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France: Taking account of EU sanctions against Russia – a compliance issue for companies

published on 26 March 2024 | reading time approx. 15 minutes

The purpose of this article, which is up to date with the latest sanctions package, is to summarise the main measures adopted by the EU in response to Russia's invasion of Ukraine. This summary is useful to enable companies to adapt their sanctions programmes, which are evolving by nature.

Presentation of the main sanctions adopted by the EU »
Conclusion »

Since the annexation of Crimea in 2014, the Union has adopted a series of restrictive measures (or sanctions) against Russia, which include trade restrictions, bans on the export of sensitive technologies, freezes on financial assets, as well as restrictions on access to the European financial market for certain Russian companies.

These measures are designed to put economic pressure on Russia, as well as weakening its military industry, to force it to respect Ukraine's territorial integrity and find a diplomatic solution to the war.

It is even more important for companies to be aware of these sanctions and to analyse them in the light of their activities in order to avoid the risk of repercussions or media allegations that could affect their reputation or share price, as demonstrated by the recent indictment of Technip for its involvement in the Arctic LNG project. While these measures mainly concern companies that maintain commercial relations with Russia, they may also affect companies that contract with natural or legal persons directly or indirectly controlled by Russian capital or that implement measures to circumvent the sanctions.

Presentation of the main sanctions adopted by the EU

Back in 2014, the EU had already adopted sanctions against Russia following the annexation of Crimea and the failure to implement the Minsk Agreements, signed on 5 September 2014.

Since Russia invaded Ukraine on 24 February 2022, the EU has gradually adopted new sanctions against Russia. Eleven 'packages' of sanctions have been adopted up to 23 June 2023, and a twelfth is being prepared by the Commission.

The main reference texts for European sanctions against Russia are:

Council Regulation (EU) No 833/2014 of 31 July 2014, which provides for a wide range of measures targeting certain economic sectors and activities;
Council Regulation (EU) No 269/2014 of 17 March 2014 and Council Decision 2014/145/CFSP of 17 March 2014, which provide for asset freezing measures and restrictions on entry into EU territory against designated natural and legal persons.

We can also add :

Council Regulation (EC) No 765/2006 of 18 May 2006 concerning restrictive measures in view of the situation in Belarus and the involvement of Belarus in the Russian aggression against Ukraine;
Council Regulation (EU) 2022/263 of 23 February 2022, which lays down restrictive measures relating to areas not controlled by the Ukrainian government in the Donetsk, Luhansk, Kherson and Zaporija oblasts.

Note: these texts have been amended several times. It is therefore necessary to refer to their consolidated versions, which are published regularly by the Union.

Finally, on 20 July 2023, the Council adopted restrictive measures due to Iran's military support for Russia's war of aggression against Ukraine (Council Reg. (EU) 2023/1529, 20 July 2023: OJ L 186, 26 July).

General penalties contained in Regulation (EU) No 833/2014

Regulation (EU) No 833/2014 is the text identifying the sectoral sanctions against Russia. This document sets out a large number of measures that companies must comply with, which are not easy to read or understand.

1. Measures with a variety of objectives

At the date of this article, the penalties provided for in this text consist mainly of the following restrictions.

In addition, article 12 of the rules prohibits "knowingly and intentionally participating in activities the purpose or effect of which is to circumvent" the prohibitions set out in the rules.

Note: given the complexity of this system of penalties, as well as the numerous exceptions provided for in each article, it is advisable to refer to the text of Regulation (EU) No 833/2014 for details of the measures.

2. Measures that are difficult to understand

Regulation (EU) No 833/2014 nevertheless remains difficult to implement. Indeed, numerous amendments and additions have been made successively to the text. Although the publication of consolidated versions is a definite help in identifying sanctions, the addition of sanctions over time, based on gaps identified in the pre-existing regime, gives the text a "catch-all" feel, making it difficult to identify both the overall coherence and the exact scope of application, particularly where industrial sectors subject to import restrictions are concerned.

This lack of coherence is also due to the need for the European authorities to take into account contradictory interests; for example, the EU's desire to reduce the Russian government's income from the sale of gas and oil, while at the same time seeking to secure the energy supply of EU Member States, particularly those most dependent on Russia in this area. The particular interests of certain Member States have also been taken into account, as demonstrated by the exclusion of the diamond sector to date (although the twelfth set of sanctions will probably target this sector).

Most sanctions provide for relatively detailed exceptions to their application. For example, bans on the export of goods and technology are generally subject to exceptions where the goods are intended for humanitarian, medical or pharmaceutical purposes. Restrictions on oil imports are also subject to a number of exceptions, particularly for landlocked EU Member States.

The annexes to Regulation (EU) No 833/2014 listing the products, goods or technologies subject to import restrictions are extremely complex to read. They go into such detail about the technical characteristics of the products covered that it is sometimes difficult, even for specialists in the products in question within the companies potentially affected, to determine whether some of their products are covered by the sanctions.

All these factors make it difficult to analyse the actual obligations on EU nationals required to apply sanctions. In particular, there is no implementing document, such as "guidelines", which would enable the texts applicable to each type of penalty to be identified in summary form. This difficulty is implicitly recognised by the Regulation itself, Article 10 of which states that "actions taken by natural or legal persons [...] shall not give rise to liability of any kind on their part, if they did not know, and could not reasonably have suspected, that their actions would infringe the measures set out in this Regulation". This article thus creates a degree of ambiguity as to the actual obligations on companies.

Individual sanctions

In addition to the general sanctions set out in Regulation (EU) No 833/2014, there are individual sanctions targeting persons and entities responsible for supporting, financing or implementing actions undermining the territorial integrity, sovereignty and independence of Ukraine, or who benefit from such actions. According to the Council, these sanctions currently target a total of 1,800 individuals and entities, including Vladimir Putin and Sergei Lavrov, his Minister of Foreign Affairs.

Note: an up-to-date list of natural and legal persons subject to restrictive measures is available from the National Freeze Register of the French Treasury.

Individual sanctions consist of a travel ban and an asset freeze. Travel bans prevent the persons listed in the annex to Council Decision 2014/145/CFSP from entering or transiting EU territory by land, air or sea. Entity sanctions consist of an asset freeze. This means that all accounts belonging to the entities listed in the annex to Regulation (EU) No 269/2014 and Council Decision 2014/145/CFSP referred to above, opened in EU banks are frozen. It is also prohibited to make funds or assets available to them, directly or indirectly.

As a result, the individuals concerned cannot use their European bank accounts (or those of a company they control) to pay or receive payments; and all income from property, whether movable or immovable, received on the account is frozen (collection of rent, prohibited sales, etc.).

Note: as of 12 October 2023, the Council reported that the amount of assets frozen in the EU stood at €21.5 billion.

Within this framework, European banking establishments, which must comply with a duty of due diligence, may not receive funds from a transaction carried out by a person or entity subject to an asset freeze in accordance with the sanctions established by the Union.

Since the tenth sanctions package adopted by the EU on 25 February 2023 (OJEU No. L 59I), natural and legal persons, entities and bodies resident or established in the European Union have been obliged to:

communicate to the competent authority of their Member State any information that may facilitate the implementation of Regulation (EU) No 269/2014, such as information concerning funds and economic resources on the territory of the Union frozen (or which should have been frozen) in accordance with Regulation (EU) No 833/2014;
cooperate with the competent authority for the purposes of verifying this information, in accordance with Article 8 of Regulation (EU) No 269/2014.

However, asset freezing measures are not, and cannot in themselves lead to the confiscation of these assets. This requires a court decision based on criminal offences.

Note: in France, such an offence may be characterised by the violation of the sanctions themselves, which may lead, in addition to criminal penalties, to the confiscation of the assets concerned, pursuant to article 459, § 1 bis of the Customs Code and articles 131-39 and 131-21 of the Criminal Code.

Measures relating to uncontrolled Ukrainian territories

Council Regulation (EU) 2022/263 of 23 February 2022, as amended by Council Regulation (EU) 2022/1903 of 6 October 2022, provides for certain restrictive measures in response to the illegal recognition, occupation or annexation by the Russian Federation of certain areas of Ukraine not controlled by the Government of Ukraine in the oblasts of Donetsk, Luhansk, Kherson and Zaporija (the "Designated Territories").

These restrictive measures are bans on :

import into the Union goods originating in the designated territories;
invest in real estate or entities in the designated territories;
sell, supply, transfer or export to the Designated Territories the goods and technologies listed in Schedule II of the Regulations. These goods and technologies may be used in the following key sectors: transport, telecommunications, energy, and oil, gas and mining prospecting, exploration and production;
provide services directly linked to tourism activities in the Designated Territories.

Note: a regularly updated map showing the designated territories is available on the Ministry of the Armed Forces website.

Sanctions against Belarus

As a result of Belarus's involvement in Russia's military invasion of Ukraine, the EU has adopted a series of measures since 2022 which include:

a ban on certain exports, in particular:
- dual-use goods and technologies to Belarus or for use in Belarus,
- goods and technologies likely to contribute to the military, technological, defense and security development of Belarus,
- electronic and telecommunications goods and equipment,
- goods and technologies for the aviation and space industries;
a ban on imports into the European Union of certain products originating in or exported from Belarus;
individual sanctions against persons;
the exclusion of five Belarusian banks from the SWIFT system;
a ban on transactions with the Central Bank of Belarus;
limits on financial inflows into the EU from Belarus;
a ban on the supply of euro-denominated banknotes to Belarus.

These restrictions are mainly contained in Council Regulation (EC) No 765/2006 of 18 May 2006, as consolidated.

Sanctions against Iran

On 20 July 2023, the Council adopted restrictive measures due to Iran's military support for Russia's war against Ukraine (EU Reg. 2023/1529).

This new sanctions regime prohibits the export from the EU to Iran of components used in the construction and production of unmanned aerial vehicles (UAVs). In addition, Iranian persons and entities are included on the list of persons and entities subject to restrictive measures on the grounds that they endanger or threaten the territorial integrity, sovereignty, and independence of Ukraine, in particular as a result of their involvement in the Iranian UAV programme. This list is set out in Council Regulation (EU) 2023/1496 of 20 July 2023.

As mentioned above, these restrictive measures include an asset freeze, with a ban on EU citizens and companies making funds available to the targeted individuals. Individuals are also subject to a travel ban, preventing them from entering or transiting through EU territory.