Since early March 2014, a number of countries have imposed various types of sanctions against Russia and certain persons in Ukraine in connection with events in Ukraine. We have issued a series of updates covering, in particular, U.S. and EU sanctions, links to which are provided at the end of this Legal Insight.
After the recent rapid pace of legislative and regulatory developments from numerous sources, there seems now to be a brief pause for reflection by the international community before any further significant changes to the mosaic of sanctions imposed in the last six months. This seems the ideal opportunity to take stock with a high-level overview of the current situation in the U.S., EU, Australia and Japan. More detail may be found via the links to previous alerts. A brief note below also addresses Russia’s response.
The U.S. sanctions have been implemented through the Office of Foreign Assets Control, U.S. Department of the Treasury (“OFAC”), which has issued a series of directives and established a new list of persons subject to OFAC restrictions, in addition to its existing Specially Designated Nationals and Blocked Persons (“SDN”) list, identified as the Sectoral Sanctions Identifications List ("SSIL"); the Bureau of Industry and Security, U.S. Department of Commerce (“BIS”), which has issued amendments to the Export Administration Regulations (“EAR”) to impose new export licensing requirements and policies in connection with certain items exported to and end users in Russia; and, the Directorate of Defense Trade Controls, U.S. Department of State (“DDTC”), which has imposed new export licensing policies relating to Russia under the International Traffic in Arms Regulations (“ITAR”). In addition, while not a sanctions measure, the U.S. has announced that, effective October 3, 2014, Russia will be graduated from the U.S. Generalized System of Preferences (“GSP”), such that certain items imported into the U.S. from Russia no longer will benefit from duty-free status.
Restrictive measures: asset freezes and visa bans
Starting on 6 March 2014, EU legislation has incrementally imposed “targeted” sanctions comprising a requirement to freeze assets of, and a prohibition on making funds or economic resources available to (usually, in the case of individuals, associated with EU travel restrictions), a growing list of individuals and entities. The grounds for imposing these sanctions have steadily evolved and now include:
At the time of writing, 141 persons and 23 entities in total are subject to the EU restrictions described in this section. The list includes:
With effect from 1 August, the EU introduced legislation affecting sectors of the Russian economy (in some cases, combined with specifically identified entities) to complement the targeted sanctions summarised above. The legislation imposed prohibitions on the following activities:
Most recently, on 12 September, the following new sanctions took effect:
The measures were due to be reviewed by the end of September in the light of the developments in the conflict in Ukraine. It has been reported that, on 30 September, representatives of the EU Member States agreed that, while there had been encouraging developments in some aspects of the peace deal, relevant parts of the same protocol needed to be properly implemented, and that, accordingly, the sanctions summarised above remain in force for the moment.
At the time of writing, 20 entities in total are subject to the EU restrictions described in this section.
Transactions involving Crimea and Sevastopol
From 25 June 2014, the EU prohibited the import of goods to the EU originating from Crimea and Sevastopol without certification by the Government of Ukraine and the provision of financial and insurance services related to the import of such goods. Exceptions were made to minimise the effect on businesses.
From 31 July, the following were additionally prohibited in relation to Crimea or Sevastopol:
On 19 March 2014, the Australian government announced that it would impose sanctions in relation to the Russian threat to Ukraine’s sovereignty. Sanctions first came into effect, on 17 June 2014, through amendments to the Autonomous Sanctions Regulations 2011 (Regulations) which placed targeted financial sanctions and travel bans on designated persons and entities included on the Autonomous Sanctions (Designated Persons and Entities and Declared Persons – Ukraine) Amendment List 2014 (the Ukraine Amendment List).
Targeted financial sanctions
Under the Regulations, unless a person has a sanctions permit, a person is prohibited from:
“Asset” includes an asset of any kind or property of any kind, whether tangible or intangible, movable or immovable, however acquired.
For the Minister for Foreign Affairs to grant a sanction permit, she must be satisfied that:
Any “declared person” for Ukraine is prevented from travelling to, entering or remaining in Australia unless the minister waives the prohibition. Declared persons for Ukraine are included on the Ukraine Amendment List.
On 1 September 2014, the Prime Minister announced that Australia would impose further sanctions restricting arms exports, access of Russian state-owned banks to Australian capital markets and Australian trade and investment in Crimea. In addition, it was stated that the export of goods and services for use in Russia’s oil exploration or production would be prohibited. These measures are yet to be implemented.
On 29 April 2014, Japan decided to temporarily suspend issuing visas to enter Japan to 23 individuals who are considered to have contributed to the violation of Ukraine’s sovereignty and territorial integrity. So far, Japan has refrained from disclosing the names, titles or nationalities of these 23 people. Other than this, Japan has not implemented any monetary sanctions like those that the EU and the U.S. have already implemented.
On 28 July, Japan decided that the following additional sanctions will be implemented, as soon as the required internal procedures are completed:
On 5 August, Japan implemented the above measures against the individuals, designated in the Ministry of Foreign Affairs Notice, as persons considered directly involved in the annexation of the Autonomous Republic of Crimea and the city of Sevastopol or in the destabilisation of the Eastern part of Ukraine. Their implementation comprises:
In addition, a third measure was implemented on all goods originating from the Autonomous Republic of Crimea or the city of Sevastopol. This was a restriction on importation. An approval system will be applied to imports of all goods originating from the Autonomous Republic of Crimea or the city of Sevastopol of Ukraine.
On 24 September, under the Foreign Exchange and Foreign Trade Act, Japan implemented the additional following sanctions on Russia:
The following entities are designated in the Foreign Affairs Notice for the purpose of the preceding bullets:
On 6 August, Vladimir Putin (President of Russia) signed a decree calling for a ban or limit on imports of certain materials originating in the countries that imposed economic sanctions against Russia. On 7 August, Dimitri Medvedev (Prime Minister of Russia) banned, for one year, all imports of fruit, vegetables, meat, fish, milk and dairy products from the United States, the Member States of the European Union, Australia, Canada and Norway. The prohibited products were listed in Resolution of the Russian Government N. 560, 6 August. The Government can propose any changes to the sanction decree if the situation changes.
It has been reported that the Government has considered a ban on certain flights, including those of U.S. and EU airlines flying to the East Asia region over Russian territory without landing in Russia, and a general ban on flights of Ukrainian airlines over Russian territory to Armenia, Turkey, Azerbaijan and Georgia. An import ban on used cars, consumer products and clothes was also discussed, however no formal regulation has been adopted in that regard.
The most recent initiative of the Russian Parliament is a proposed the law granting state-fund compensation to persons and entities whose foreign assets have been seized under international sanctions, and accordingly allowing the Russian Federation to seize Russian assets of the countries that have imposed sanctions on such persons and entities. Despite having been highly criticised, on 8 October 2014 the bill passed its first reading in the State Duma is and expected to be adopted in the very near future.
· Developments in the Ukraine and Impact on Investments (10 March 2014)
· UPDATE: Developments in the Ukraine and Impact on Investments (18 March 2014)
· UPDATE: Developments in the Ukraine and Impact on Investments (21 March 2014)
· UPDATE: Developments in the Ukraine and Impact on Investments (22 April 2014)
· UPDATE: Developments in the Ukraine and Impact on Investments (29 April 2014)
· UPDATE: Developments in the Ukraine and Impact on Investments (13 May 2014)
· UPDATE: Developments in the Ukraine and Impact on Investments (25 June 2014)
· United States and European Union Ratchet Up Russia Sanctions (22 July 2014)
· Update on EU Sanctions against Russia (28 July 2014)
· Update on EU Sanctions against Russia (30 July 2014)
· Russia imposes sanctions against the United States, the European Union, Australia, Canada and Norway (7 August 2014)
· Update on U.S. Sanctions Relating to Russia (25 September 2014)