New EU Sanctions

Iran support to Russia

On 18 November 2024, the Council of the European Union (the Council) took several actions in view of Iran’s military support to Russia’s war of aggression against Ukraine and to armed groups and entities in the Middle East and the Red Sea region. The Council:

• introduced a prohibition on the export, transfer, supply, or sale from the EU to Iran of components used in the development and production of missiles and UAVs (see Annex II of Regulation 2023/1529;
• introduced a transaction ban prohibiting any transaction with ports and locks that are owned, operated or controlled by listed individuals and entities, or are used for the transfer of Iranian UAVs or missiles or related technology and components to Russia (see Annex IV);
• expanded the grounds for imposing sanctions, which now include natural or legal persons, entities or bodies: (a) responsible for, supporting or involved in Iran’s UAV or missile programme; (b) supplying, selling or otherwise involved in transferring Iran’s UAVs or missiles or related technologies or components thereof to (i) Russia in support of its war of aggression against Ukraine; (ii) armed groups and entities undermining peace and security in the Middle East and the Red Sea region; (iii) natural or legal persons, or entities or bodies acting in breach of United Nations Security Council Resolution 2216 (2015); or (c) associated with natural or legal persons, entities or bodies referred to in point (a) or (b);
• sanctioned one individual and four shipping entities (including three Russian) for their role in transporting Iranian-made weapons and ammunition, including UAV components.
• included several derogations for ground handling services and air safety matters and exemptions.

Continued repression and human rights violations in Syria

On 25 November 2024, the Council added three individuals to the list of persons and entities subject to targeted EU restrictive measures in view of the situation in Syria. Sanctions under the EU Syria sanctions regime now apply to a total of 318 persons and 86 entities.

Unauthorised drilling activities of hydrocarbons in the Eastern Mediterranean

On 25 November 2024, the Council renewed the measures imposed in view of Türkiye’s unauthorised drilling activities in the Eastern Mediterranean in 2019, for an additional year, until 30 November 2025.

G7 Sanctions Update

On 16 November 2024, the G7 Leaders adopted a statement in support of Kyiv as the thousandth day of Russia’s war of aggression against Ukraine approached. Concerning sanctions, the statement confirmed the G7's commitment to imposing severe costs on Russia through sanctions, export controls and other effective measures.

EU Sanctions Compliance: What Are Best Efforts?

On 22 November 2024, the European Commission (the “Commission”) published frequently asked questions (FAQs) regarding the "best efforts" obligation, a legal requirement enshrined in article 8a of Regulation 833/2014 (Russia) and article 8i of Regulation 765/2006 (Belarus).

The FAQs set forth the Commission's expectations of EU operators with respect to measures suitable, necessary and feasible to ensure that the entities that they own or control anywhere in the world beyond the EU do not undermine EU sanctions against Russia and Belarus.

Background: continued fight against circumvention

The 14th package of EU sanctions against Russia adopted on 24 June 2024 was arguably one of the most compliance-heavy round of measures adopted to date. Announcing the continuing efforts to fight circumvention in the EU and beyond, the EU noted:

As Russia is constantly looking for ways to circumvent sanctions, the EU has reassessed and adjusted its strategies. To further limit Russia's ability to access restricted goods and technology, this package contains several measures meant to boost private sector compliance, support enforcement by national competent authorities, and hamper sanctions circumvention, including by keeping in check the foreign subsidiaries of EU operators.

From a compliance perspective, the measures included in the 14th package included: (i) the best efforts obligation, (ii) extended no-Russia clause requirements, (ii) enhanced compliance obligations for CHP operators, (iii) an amendment to the prohibition against circumvention, (iv) a limitation on the availability of the "no liability" clause, and (v) guidance on voluntary self-disclosures. Recitals took a new dimension as a source of compliance guidance.

Overview of the best efforts obligation

Prefacing these measures, the 14th package (in recital 27) first clarified how and when liability in the EU could arise for acts or actions undermining EU sanctions against Russia that occur, even entirely, outside of the EU.

Regulation (EU) No 833/2014 applies only within the jurisdictional limits defined in Article 13 thereof. At the same time, if Union operators are able to and effectively assert a decisive influence over the conduct of a legal person, entity or body established outside the Union, they may incur responsibility for actions of that legal person, entity or body that undermine the restrictive measures and should use their influence to prevent those actions from occurring.

Having expanded the jurisdictional reach and heightened expectation on EU operators, article 8a of Regulation 833/2014 was introduced as a new freestanding legal obligation (since also introduced in the sanctions against Belarus). The "best efforts clause" provides:

Natural and legal persons, entities and bodies shall 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 provided for in this Regulation

The recitals of regulation 2024/1745 noted that best efforts:

• include all actions that are suitable and necessary to prevent the activities that undermine the restrictive measures provided for in Regulation 833/2014.
• activities that undermine the sanctions are those resulting in an effect that those measures seek to prevent.
• can include, for example, the implementation of appropriate policies, controls and procedures to mitigate and manage risk effectively, considering factors such as the third country of establishment, the business sector and the type of activity of the legal person, entity or body that is owned or controlled by the EU operator.
• should, at the same time, be understood as comprising only actions that are feasible for the EU operator in view of (i) its nature, (ii) its size and the relevant factual circumstances, and (iv) in particular the degree of effective control over the legal person, entity or body established outside the Union. Such circumstances include the situation where the EU operator, due to reasons that it did not cause itself, such as the legislation of a third country, is not able to exercise control over a legal person, entity or body that it owns.

The FAQs on best efforts

In this context, the initial set of FAQs released on 22 November 2024 discusses nine questions. The FAQs refer to and rely on the four recitals of regulation 2024/1745 while laying out several clarifications and expectations. Among other key guidance principles, the FAQs:

• distinguish with examples the legal notions of "undermining" and "circumventing" EU sanctions.
• note that the best efforts obligation applies anywhere outside of the EU, including Russia.
• note that the precise scope of best efforts that can be expected from each EU operator will differ on a case-by-case basis depending on several factors.
• expect EU operators to be aware of the activities of the non-EU companies that they own or control; failing to do so might in itself breach the best efforts obligation.
• recognize that in some cases implementation of best efforts may not be feasible.
• suggest that the degree of control is a central consideration in assessing compliance with the best efforts obligations, among other factors, as well as the circumstances that may (inappropriately) put the EU operator in a position of insufficient control.
• reiterate that EU operators should develop and implement tailored risk-based sanctions compliance programs and implement them in their non-EU subsidiaries, beginning with risk assessments and making case-by-case evaluations.
• suggest that "necessary and feasible actions" include an obligation to block certain transactions undertaken by non-EU subsidiaries, noting that awareness and acceptance by the EU operator of activities undermining the sanctions in the non-EU entity would breach the obligation.
• underline the need to raise awareness and to undertake training and communication efforts in non-EU subsidiaries, both internally and externally.

It behoves EU operators to define how they intend to implement the best effort obligation. The FAQs set a baseline, adding another building block towards common standards and an EU sanctions compliance culture at a time when the EU continues to expand the reach of its measures. Discussions regarding the best efforts obligations will likely to continue and additional guidance is expected. As the FAQs note "[t]he Commission will engage with Member States towards preparing a clear set of expectations for EU operators, thus enabling the latter to comply with their obligations and ensuring a level playing field."

The Netherlands Publish A Non-Paper on Sanctions Implementation and Enforcement

On 22 November 2024, the Netherlands published a comprehensive non-paper titled "Strengthening European cooperation to reinforce national efforts on the implementation and enforcement of EU restrictive measures." The non-paper discusses proposals within the competences and mandate of Member States and the Commission to increase the effectiveness of sanctions, whilst also fitting the better regulation agenda. Noting that "the time is right for reflection on strengthening European cooperation on the implementation and enforcement across the Union," the Netherlands invited Member States to support these ideas and sponsor this paper.

The paper is structured around seven themes: (i) implementation by design; (ii) EU-wide (risk) assessment of sanctions circumvention; (iii) centralized hub for information and actionable feedback; (iv) supporting sanctions enforcement systems of Member States; (v) working toward a minimum standard for sanctions implementation and enforcement in Member States; (vi) better assisting private sector implementation; and (vii) adopt base-line compliance rules for high-risk large businesses to prevent breaches of sanctions.

German NCA Publishes Additional FAQs

On 29 November 2024, the German Federal Ministry for Economic Affairs and Climate Action published additional FAQs relating to EU sanctions against Russia, including on article 12g of Regulation 833/2014 (the no re-export to Russia clause). The updated FAQs are available here.

EP Resolution on the Russian Shadow Fleet and Enforcement

On 14 November 2024, the European Parliament adopted a resolution on "EU actions against the Russian shadow fleets and ensuring a full enforcement of sanctions against Russia." The resolution called for, among other things:

• more targeted sanctions on the ‘shadow fleet’ in the next sanctions packages against Russia, such as designating all individual ‘shadow fleet’ vessels, as well as their owners, operators, managers, accounts, banks, insurance companies, etc.
• an immediate ban on the use of Western vessels in the transport of Russian oil and the systematic sanctioning of vessels sailing through EU waters without known insurance.
• more efforts to curb sanctions evasion and circumvention by Russia, including through enhanced EU-wide measures to ensure stricter enforcement and the expansion of sanctions.
• clearer guidelines and more robust due diligence standards for EU companies and financial institutions to avoid unintended interactions with entities linked to ‘shadow fleets
• support for the work of the EU Sanctions Envoy, emphasizing that if classical diplomatic efforts fail, the EU should seriously reassess its bilateral cooperation with non-EU countries that are helping Russia circumvent EU sanctions.
• thoroughly investigate companies’ compliance with export restrictions on listed goods and to impose dissuasive penalties, reiterating its call on the Council to expand the powers of the European Public Prosecutor's Office (EPPO) in order to address the crime of violation of EU restrictive measures; calls for the EU and its Member States to reinforce and centralise, at EU level, the oversight of sanctions implementation and to develop a mechanism to prevent and monitor sanctions circumvention.

In preparation for the resolution, the European Parliamentary Research Service published a briefing note tilted Russia's 'shadow fleet': Bringing the threat to light.

EP Resolution on Georgia Democratic Crisis

On 28 November 2024, the European Parliament adopted a resolution on Georgia’s worsening democratic crisis following the recent parliamentary elections and alleged electoral fraud.

Among other things, the resolution called on the Council to impose sanctions. The resolution called for the EU and its Member States to impose personal sanctions on the officials and political leaders in Georgia who are responsible for the democratic backsliding, violations of electoral laws and standards, administrative abuses and misuse of state institutions and to extend these sanctions to judges passing politically-motivated sentences.

Towards a 15th Round of EU Sanctions against Russia?

Initial discussions on a potential next set of sanctions against Russia have reportedly begun. The measures could include, among other things, asset freeze sanctions on entitles in third countries, including China, involved in circumvention and measures targeting the Russian shadow fleet.

Agenda

• Foreign Affairs Council, 16 December 2024
• European Council, 19-20 December 2024

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