The EU's 15th package adopted today and latest developments in the EU, UK and US Russia sanctions programmes

This includes the largest package of UK sanctions on Russia since 2023, the launch of the UK Office of Trade Implementation, updates on the US Office of Foreign Assets Control's new Russia FAQs, and updates to the EU FAQs. We will also summarise the first ever G7 joint guidance for industry on preventing evasion of the export controls and sanctions imposed on Russia and the Price Cap Coalition updated advisory on the price cap regime against Russian petroleum.

EU sanctions updates

The council of the European Union adopts the 15th package of sanctions against Russia 

Today, the Council of the European Union (the "Council") adopted the 15th package of sanctions against Russia with the objective of further limiting Russia's ability to wage its war of aggression against Ukraine. According to the Council's press release (EU Commission press release is available here),  the measures adopted today are designed to address the circumvention of EU sanctions by targeting the Russian shadow fleet and weaken Russia's military and industrial complex. 

The new measures include: 

• Individual listings: 54 individuals and 30 entities are subject to EU asset freeze restrictions. The EU is targeting individuals in the military unit responsible for the strike against a children's hospital in Kyiv, management within leading energy companies and individuals responsible for child deportation, propaganda and circumvention. The EU is also targeting entities in the Russian defence as well as shipping companies responsible for the transport of Russian crude oil and petroleum products. The EU is also targeting Chinese companies supplying drone components an microelectronic components to Russia. 
• Port access ban: 52 vessels originating in third countries were added to the list of vessels subject to a port access ban and ban on the provision of services related to maritime transport. These listings is intended to target non-EU tankers part of the shadow fleet and vessels that transport military equipment for Russia or are involved in the transport of stolen Ukrainian grain.
• Trade: 32 entities, including entities located in third countries, will be subject to tighter export restrictions concerning dual-use goods and technology, and goods which might contribute to the technological enhancement of Russia's defence and security sector. 
• Protection of European companies: The EU has prohibited the recognition or enforcement in the EU of rulings issued by Russian courts. The EU has also introduced a derogation allowing for the release of cash balances held by EU central securities depositories. The EU also extended the deadlines for certain derogations needed for the divestment from Russia. 

The new measures will enter into force upon publication in the EU Journal expected shortly. 

EU updates certain sanctions FAQs

The EU has updated certain Sanctions FAQs. Notably, on 5 September 2024, the "Asset freeze and prohibition to make funds and economic resources available" FAQs were updated to clarify that an entity is considered owned by listed persons if their combined ownership is 50% or more, meaning a combined ownership of 50% is sufficient for the entity to be considered owned by listed persons. This is a change from the wording "more than 50%", which was used up until 5 September 2024. The equivalent clarification was made in the latest update of the EU Best Practices on 3 July 2024. 

Furthermore, on 22 November 2024, the EU issued guidance in its FAQ on the understanding of the "best efforts" obligation in Article 8a of Council Regulation 833/2014. The article impose an obligation on EU persons, entities and bodies to  undertake their best efforts to ensure that any legal person, entity or body established outside the Union that they own or control does not participate in activities that undermine the restrictive measures. The new updates to the FAQ, adding nine questions and answers clarifying the obligation under Article 8a, can be read here. 

On 11 December 2024, the EU issued updated guidance on measures and expectations concerning due diligence and prevention of circumvention of sanctions. The update include new FAQs on the interpretations of the term "knowingly and intentionally" in the circumvention regulations in Council Regulation 833/2014 and Council Regulation 269/2014 against Russia, as well as on the understanding of the so-called "non liability"-clauses in the same regulations. These new updates to the FAQ can be read here.

On 11 December 2024, the EU also published new FAQs concerning the due diligence requirements pursuant to Article 12gb in Council Regulation 833/2014. The article concerns the sale, supply, transfer or export of common high priority (CHP), as listed in Annex XL to the regulation, and require that sufficient due diligence is performed. The FAQs, e.g. containing example of specific checks that EU operators can perform when implementing their due diligence procedures, can be read here.

EUparliamentary briefing on Russia's shadow fleet

On 8 November 2024, the EU Parliament issued a briefing on Russia's shadow fleet. The briefing provides an introduction to the shadow fleet, how it works, and gives a walk through on the EU sanctions and other measures imposed to counter the fleet's operations. The briefing can be read in its entirety here.

UK sanctions updates 

Launch of UK office of trade sanctions implementation

Introduction

On 12 September 2024, the UK government laid a new statutory instrument before Parliament known as The Trade, Aircraft, and Shipping Sanctions (Civil Enforcement) Regulations 2024 (the "Regulations"). These Regulations were made under the Sanctions and Anti-Money Laundering Act 2018 and establish new civil enforcement powers for violations of UK trade sanctions, as well as sanctions related to aircraft and shipping. These new powers came into force on 10 October 2024 and will be exercised by a newly launched sanctions agency, the Office of Trade Sanctions Implementation ("OTSI"). The policy paper from the UK government can be found here. The Statutory guidance to the Regulations can be found here.

The Regulations introduce new reporting obligations under aircraft, shipping and certain trade sanctions, along with strict liability civil enforcement powers for breaches of these sanctions. The Regulations will apply to all UK persons (both natural and legal) regardless of their location worldwide, as well as any natural or legal person of any origin within the UK or its territorial sea, be that conducting business or otherwise

OTSI's governmental role

The establishment of OTSI was announced in December 2023. The agency is modelled on the Office of Financial Sanctions Implementation ("OFSI") and is part of the UK Department for Business and Trade ("DBT"). OTSI's responsibility will be trade sanctions enforcement. OTSI's work will complement the efforts of other government departments and offices responsible for the implementing and enforcing other sanctions regimes. His Majesty's Revenue and Customs ("HMRC") will still have an important investigatory and enforcement role. The Department for Transport ("DFT") will continue to have enforcement powers related to aircraft and shipping sanctions.

OTSI's civil enforcement powers

OTSI will be responsible for the civil enforcement of trade sanctions and will have the power to impose civil monetary penalties where a breach of sanctions has occurred, determined on the balance of probabilities. This power is similar to OFSI's authority to impose such penalties for breaches of UK financial sanctions and the G7 Russian oil price cap regime. Previously, violations of UK trade sanctions were only subject to criminal enforcement. OTSI may now impose monetary penalties on a so-called "strict liability" basis, meaning that one cannot defend by claiming ignorance or lack of reasonable cause to suspect that an offence had been committed, which is possible for many other trade sanctions offences. 

For trade sanctions breaches, OTSI can impose a maximum civil monetary penalty of either £1,000,000 or 50% of the value of the breach, whichever is greater. Voluntary disclosure of a breach of trade sanctions may be a mitigating factor when determining penalties.

Information requests

The Regulations give OTSI the power to request information if they believe a person will be able to provide it. OTSI may require persons to provide specified documents or documents of a specified description for the purposes such as investigating a suspected sanctions breach or monitoring compliance with sanctions regulations. If the requested person does not have such documentation or information, they must take reasonable steps to obtain it. Failure to provide information requested by OTSI is a criminal offence and may result in fines or imprisonment.

Reporting obligations

The Regulations also introduce reporting obligations for "relevant persons". Such relevant persons include banks, other FCA-regulated firms, legal services providers, and money service businesses. A relevant person is required to report suspected breaches of trade sanctions to OTSI if, through the course of carrying on their business, they know or have cause to suspect that a breach of trade sanctions has occurred. Failure to comply with these obligations constitutes a criminal offence.

UK introduces largest package of sanctions again Russia since 2023

On 7 November 2024, the UK imposed a new round of sanctions targeting Russia's military industrial complex and Russian-backed mercenary groups. Among the 56 new designations were suppliers and producers of e.g. machine tools, microelectronics and components for drones. Furthermore, a large share of the entities designated are based in China, Turkey and Central Asia. The press release announcing and describing the new sanctions can be read here.

New wave of designations of vessels in Russia's shadow fleet

On 25 November 2024, an additional 30 ships in Russia's so-called shadow fleet was sanctioned by the UK. This is the largest round of designations of shadow fleet sanctions to date. In addition to the 30 oil tankers, two insurance companies (Alfastrakhovanie PLC and VSK) was sanctioned for their role in enabling the shadow fleet activity. The UK has now sanctioned 73 oil tankers suspected to be part of the shadow fleet. 

US sanctions update

The US designates 275 individuals and entities under Russia sanctions regime

On 30 October, the US designated 275 individuals and entities, across 17 jurisdictions, involved in supplying Russia with technology and equipment able to support their war effort in Ukraine. The sanctions targeted trade networks being used to evade sanctions imposed on Russia and included individuals and entities from e.g. India, the People’s Republic of China (PRC), Switzerland, Thailand, and Türkiye. The press release, containing more details on the measures and the persons designated, can be read here.

New and amended FAQs on insurance-related activity 

On 11 November 2024, OFAC amended ten questions and added two in its FAQ. The two new FAQs published provided clearance concerning compliance for the insurance industry, e.g. providing clarification that authorisation must be issued for settlements of claims to innocent third-parties made under a policy issued to a blocked person. 

Other updates

Further expansions of and work on Norwegian export control regulations

On 7 October 2024 Norway aligned with EU on additional sanctions against Belarus in response to the Belarusian regime's role and involvement in Russia's unlawful attack on Ukraine. The new sanctions against Belarus include an expansion of the prohibition to provide professional guidance related to goods and technology listed on List 1 of the Norwegian Export Control Regulation, as well as making several of the measures under the sanctions regime against Russia also apply to Belarus. The press release, containing more details on the new measures, can be read here.

On 1 November 2024, the additions to the annexes of the Norwegian Export Control Regulation, comprising of a new List III, entered into force. The new list covers certain critical goods and technologies that are not currently controlled. The list includes goods and technologies for the production of advanced computer chips and quantum computers. It is expected that the list will be expanded with additional goods and technologies in the future. The goods and technologies in List III are considered to be disruptive or emerging technologies that are of such a nature that they should be subject to control. The same goods and technologies have been made subject to control by Denmark, Finland, the Netherlands, Spain and the UK, among others. Wikborg Rein has previously published an alert further describing these additions to the regulation, which can be read here.

Furthermore, the Ministry of Foreign Affairs has since 2022 been working on changes to the export control regulations, especially in light of the security risk associated with transferring technology to states with which Norway do not have security cooperation with. The work to finalise changes to the export control regulations is in the final phase and the ministry is working towards implementing changes during the first half of 2025. The term "knowledge transfer" will be replaced with "technology transfer" and the revision will include clarifications concerning the definition of the term "technology". The new amendments will also include separate provisions on the licence obligations for technology. A guide on technology transfer in academia will be published by the ministry at the same time as the regulatory change, but the ministry has stated that there will be no licensing requirements for publishing.

Delegation of authority to the new directorate for export control and sanctions

On 27 November 2024, the Norwegian government published the decision of delegation of authority to the newly established Directorate for Export Control and Sanctions. The decision enters into force 1 January 2025. Further information on the functions and authority of the new directorate can be read here. 

G7 announces industry guidance on preventing evasion of export controls and sanctions imposed on Russia 

On 24 September 2024, the G7 published its first ever joint guidance for industry on preventing evasion of the export controls and sanctions imposed on Russia. It is a top priority for the G7 to stop Russia acquiring missile and UAV components. The new guidance has been issued to help industries identify and counter Russia's evasion tactics.

Key points of the guidance include:

1. High-risk items for diversion to Russia,
2. Indicators of potential export control or sanction evasion,
3. Best practices for addressing these threats.

Price cap coalition issues updated advisory for maritime industry 

On 21 October 2024, the Price Cap Coalition, which consists of the G7 countries, the European Union, Australia and New Zealand, updated its advisory for government and private sector actors involved in the global maritime industry. Expanding on the advisory originally published in October 2022, the new update provides new recommendations concerning how to meet the obligations imposed under the price cap regime. More specifically, the three new recommendations concerns monitoring tanker sales, avoiding interactions with sanctioned parties and raising the level of awareness and enhancing market transparency.  The advisory can be read here.