When dealing with Russian companies or persons, one has to be extra careful of the applicable EU sanctions. The restrictive measures consist of a set of complex rules of which the violation is considered an economic offence, punishable by high fines and even imprisonment. On December 5^th, the EU clarified and amended the sanctions of the Sanctions Regulation (EU Regulation 833/2014). Our British CMS colleagues have recently posted a news item (http://www.law-now.com/regzone/articles/2014/december/eu-amends-sanctions-against-russia?cc_lang=en) on that topic. Below, we will elaborate the sanctions regime for goods and technology, save for the sanctions regarding the financial markets.
The legal framework
The main objective of the European sanctions for goods and technology is to hit the Russian energy sector and to avoid military end-use of certain goods and technology. In doing so, the sanctions follow the existing regime of the Dual-Use Regulation for the transit and export of dual-use goods. 'Dual-use' refers to the fact that the end-use can both be for civil and military purposes. The Dual-Use Regulation contains an annex listing products that in any case are considered to be destined for dual-use.
Such products – which include software, technology and the technical assistance relating thereto – may only be exported to countries outside the EU if a permit is obtained. Such a permit is usually granted by the local customs authorities. If the products involved can be used, in whole or in part, as part of military products (or the exporter is aware of this), then this has to be reported. For brokering/transit services a similar regime applies, with a few exceptions. In addition, specific Dutch regulations apply, of which the main ones are: the Decree on strategic goods (Besluit strategische goederen) and the Strategic services act (Wet strategische diensten).
As said, by introducing the Sanctions Regulation, the EU has introduced specific sanctions for the transit and export to every natural person and legal person in Russia, of goods and technology mentioned in the annex to the Dual-Use Regulation, if there is (partial) military end-use. The annex lists a large diversity of materials, substances, computers, machines, vehicles and software. It is important to know that, as in the Dual-Use Regulation, the technical assistance relating to such good and technology, is also subject to the sanctions, and thus prohibited. Sending a manual, a simple email instruction or even a phone call containing information about the use of such goods and technology is therefore punishable by law, provided that the goods and technology to which such assistance relates fall within the Sanctions Regulation. Naturally, the existing (dual-use) rules will remain applicable in that situation. Violation of the sanctions may result in imprisonment of up to 6
years, community service, and/or a fine of up to € 81,000.-.
For the oil and gas industry, specific sanctions apply. It is prohibited to export certain goods that relate to the extraction of oil and gas. These goods are included in an annex to the Sanctions Regulation.
Local customs authorities are entitled make an exception to the sanctions regime (without prejudice to any permits that need to be obtained – such as those for dual-use goods), in the event of the execution of a contract that has been entered into prior to August 1^st, 2014.
What to watch out for in practice
The sanctions change constantly. Therefore it is important to identify the risks. The transit or export of certain goods or technology (including the technical assistance relating thereto) does not necessarily have to be prohibited, but that does not mean that there may not be an obligation to report to the local customs authorities, since they usually want to be kept informed of any possible future violations. It is advisable to clearly map the flow of goods and commodities within your organization and to include the right legal remedies in contracts with third parties, where possible.