On January 27, 2019, the US Department of the Treasury's Office of Foreign Assets Control (OFAC) lifted sanctions imposed on En+ Group plc (En+), UC Rusal plc (Rusal), and JSC EuroSibEnergo (ESE), removing these entities from the List of Specially Designated Nationals and Blocked Persons (SDN List).1
The delisting also resulted in the removal of sanctions from entities owned 50 percent or greater, directly or indirectly, by EN+, Rusal, or ESE, which were previously considered "blocked by operation of law."
OFAC proceeded with the delisting on January 27 pursuant to OFAC's December 19, 2018 notification to Congress of its intent to delist the entities following 30 days of Congressional review.2 Although the House of Representatives passed a resolution on January 17 to reject the delisting, a similar resolution did not pass the Senate, clearing the path for the January 27 delisting.
The three entities were originally designated on the SDN List for their links to sanctioned Russian individual Oleg Deripaska. All sanctions on Oleg Deripaska remain in force.
Prior to the delisting, US persons3 were prohibited from engaging in any dealings, directly or indirectly, with these entities or entities owned 50 percent or greater, directly or indirectly, by En+, Rusal, ESE,and other SDNs in the aggregate, except for limited dealings authorized by general licenses. OFAC general licenses in effect prior to the delisting authorized US persons to engage in certain transactions necessary: (1) to maintenance or wind down of operations or existing contracts with the entities; (2) to divest or transfer debt, equity, or other holdings in the entities to nonUS persons; and (3) to facilitate the transfer of debt, equity, or other holdings in the entities between nonUS persons.4 Pursuant to the delisting, US persons may now deal with En+, Rusal, ESE, and entities in which they hold a 50 percent or greater ownership interest without the constraints of the previouslyissued general licenses.
Terms of Removal
The delisting of En+, Rusal, and ESE follows lengthy negotiations between the entities and the US Government. Under the terms of their removal from the SDN List, En+, Rusal, and ESE have reduced Oleg Deripaska's direct and indirect shareholding stake in these companies and severed his control. This removal action was contingent on terms requiring that the majority of directors on the En+ and Rusal boards be independent directors—including US and European persons—who have no business, professional, or family ties to Oleg Deripaska or any other SDN, and that independent US persons vote a significant bloc of the shares of En+.
The entities have also agreed to "unprecedented transparency" with OFAC regarding their operations by undertaking extensive, ongoing auditing, certification, and reporting requirements.5 The delisting is subject to continued compliance by these companies with the terms of the removal agreement.
While Oleg Deripaska remains listed as an SDN, En+, Rusal, and ESE have been removed from the SDN List, consistent with the US government's position of providing sanctions relief through divestment and relinquishment of control of entities by designated parties.
The United States, however, maintains other sanctions in connection with Russia, including designations of certain Russian parties and sectoral sanctions targeting certain transactions in the Russian financial, energy, and defense sectors. Noncompliance with US sanctions could result in severe penalties.
1 OFAC's press release is available here.
2 See White & Case's previous alert, available here.
3 US person is defined to include US citizens and permanent resident aliens, wherever located, entities organized under US law
(including foreign branches), and individuals and entities located in the United States.
4 The last general licenses are available here (GL 13J), here (GL 14E), and here (GL 16E).
5 See OFAC's press release, available here.