("Common High Priority" (CHP) goods (e.g. electronic integrated circuits, semiconductor components or ball bearings) or transfer industrial know-how must now guarantee group-wide compliance in future in accordance with Articles 12ga and 12gb.

Best efforts duty to achieve group-wide compliance

Contrary to speculation during the decision-making process, the Regulation does not contain any absolute liability for the actions of foreign subsidiaries that act contrary to the sanctions. However, the Regulation now provides that EU persons must use their best efforts to ensure that legal persons established outside the Union that are owned or controlled by them do not engage in conduct that undermines the restrictive measures under this Regulation.

The Regulation clarifies once again that it only applies within the limits of application set out in Article 13. However, since EU economic operators may be able to assert a decisive influence over the conduct of a legal person, entity or body established outside the Union, they should use their influence to prevent acts that undermine the restrictive measures. Otherwise, they can be held responsible for such actions.

However, this always presupposes that the EU person has significant influence and can effectively exert it. The EU itself assumes that significant influence cannot always be exercised, for example because the legislation of a third country prevents an EU person from doing so.

Sanctions in the transport sector

• Sanctions in maritime transport - sectoral access ban for sanctioned vessels
  With immediate effect, the EU is denying access to European ports and any services to ships that contribute to Russian warfare or that are part of Putin's shadow fleet. The measure is intended to prevent the sanctions already in place from being circumvented.
   
• Air transport sanctions - for flights
  Ban on non-scheduled flights if a Russian person decides on the place of departure or destination
   
• Road transport sanctions - goods transport by road
  Tightening of the existing ban on the transport of goods by road in the EU, including transit, for EU companies that are 25% or more owned by Russian persons.

Further measures

• Additional import restrictions
  The import ban on diamonds adopted in the 12th sanctions package has been concretized. The import of helium is now prohibited.
   
• Sanctions in the energy sector // for LNG
  No Russian LNG may be transshipped in EU ports for transport to third countries. This means that only re-export to other countries is prohibited, while the purchase of Russian LNG remains permitted. Russian LNG may also no longer be imported to certain terminals that are not connected to the EU's long-distance gas pipeline network. In addition, new investments and the provision of goods, technologies and services for the completion of LNG projects under construction such as "Arctic LNG 2" and "Murmansk LNG" are prohibited.
   
• Sanctions in the financial sector
  EU banks are prohibited from using the SPFS financial messaging system - the Russian equivalent of SWIFT - outside of Russia. In addition, transactions with banks and providers of cryptocurrencies in Russia and certain third countries are prohibited.
   
• Financing ban
  Political parties, non-governmental organizations and media service providers may not be financed by the Russian state and its authorized representatives.

Entry into force

The amendments to the fourteenth sanctions package against Russia entered into force on 24 and 25 June 2024. The use of EU ports for the transshipment of Russian LNG will only be prohibited after a transitional period of nine months.

What should companies do now?

As with the previous sanctions packages, companies must check in future whether existing and new business contacts are now subject to sanctions and whether their goods are subject to an embargo. With regard to their subsidiaries abroad, companies must comply with the due diligence obligations for CHP goods and industrial know-how and the due diligence obligations for all other goods.

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