Update on EU Sanctions against Russia

Transcription

1 July 2014 Practice Group(s): International Arbitration International Trade Update on EU Sanctions against Russia By Vanessa C. Edwards; Daniel J. Gerkin; Zanda Misina; Philip Torbøl; William M. Reichert; Ian Meredith; Jerome J. Zaucha Further to the most recent alerts circulated on 21 and 28 July, below is an update on developments in the EU and U.S. regarding sanctions against Russia. European Union Sanctions On July 29, 2014, the Council s Committee of Permanent Representatives reached an agreement to impose economic sanctions against Russia and additional restrictions for Crimea and Sevastopol and add further individuals and entities to the list of those subject to existing restrictive measures. New restrictions for Crimea and Sevastopol. Today, on July 30, the EU published the legislative acts formally implementing additional restrictions for Crimea and Sevastopol which enter into force on July 31. It is prohibited to: 1. grant a financial loan or credit, extend a participation or create any joint venture in the following sectors: infrastructure projects in the transport, telecommunications and energy sectors and in relation to the exploitation of oil, gas and certain mineral resources in Crimea or Sevastopol; 2. sell, transfer or export certain key equipment for the same six sectors to any natural or legal person, entity or body in Crimea or Sevastopol or for use in Crimea or Sevastopol; and 3. provide finance and insurance services related to such transactions. Contracts concluded before July 30, 2014 and notified to the competent authority of the relevant Member State are exempted. However, contracts for export of key equipment must be carried out by October 28, New designations on targeted sanctions list. The legislative acts adding eight individuals and three entities to the list of those subject to an asset freeze, a prohibition against making funds or economic resources available and an EU travel ban were also published on July 30 (please see Appendix 1 for names and the reasons for their inclusion in the list as described in the EU legislation). The legislative acts entered into force on the same day. The Council that these individuals and entities are providing support to or are benefitting from Russian decision makers responsible for the destabilisation of Eastern Ukraine and the illegal annexation of Crimea. Economic sanctions. The Council of the EU has confirmed that an agreement to impose wider economic sanctions has been reached. It will be prohibited to:

2 1. buy or sell bonds, equity, or similar financial instruments with a maturity exceeding 90 days, issued by major state-owned Russian banks, development banks, their subsidiaries and those acting on their behalf; 2. provide services relating to the issuing of such financial instruments, e.g. brokering; 3. import and export arms and related material from/to Russia, which covers all items on the EU common military list; 4. export dual use goods and technology for military use in Russia or to Russian military end-users, which covers all items in the EU list of dual use goods; and 5. export certain energy-related equipment and technology to Russia without prior authorisation by competent authorities of Member States. Export licenses will be denied if products are destined for deep water oil exploration and production, Arctic oil exploration or production and shale oil projects in Russia. It is expected that the legislative acts implementing the agreement on economic sanctions will be published late on July 31 and will enter into force the next day. We will report on any developments. United States Sanctions On July 29, 2014, the United States announced a further expansion of its sanctions on Russia in connection with escalating tensions in Eastern Ukraine. Specifically, the U.S. Department of the Treasury, Office of Foreign Assets Control ( OFAC ) announced the imposition of sectoral sanctions against three additional Russian entities in the financial services sector and added a Russian entity to its Specially Designated Nationals and Blocked Persons list ( SDN list ). Further, the U.S. Department of Commerce, Bureau of Industry and Security ( BIS ) followed suit by announcing it will add the same entity to its Entity List and also that it will institute a policy denying export, reexport or foreign transfer of certain items for use in Russia's energy sector that may be used for exploration or production from deepwater, Arctic offshore, or shale projects that have the potential to produce oil. OFAC Sectoral Sanctions. Pursuant to Executive Order (Mar. 20, 2014), which authorized the imposition of sanctions targeting the defense and related materiel, energy, engineering, financial services, and metals and mining sectors of the Russian economy, OFAC has added the following three entities in the Russian financial services sector to its Sectoral Sanctions Identification List ( SSIL ): (i) BANK OF MOSCOW; (ii) RUSSIAN AGRICULTURAL BANK; and (iii) VTB BANK OAO. As with the prior entities listed in the financial services sector, as stated in the new listings: The following transactions by U.S. persons or within the United States are hereby prohibited: transacting in, providing financing for, or otherwise dealing in new debt of longer than 90 days maturity or new equity for these persons (listed here), their property, or their interests in property. The complete listings are set forth in Appendix 1. As previously noted, entities 50 percent or more owned by such listed entities are also considered included on the Sectoral Sanctions Identification list and are subject to the same restrictions. Please note, as mentioned in a prior update, although the Presidential Directives underlying OFAC s implementation of the new sectoral sanctions use the term debt/equity for the listed entities, the prior Sectoral Sanctions Identifications List listings used the term debt/equity of the listed entities. However, since the date of the last update, the prior 2

3 listings have been modified to utilize the debt/equity for language, which is also used in the new listings as described above. Based on the most recent Frequently Asked Questions relating to the sanctions released by OFAC it remains unclear whether the difference in language materially affects the scope of the restrictions. OFAC SDN Designation. In addition to the sectoral sanctions detailed above, OFAC also added the entity set forth in Appendix 3 to the SDN list. As a result, the property and interests in property of that entity, as well as entities that are 50 percent or more owned, directly or indirectly, by such person, that are in the United States, that come within the United States, or that are or come within the possession or control of any U.S. person, are blocked. BIS Actions. In addition to the OFAC sanction extensions, BIS also will add OJSC United Shipbuilding Corporation to its Entity List and announced it will be implementing new licensing measures targeting the Russian energy sector. Specifically, BIS stated: BIS will institute a policy denying export, reexport or foreign transfer of certain items for use in Russia's energy sector that may be used for exploration or production from deepwater, Arctic offshore, or shale projects that have the potential to produce oil. While these sanctions do not target or interfere with the current supply of energy from Russia or prevent Russian companies from selling oil and gas to any country, they make it difficult for Russia to develop long-term, technically challenging future projects. Implementing regulations should be issued shortly. Authors: Vanessa C. Edwards [email protected] +32.(0) Daniel J. Gerkin [email protected] Zanda Misina [email protected] +44.(0) Philip Torbøl [email protected] +32.(0) William M. Reichert [email protected] Ian Meredith [email protected] +44.(0) Jerome J. Zaucha [email protected]

4 Anchorage Austin Beijing Berlin Boston Brisbane Brussels Charleston Charlotte Chicago Dallas Doha Dubai Fort Worth Frankfurt Harrisburg Hong Kong Houston London Los Angeles Melbourne Miami Milan Moscow Newark New York Orange County Palo Alto Paris Perth Pittsburgh Portland Raleigh Research Triangle Park San Diego San Francisco São Paulo Seattle Seoul Shanghai Singapore Spokane Sydney Taipei Tokyo Warsaw Washington, D.C. Wilmington K&L Gates comprises more than 2,000 lawyers globally who practice in fully integrated offices located on five continents. The firm represents leading multinational corporations, growth and middle-market companies, capital markets participants and entrepreneurs in every major industry group as well as public sector entities, educational institutions, philanthropic organizations and individuals. For more information about K&L Gates or its locations, practices and registrations, visit This publication is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer K&L Gates LLP. All Rights Reserved. Appendix 1 Individuals 1. Alexey Alexeyevich GROMOV (Born on ; in Zagorsk (Sergiev Posad))- As first Deputy Chief of Staff of the Presidential Administration, he is responsible for instructing Russian media outlets to take a line favourable with the separatists in Ukraine and the annexation of Crimea, therefore supporting the destabilisation of Eastern Ukraine and the annexation of Crimea. 2. Oksana TCHIGRINA (Оксана Чигрина)- Spokesperson of the so called government of the so called Lugansk People's Republic who made declarations justifying inter alia the shooting down of a Ukrainian military airplane, the taking of hostages, fighting activities by the illegal armed groups, which have as a consequence undermined the territorial integrity, sovereignty and unity of Ukraine. 3. Boris LITVINOV (Борис Литвинов)- As of 22 July, chairman of the so-called Supreme Council of the so called Donetsk People's Republic who was at the source of policies and the organisation of the illegal referendum leading to the proclamation of the so-called Donetsk People's Republic, which constituted a breach of the territorial integrity, sovereignty and unity of Ukraine. 4. Sergey ABISOV (Born on )- By accepting his appointment as so-called Minister of Interior of the Republic of Crimea by the President of Russia (decree No.301) on 5 May 2014 and by his actions as so-called Minister of Interior he has undermined the territorial integrity, sovereignty and unity of Ukraine 5. Arkady Romanovich ROTENBERG (Born on in Leningrad (St Petersburg))- Mr Rotenberg is a long-time acquaintance of President Putin and his former judo sparring partner. He has developed his fortune during President Putin's tenure. He has been favoured by Russian decision-makers in the award of important contracts by the Russian State or by State-owned enterprises. His companies were notably awarded several highly lucrative contracts for the preparations of the Sochi Olympic Games. He is 4

5 a major shareholder of Giprotransmost, a company which has received a public procurement contract by a Russian State-owned Company to conduct the feasibility study of the construction of a bridge from Russia to the illegally annexed Autonomous Republic of Crimea, therefore consolidating its integration into the Russian Federation which in turn further undermines the territorial integrity of Ukraine. 6. Konstantin Valerevich MALOFEEV (Константин Валерьевич Малофеев) (Born on in Puschino)- Mr Malofeev is closely linked to Ukrainian separatists in Eastern Ulkraine and Crimea. He is a former employer of Mr Borodai, so-called Prime Minister of the so-called Donetsk People's Republic and met with Mr Aksyonov, so-called Prime Minister of the so-called Republic of Crimea, during the period of the Crimean annexation process. The Ukrainian Government has opened a criminal investigation into his alleged material and financial support to separatists. In addition, he gave a number of public statements supporting the annexation of Crimea and the incorporation of Ukraine into Russia and notably stated in June 2014 that You can't incorporate the whole of Ukraine into Russia. The East (of Ukraine) maybe. Therefore Mr. Malofeev is acting in support of the destabilisation of Eastern Ukraine. 7. Yuriy Valentinovich KOVALCHUK (Юрий Валентинович Ковальчук) (Born on in Leningrad (St Petersburg))- Mr Kovalchuk is a long-time acquaintance of President Putin. He is a co-founder of the so-called Ozero Dacha, a co-operative society bringing together an influential group of individuals around President Putin. He is benefiting from his links with Russian decision-makers. He is the chairman and largest shareholder of Bank Rossiya, of which he owned around 38 % in 2013, and which is considered the personal bank of Senior Officials of the Russian Federation. Since the illegal annexation of Crimea, Bank Rossiya has opened branches across Crimea and Sevastopol, thereby consolidating their integration into the Russian Federation. Furthermore, Bank Rossiya has important stakes in the National Media Group which in turn controls television stations which actively support the Russian government's policies of destabilisation of Ukraine. 8. Nikolay Terentievich SHAMALOV (Николай Терентьевич Шамалов) (Born on )- Mr Shamalov is a long-time acquaintance of President Putin. He is a cofounder of the so-called Ozero Dacha, a co-operative society bringing together an influential group of individuals around President Putin. He benefits from his links with Russian decision-makers. He is the second largest shareholder of Bank Rossiya, of which he owned around 10 % in 2013, and which is considered the personal bank of Senior Officials of the Russian Federation. Since the illegal annexation of Crimea, Bank Rossiya has opened branches across Crimea and Sevastopol, thereby consolidating their integration into the Russian Federation. Furthermore, Bank Rossiya has important stakes in the National Media Group which in its turn controls television stations which actively support the Russian government's policies of destabilisation of Ukraine. Entities 1. JOINT-STOCK COMPANY CONCERN ALMAZ-ANTEY (a.k.a. ALMAZ-ANTEY CORP; a.k.a. ALMAZ-ANTEY DEFENSE CORPORATION; a.k.a. ALMAZ-ANTEY JSC;)- Almaz-Antei is a Russian state-owned company. It manufactures anti-aircraft weaponry including surface-to-air missiles which it supplies to the Russian army. The Russian authorities have been providing heavy weaponry to separatists in Eastern Ukraine, 5

6 contributing to the destabilization of Ukraine. These weapons are used by the separatists, including for shooting down airplanes. As a state-owned company, Almaz-Antei therefore contributes to the destabilization of Ukraine. 2. DOBROLET aka DOBROLYOT (Добролет/Добролёт)- Dobrolet is a subsidiary of a Russian state-owned airline. Since the illegal annexation of Crimea Dobrolet has so far exclusively operated flights between Moscow and Simferopol. It therefore facilitates the integration of the illegally annexed Autonomous Republic of Crimea into the Russian Federation and undermines Ukrainian sovereignty and territorial integrity. 3. RUSSIAN NATIONAL COMMERCIAL BANK- After the illegal annexation of Crimea, Russian National Commercial Bank (RNCB) became fully owned by the so-called Republic of Crimea. It has become the dominant player in the market, while it had no presence in Crimea before the annexation. By buying or taking over from branches of retreating banks operating in Crimea, RNCB supported materially and financially the actions of the Russian government to integrate Crimea into the Russian Federation, thus undermining Ukraine's territorial integrity.provide services relating to the issuing of such financial instruments, e.g. brokering; Appendix 2 BANK OF MOSCOW (f.k.a. AKTSIONERNY KOMMERCHESKI BANK BANK MOSKVY, OTKRYTOE AKTSIONERNOE OBSCHCHESTVO; a.k.a. JOINT STOCK COMMERCIAL BANK - BANK OF MOSCOW, OPEN JOINT STOCK COMPANY), 8/15 Korp. 3 ul. Rozhdestvenka, Moscow , Russia; Bld 3 8/15, Rozhdestvenka St., Moscow , Russia; SWIFT/BIC MOSW RU MM; Website Address [email protected]; alt. Address [email protected]; BIK (RU) ; Registration ID ; Government Gazette Number ; The following transactions by U.S. persons or within the United States are hereby prohibited: transacting in, providing financing for, or otherwise dealing in new debt of longer than 90 days maturity or new equity for these persons (listed here), their property, or their interests in property. All other transactions with these persons or involving any property in which one or more of these persons has an interest are permitted, provided such transactions do not otherwise involve property or interests in property of a person blocked pursuant to Executive Orders 13660, 13661, or 13662, or any other sanctions programs implemented by the Office of Foreign Assets Control. [UKRAINE-EO13662]. RUSSIAN AGRICULTURAL BANK (f.k.a. OTKRYTOE AKTSIONERNOE ROSSISKI SELSKOKHOZYAISTVENNY BANK; a.k.a. ROSSELKHOZBANK; a.k.a. ROSSIYSKI SELSKOKHOZYAISTVENNY BANK OAO; a.k.a. RUSSIAN AGRICULTURAL BANK OAO), 3, Gagarinsky Pereulok, Moscow , Russia; 3 Gagarinsky per., Moscow , Russia; SWIFT/BIC RUAG RU MM; Website Address [email protected]; Registration ID ; Government Gazette Number ; The following transactions by U.S. persons or within the United States are hereby prohibited: transacting in, providing financing for, or otherwise dealing in new debt of longer than 90 days maturity or new equity for these persons (listed here), their property, or their interests in property. All other transactions with these persons or involving any property in which one or 6

7 more of these persons has an interest are permitted, provided such transactions do not otherwise involve property or interests in property of a person blocked pursuant to Executive Orders 13660, 13661, or 13662, or any other sanctions programs implemented by the Office of Foreign Assets Control. [UKRAINE-EO13662]. VTB BANK OAO (f.k.a. BANK VNESHNEY TORGOVLI ROSSIYSKOY FEDERATSII, CLOSED JOINT-STOCK COMPANY; f.k.a. BANK VNESHNEY TORGOVLI RSFSR; f.k.a. BANK VNESHNEY TORGOVLI, JOINT-STOCK COMPANY; f.k.a. BANK VNESHNEY TORGOVLI, OPEN JOINT-STOCK COMPANY; a.k.a. BANK VTB OAO; a.k.a. BANK VTB, OPEN JOINT-STOCK COMPANY; a.k.a. JSC VTB BANK; f.k.a. VNESHTORGBANK; f.k.a. VNESHTORGBANK ROSSII, CLOSED JOINT-STOCK COMPANY; a.k.a. VTB BANK, OPEN JOINT-STOCK COMPANY), 29, Bolshaya Morskaya str., St. Petersburg , Russia; 37 Plyushchikha ul., Moscow , Russia; 43, Vorontsovskaya str., Moscow , Russia; SWIFT/BIC VTBRRUMM; Website Registration ID (Russia); Tax ID No (Russia); Government Gazette Number (Russia); License 1000 (Russia); The following transactions by U.S. persons or within the United States are hereby prohibited: transacting in, providing financing for, or otherwise dealing in new debt of longer than 90 days maturity or new equity for these persons (listed here), their property, or their interests in property. All other transactions with these persons or involving any property in which one or more of these persons has an interest are permitted, provided such transactions do not otherwise involve property or interests in property of a person blocked pursuant to Executive Orders 13660, 13661, or 13662, or any other sanctions programs implemented by the Office of Foreign Assets Control. [UKRAINE-EO13662]. Appendix 3 UNITED SHIPBUILDING CORPORATION (a.k.a. OBEDINENNAYA SUDOSTROITELNAYA KORPORATSIYA OAO; a.k.a. OJSC UNITED SHIPBUILDING CORPORATION; a.k.a. UNITED SHIPBUILDING CORPORATION JOINT STOCK COMPANY; a.k.a. "OSK OAO"), 90, Marata ul., St. Petersburg , Russia; 11, Sadovaya-Kudrinskaya str., Moscow , Russia; Website Address [email protected] [UKRAINE2]. 7