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A 12th package of EU sanctions against Russia has just come into effect. The new sanctions are comprehensive and include a significant number of new measures relevant for Danish companies such as new export and import restrictions; additional services restrictions; a requirement for EU exporters of particularly sensitive items to contractually prohibit re-exportation to Russia; a notification requirement for sale of oil tankers; and new asset freezes.
The new sanctions package entered into force on 18 and 19 December 2023, respectively. The measures are set out in the regulations accessible here, here and here.
We have summarized the most significant changes below:
The new sanctions include a prohibition on the sale, export etc., as well as provision of related services, for a wide range of commonly used enterprise software and software for industrial design and manufacture.
The relevant categories of software are set out in the new Annex XXXIX to Regulation (EU) 833/2014, and include enterprise resource planning (ERP), customer relationship management (CRM), business intelligence (BI), supply chain management (SCM), enterprise data warehouse (EDW), and project management software, as well as typical components of all the mentioned types of software.
EU companies with subsidiaries in Russia should pay special attention to these new restrictions, as they are likely to affect software used by their subsidiaries. Certain exemptions and license possibilities are provided in respect of the new restrictions. Note for this purpose that the exemption for services provided to Russian subsidiaries of EU parents will expire on 20 June 2024, cf. below.
Other new export restrictions have also been enacted with a special focus on weakening Russia’s military capabilities and limiting Russia’s access to dual-use and advanced technology. They include restrictions on items such as chemicals, thermostats, DC motors, servomotors for drones, and certain machine tools and machine parts. As a result, a number of product related annexes to Regulation 833/2014 have been expanded, including Annexes VII and XXIII.
Article 5n of Regulation 833/2014 contains a prohibition on provision of various services such as accounting, auditing, management consulting, legal advisory services, and IT consultancy services Russian legal entities. Until now, provision of such services intended for the exclusive use of legal entities that are owned by an EU (and EEA/Swiss/EU partner country) parent has been exempted.
With the new sanctions, a time-limit has been set for this exemption, which will expire on 20 June 2024. After this date, it will instead be possible to apply for an authorization from the national authority to provide such services to Russian subsidiaries of EU (etc.) parents.
The new sanctions include a ban on the import, purchase, or transfer of diamonds from Russia. The ban is broad in its scope and covers diamonds originating in, exported from, or transiting Russia as well as Russian diamonds, which have been processed in third countries. The import ban will be phased in gradually.
In addition to the diamond import ban, the new sanctions also include an import ban on liquified propane gas and raw materials for steel production, processed aluminum products and other metal goods, such as pig iron, spiegeleisen, aluminum wires, foil, and copper wires.
Pursuant to existing sanctions, citizens travelling from Russia to EU bringing personal use items (such as personal hygiene items, make-up, and clothing items) might in principle have been subject to import restrictions. The new regulations introduce some exemptions for the import of such items, where they are strictly for personal use of the person crossing the border.
EU exporters of particularly sensitive goods and technology (as listed in Annexes XI, XX, XXXV and the new Annex XL in Regulation (EU) 2014/833, as well as Annex I to Regulation (EU) 258/2012) are now required to contractually prohibit re-exportation to Russia and re-exportation for use in Russia when selling these items to certain third countries and to include adequate contractual remedies in the event of a breach of the re-exportation prohibition.
The relevant items covered by the requirement include firearms and ammunitions, jet fuel and fuel additives, items suited for use in the aviation and space industry, and common high priority items, such as electronic integrated circuits and other advanced technology.
Contracts concluded before 19 December 2023 are subject to a wind-down period until 20 December 2024 or until their expiry date, whichever is earlier.
In an effort to curb Russia’s ability to sell oil above the price cap imposed by the EU, the new sanctions include measures to monitor the sale of oil tankers by EU operators to Russia and third countries. EU operators are now required to notify national authorities of all sales of oil tankers to third countries whereas sales to Russian person and entities, or for use in Russia, will be subject to prior authorization from the national authority.
Any sale or other transfer of ownership of said oil tankers after 5 December 2022 and prior to 19 December 2023 shall be notified to the competent authorities before 20 February 2024.
The deadline in Article 12b to obtain a license for divestment of Russian subsidiaries or wind-down of business activities in Russia was set to expire on 31 December 2023, but has been prolonged until 30 June 2024.
Over 140 additional asset freezes were imposed, covering primarily actors in the Russian military and defense sector, actors from the IT sector, actors involved in the sham elections in the occupied territories of Ukraine, as well as certain other important economic actors, such as AlfaStrakhovanie Group, a large Russian insurance company, and four telecom companies operating in the occupied Ukranian territories. The new asset freeze list is set out in Annex I in Regulation (EU) 2023/2875 (amending Regulation (EU) 269/2014).
Another notable measure is that the asset freeze listing criteria have been expanded to also include individuals and entities responsible for the forced take-over of EU companies established in Russia.[1] This also includes individuals benefitting from the take-over, such as the new management inserted by the Russian Government. Going forward, if additional asset freezes are imposed based on these new criteria, it may severely limit the possibilities of doing business with companies that have been subject to forced take-overs.
The scope of applicable sanctions targeting Russia has again been extended and Danish companies should ensure that their sanctions compliance programmes, policies, screening processes and payment processes are updated to ensure that the newly enacted sanctions are appropriately addressed.
In light of the enhanced export controls and new additions to the asset freeze lists, we recommend that Danish companies conduct re-screening of products and business partners.
Gorrissen Federspiel closely follows the developments of sanctions against Russia and we can assist with the interpretation of and compliance with the applicable sanctions, as well as implementation of measures to ensure that sanctions are observed. If you have any questions, please contact a member of our Compliance & Sustainability team.
For more information on the previous EU sanctions packages, please see Gorrissen Federspiel’s newsletter of 26 June 2023, newsletter of 27 February 2023, newsletter of 19 December 2022, newsletter of 7 October 2022, newsletter 8 June 2022, newsletter of 11 April 2022, Gorrissen Federspiel’s newsletter of 16 March 2022, Gorrissen Federspiel’s newsletter of 10 March 2022, Gorrissen Federspiel’s newsletter of 2 March 2022, Gorrissen Federspiel’s newsletter of 28 February 2022 and Gorrissen Federspiel’s newsletter of 24 February 2022.
[1] See Regulation (EU) 2023/2873 (amending Regulation (EU) 269/2014