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August 2014
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R
USSIA
B
RIEFING
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5
Legal Framework: What do sanctions really mean?
And there are evenmore items to consider. Alongwith the companies
which belong to listed individuals in amounts of 50 percent or
more, the sanctions also affect companies which do not belong to
listed individuals legally, but are controlled by them, sometimes via
middlemen.
Other countries follow
After the introduction of sanctions by the EU and the US, other
countries followed suit. Within months, countries like Norway and
Montenegro joined the EU sanctions regime.
On March 17, Canada introduced its own sanctions list (Special
Economic Measures (Russia) Regulations, SOR/2014-58), with
rules similar to the US rules. This list was extended on March 19
(SOR/2014-58), March 21 (SOR 2014-62), April 28 (SOR 2014-65),
May 4 (SOR/2014-98) and May 12 (SOR/2014-108). The Canadian
sanctions list consists of 47 individuals and 19 companies. Some
names which are found on the US or EU lists, are not included on
the Canadian list. For example, Igor Sechin, a CEO of Russian oil giant,
Rosneft, was not included on the Canadian list, although his name
is on the US list. Rosneft is active in Canadian oil projects.
On April 2, Switzerland introduced its own measures “to prevent
escaping from the sanctions”, which were extended on May 20
(SR 946.231.176.72.). Making new business contacts with listed
persons is now prohibited and previously existing business
relationships must be reported to the authorities. Switzerland also
imposed travel bans against those on the EU lists.
Australia has imposed its own sanctions too. Japan has introduced
a very special type of sanctions – in the form of cancelling the
Japanese-Russian talks on visa liberalization, defense cooperation
and investment agreement.
Should I follow the sanctions?
One of themost essential questions for any company and individual
is whether they should follow the sanctions regime. The answer
is rather simple here. Both the EU and US sanctions regime must
be followed by companies established under EU and US laws,
respectively. This means that a German or French company can not
sell goods to a listed person or manage its property.
Withinmost sanctions regimes (including those related to Russia and
Ukraine) the prohibitions also apply to the foreign branches (and
representative offices) of EU and US companies – but do not affect
the foreign subsidiaries of these companies which are established
under foreign laws. The US expands its sanctions regime to all foreign
subsidiaries of US companies only within certain situations, such as
the sanctions against Iran or North Korea. But it should be noted
that the purposeful structuring of a business in such a way that the
sanctions are circumvented, e.g. by delivering goods via subsidiaries
to listed persons, will be regarded as a violation of the sanctions.
This means that a Russian representative office of a German or US
company must follow the European or US sanctions against Russia,
respectively, but a Russian subsidiary of a German or US company is
not required to do so. One important exception: if a foreign company
has a US representative office, the US laws would view this company
as a US company and demand adherence to the US sanctions regime.
Private persons are liable too
Nomatter where they live, citizens of the EU or the US should follow
the sanctions. This means that a German or US director working for
a Russian subsidiary of a German or a US company will find himself
liable for forbidden interactions with listed persons, even if the
company itself is considered to be a Russian company and does not
need to follow the sanctions.
In the following table, you can find out how the sanctions are implemented based on the origin of the individual or company.
EU company* or
• its foreign branch
• its foreign
representative
office
or an EU citizen
US company* or
• its foreign branch
• its foreign
representative
office
or a US citizen or
resident
Non-EU and
Non-US company
Non-EU and
Non US-citizen who
resides neither
in the US nor in
EU**
acts
in the EU
EU list
applies
EU list
applies
EU list
applies
EU list
applies
US list does
not apply
US list
applies
US list does
not apply
US list does
not apply
acts in
the US
EU list
applies
EU list does
not apply
EU list does
not apply
EU list does
not apply
US list
applies
US list
applies
US list
applies
US list
applies
acts in a
third coun-
try
(for example,
in Russia)
EU list
applies
EU list does
not apply
EU list does
not apply
EU list does
not apply
US list does
not apply
US list
applies
US list does
not apply
US list does
not apply
* Subsidiaries
of EU or US
companies
registered outside
of the EU or US,
respectively, are
not regarded
as EU or US
companies, but as
non-EU and non-
US companies.
** For example, a
Russian national
residing in Russia
who wants to
sell his house
that is located in
the US or EU to
a listed person.