The European Union has adopted its 8th sanctions package on 6 October 2022

The adoption by the European Union of the 8th package of economic and individual sanctions against the Federation of Russia, Belorussia and certain of their nationals [1], has far-reaching consequences on European legal advisors and their clients.

We have summarized below the most relevant take-aways of these new measures, which are binding upon European nationals and residents (individuals and entities) since 7 October.

1.A broader list of designated persons

In an effort to increase the pressure on persons seeking sanctions-circumvention, the EU decided to broaden the criteria under which persons are included in the list of designated persons. From now on any person (individuals, entities or bodies) “facilitating infringements of the prohibition against circumvention” of the EU sanctions against Russia could be added to the EU list of designated persons [2].

Such a revision of Article 3(1) of Regulation (EU) No 269/2014 allows for an implementation of the pre-existing general sanction of Article 12 of Regulation (EU) No 833/2014 which prohibits the participation “knowingly and intentionally, in activities the object or effect of which is to circumvent prohibitions in this Regulation.”

Regarding these specific new targets, Vice-President Borell explained that “In the category of economic actors, a lot of has been done already, but we will add further key operators. Among these operators, it will be – not necessarily Russians – but people who participate in the circumvention of sanctions. Because it is clear that there are some phenomena of circumvention of sanctions that have to be included in our listings.”

As a reminder, both Regulations apply (i) within the EU territory, including its airspace, (ii) on board of any aircraft or vessel being under the jurisdiction of a Member State, (iii) to any person inside or outside the territory of the Union who is a national of a Member State, (iv) to any legal person, entity or body, inside or outside the territory of the Union, which is incorporated or constituted under the law of a Member State and (v) to any legal person, entity or body in respect of any business done in whole or in part within the Union.

For European legal advisors and their clients such revision does not increase their burden, as they were already compelled to implement robust due diligence processes of sanctions, clients and activities scrutiny, but is adding an important reputational penalty.

Furthermore, 30 individuals (mostly persons having played a role in the recent “referenda” on territories annexation) and 7 entities (including, inter alia, JSC Goznak, JSC Irkut Corporation and the state-owned Russian Maritime Register of Shipping) have been added to the list of sanctioned persons set out in Annex I to Regulation (EU) No 269/2014.

2.Prohibition to provide legal services to Russian persons

Since 7 October 2022 European legal counsels are prohibited to provide directly or indirectly legal advisory services in all matters distinct from judicial proceedings, to Russian nationals or residents.

Similarly to the pre-existing professional services bans, Russian subsidiaries of EU entities are expressly excluded from the scope of the prohibition. This exemption is however tempered by the general prohibition to assist clients in circumventing the EU sanctions (such anti-circumvention measures also exist at a UK level).

As regards the notion of “indirectly” provide legal services, the EU Commission advised – regarding auditing services, however the prohibition has the same definition for audit and legal services – that “The use of the term “indirectly” in paragraph 1 of Article 5n means, for example, that it is prohibited for an EU auditing services provider to provide services to EU or other non-Russian entities that are subsidiaries of entities established in Russia if those services would actually be for the benefit of the parent company established in Russia.[3]

Which financial, legal and tax services are now banned and to whom?

The European Union has adopted its 8th sanctions package on 6 October 2022

3. Prohibition to take directorships or governing positions in certain Russian or non-EU entities

As from 22 October 2022, EU nationals will be prohibited from holding or joining any posts in the governing bodies of (i) the listed Russian state-owned entities which are subject to a transaction ban (i.e. entities with which a prohibition of conducting direct or indirect transactions has been set forth under Article 5aa of Regulation (EU) No 833/2014), (ii) legal persons, entities or bodies established outside the European Union whose proprietary rights are directly or indirectly owned for more than 50 % by these Russian state-owned listed entities.

For further details, you may refer to the corresponding revisions using the following link: EUR-Lex – 32022R1904 – EN – EUR-Lex (europa.eu)

4.Full prohibition to provide crypto-assets services

Before 6 October 2022 it was prohibited to provide crypto-asset wallet, account or custody services in respect of crypto-assets having a total value of more than EUR 10,000. Such threshold has been abandoned in favour of an absolute and global ban on providing any crypto-asset wallet, account or custody services to Russian nationals or natural persons residing in Russia, or legal persons, entities or bodies established in Russia, irrespective of any value of the concerned crypto-assets (the revised version of Article 5b, paragraph 2 of Regulation (EU) No 833/2014 provides that “It shall be prohibited to provide crypto-asset wallet, account or custody services to Russian nationals or natural persons residing in Russia, or legal persons, entities or bodies established in Russia.”). Bi-nationals being also nationals of a Member State, of a country member of the European Economic Area or of Switzerland, or being resident in these jurisdictions, are exempted.

For further details, you may refer to the corresponding revisions using the following link: EUR-Lex – 32022R1904 – EN – EUR-Lex (europa.eu)

To deep down:

 
Samia Rabia, Partner - Brouxel & Rabia Luxembourg Law Firm
Samia RABIA, Partner
Estelle NZOUNGOU, Senior Associate - Brouxel and Rabia Luxembourg Law Firm
Estelle NZOUNGOU, Senior Associate

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