CENTRAL BANK OF IRAN WINS COURT CHALLENGE TO ITS LISTING

The General Court of the European Union (1st Chamber) today decided that the inclusion of the Central Bank of Iran on the EU’s sanctions (restrictive measures) relating to Iran in March 2012 was unlawful and therefore its entry in the annex to Regulation 267/2012 should be annulled. Judgment here – Case T-262/12 Central Bank of Iran v Council of the EU (18 September 2014).

The Bank was at that time listed on the grounds of “involvement in activities to circumvent sanctions”. The General Court said that that reason simply copied out one of the criteria for listing, but was insufficient for the Bank to defend itself or for the Court to exercise judicial review, because it gave no indication of why that reason applied to the Bank, “no details of the names of persons, entities or bodies, listed on a list imposing restrictive measures, whom the applicant assisted in circumventing sanctions or of when, where and how that assistance took place. The Council does not refer to any identifiable transaction, or to any particular assistance”.

The Court declined to decide whether the additional reason given for the Central Bank’s listing that was added in October 2012 (namely that it “provides financial support to the Government of Iran”) was lawful. The Court will rule on that issue in another application brought by the Central Bank challenging those subsequent measures, in which an oral hearing will be held in Luxembourg on 30 September 2014.

Maya Lester acts for the Central Bank of Iran.

CANADA EXTENDS SANCTIONS AGAINST RUSSIA

Canada extended its Russia sanctions regime yesterday.  The Minister for Foreign Affairs issued the following statement:

“Despite the efforts by President Poroshenko to end the violence in Eastern Ukraine, the Putin regime’s military aggression continues. For example, today we are seeing reports that President Putin has ordered a surge of troops in Crimea, and we have seen no evidence of progress on our calls for the Putin regime to end its support to the armed militants fomenting violence. Canada will continue to stand in steadfast support of the Ukrainian people as they struggle for peace and freedom against this aggression. Those responsible for fanning the flames of conflict will continue to face increased pressure through targeted sanctions. The sanctions imposed in coordination with our other allies are without a doubt having an effect on the Russian economy. Canada stands prepared to move farther with our allies and partners to hold the Putin regime accountable.”

The new sanctions:

(1) Impose additional asset freezes and travel bans on Russian individuals, Russian arms manufacturers and one financial institution (Sberbank).  The individuals are:

  • General Dmitry Vitalievich Bulgakov, senior official in the Russian Armed Forces
  • Lieutenant-General Yuriy Eduardovich Sadovenko, senior official in the Russian Armed Forces
  • Colonel-General Nikolay Bogdanovskiy, senior official in the Russian Armed Forces
  • Colonel-General Oleg Leonidovich Salyukov, senior official in the Russian Armed Forces

The entities are:

  • OJSC Dolgoprudny Research Production Enterprise (DNPP)
  • JSC Kalinin Machine-Building Plant (MZiK)
  • Mitischinskii Machine-Building Plant OAO (MMZ)
  • V. Tikhomirov Scientific Research Institute of Instrument Design (NIIP)
  • Marine Scientific Research Institute of Radioelectronics Altair (MNIIRE “Altair”)

(2) Impose additional restrictions on the terms under which designated Russian banks can access capital markets, by prohibiting the issuance of any loan carrying a maturation date greater than 30 days.

Further details are available here.

USA EXPANDS RUSSIA SANCTIONS

Yesterday we posted details of the new EU sanctions on Russia here.  The USA has now also expanded its sanctions programme relating to Russia in the following ways (in broad summary):

(1) The following entities have been added to OFAC’s SDN List:

JOINT STOCK COMPANY ALMAZ-ANTEY AIR DEFENSE CONCERN MAIN SYSTEM DESIGN BUREAU NAMED BY ACADEMICIAN A.A. RASPLETIN.

JSC V. TIKHOMIROV SCIENTIFIC RESEARCH INSTITUTE OF INSTRUMENT DESIGN.

KALININ MACHINE PLANT JSC.

MYTISHCHINSKI MASHINOSTROITELNY ZAVOD.

OAO ‘DOLGOPRUDNY RESEARCH PRODUCTION ENTERPRISE’.

(2) The following entities have been added to OFAC’s Sectoral Sanctions Identifications List:

​AK TRANSNEFT OAO, LUKOIL OAO, OJSC GAZPROM NEFT, OPEN JOINT STOCK COMPANY GAZPROM, ROSTEC, SBERBANK OF RUSSIA, SURGUTNEFTEGAS.

(3) There is a new prohibition on financing persons in the SSI List, which are largely defense-related companies.  There are amendments to the prohibitions on transacting with, providing financing for, or dealing in new debt with a maturity of more than a certain number of days or new equity, by, on behalf of, or for the benefit of certain named persons, their property or their interests in property.

(4) There is a new prohibition on the provision of goods, services (other than financial services) or technology in support of certain deepwater, Arctic offshore or shale products which could produce oil for Russia and which involve certain companies.

NEW EU RUSSIA SANCTIONS PUBLISHED

As foreshadowed, the European Union has today published its new sanctions relating to Russia.  They take the form of: (a) expanded criteria for including people and entities on the travel ban / asset freeze list; (b) the addition of 24 people to those lists; and (c) expanded restrictions on dealing with securities issued by certain Russian banks, entities in the military and oil sectors, on the supply of dual-use items to Russia, and on services for deep water, arctic, and shale oil exploration and production.

(1) Expanded listing criteria for inclusion in targeted sanctions

Decision 2014/658/CFSP amends the listing criteria in Decision 2014/145/CFSP, and Council Regulation (EU) No 959/2014 similarly amends Regulation (EU) No 269/2014, and renews those restrictions for another 6 months, until 15 March 2015.  The new criterion for inclusion in the asset freeze and travel ban is “natural or legal persons, entities or bodies conducting transactions with the separatist groups in the Donbass region of Ukraine.”

(2) Addition of 24 people on asset freeze and travel ban list

Council Implementing Regulation (EU) No 961/2014 includes the following 24 people in the asset freeze and travel ban: Alexander ZAKHARCHENKO (rebel leader in Donetsk), Vladimir KONONOV, Miroslav Vladimirovich RUDENKO, Gennadiy Nikolaiovych TSYPKALOV, Andrey Yurevich PINCHUK, Oleg BEREZA, Andrei Nikolaevich RODKIN, Aleksandr KARAMAN, Georgiy L’vovich MURADOV, Mikhail Sergeyevich SHEREMET, Yuri Leonidovich VOROBIOV, Vladimir Volfovich ZHIRINOVSKY (head of Liberal Democratic Party of Russia), Vladimir Abdualiyevich VASILYEV, Viktor Petrovich VODOLATSKY, Leonid Ivanovich KALASHNIKOV, Vladimir Stepanovich NIKITIN, Oleg Vladimirovich LEBEDEV, Ivan Ivanovich MELNIKOV, Igor Vladimirovich LEBEDEV, Nikolai Vladimirovich LEVICHEV, Svetlana Sergeevna ZHUROVA, Aleksey Vasilevich NAUMETS, Sergey Viktorovich CHEMEZOV (head of Rostec), and Alexander Mikhailovich BABAKOV.

A notice for the attention of those people informs them that they have been listed for the reasons given in the published measures, that they can apply to national authorities for licences, and that they may request that the Council of the EU reconsider their inclusion before 1 February 2015, and may apply to the European Court to annul their listing.

(3) Expanded financial and other restrictions on the military and oil sectors

Council Decision 2014/659/CFSP and Council Regulation (EU) No 960/2014 impose the following measures:

(a) They prohibit the direct or indirect purchase or sale of, the direct or indirect provision of investment services for or assistance in the issuance of, or any other dealing with bonds, equity, or similar financial instruments with a maturity exceeding 90 days, issued after 1 August 2014 to 12 September 2014, or with a maturity exceeding 30 days, issued after 12 September 2014 by major credit institutions or finance development institutions established in Russia with over 50 % public ownership or control (which are listed), and by a number of other types of entities in the defence / oil sectors.

(b) They prohibit the sale, supply or transfer of dual-use items to certain persons, entities or bodies in Russia.

(c) They prohibit the provision of services necessary for deep water oil exploration and production, arctic oil exploration and production or shale oil projects.

All these measures are on the ‘sanctions in force’ section of this blog.

UK PARLIAMENT RECOMMENDS DEBATE ON RUSSIA SANCTIONS

The European Scrutiny Committee of the House of Commons in the UK has published a report (its 11th report) on Ukraine and Russia EU restrictive measures, which summarises the measures imposed so far.  The Committee:

(1) Has recommended to the British Government that if sanctions measures relating to Russia are to be extended to allow the European Union to target individuals and entities “with close ties to Vladimir Putin”, that that should be debated on the floor of the House of Parliament as soon as possible, and that the debate should also example the wider political context of these measures, and what other steps are agreed or in prospect.

(2) Is critical of the Explanatory Memorandum provided by the Minister, for taking “no cognisance of the wider considerations driving EU policy”, making no mentioning of the widespread discussion of how “the Western alliance as a whole should respond”.

(3) Quotes the following statement of the Minister: “Although the practical impact of these measures cannot yet be assessed, as a whole they send the message that the UK and the EU will not accept the efforts of Russia to destabilise and undermine the sovereignty of the Ukraine. The additional listings seek to target individuals and entities close to Vladimir Putin, in a bid to increase the pressure on those with influence at the top. The embargo will ensure that the EU plays no inadvertent role in facilitating the supply of goods which could contribute to Russia’s efforts to support separatists in the Ukraine. The areas of the embargo targeting shale gas projects and oil exploration & production will ensure that the long-term development of Russia’s oil sector is slowed by the denial of vital technology from the EU and other countries imposing similar measures. The financial measures are designed to raise the cost of borrowing in Russia, for state corporations and others.”

EU SANCTIONS TO ENTER INTO FORCE TOMORROW

On Friday, 12 September 2014 the most recent round of sanctions against Russia are set to come into force. As we reported previously, the sanctions are designed to extend current measures relating to entry into capital markets, the export of ‘dual-use’ technologies, and targeted sanctions aimed at individuals.

In his announcement of the date of effect, European Council President Herman Van Rompuy also invited proposals from the Commission and the European External Action Service (EEAS) as to possible variations to existing sanctions that might be appropriate in light of a comprehensive review of the Ukrainian peace plan set to be concluded by the Permanent Representatives Committee by the end of this month.

CAEC PUBLISHES GOVERNMENT RESPONSES ON ARMS EXPORT DECISIONS

On 9 September 2014, the Committee on Arms Export Controls (CAEC) published the government’s responses to questions concerning fourth quarter export licence decisions.

The CAEC, a coordinated initiative between government select committees, is mandated to scrutinise the Government’s approval or refusal of arms export licences throughout the year. The Committee reports quarterly, with the most recent publication relating to the final quarter (October-December) of 2013. In the document, the Government’s justifications for the granting or refusal of arms export licenses are offered on a country-by-country basis.

EUROPE MOVES AHEAD WITH INCREASED RUSSIAN SANCTIONS

On 8 September 2014, new European sanctions were agreed against Russian interests. Despite their formal adoption, the sanctions are only due to take effect “in the next few days”, leaving sufficient time for the EU to assess the changing situation on the ground in Ukraine. EU Council President Herman Van Rompuy has noted that “the EU stands ready to review the agreed sanctions in whole or in part” depending on the perceived willingness of Russia to comply with the negotiated ceasefire between the parties that began in Ukraine on 5 September 2014. The ceasefire agreement has proved fragile over the last few days.

The new measures tighten the existing bar on Russian entry to EU capital markets to include a ban on syndicated loans by EU banks. The targets of these sanctions have also been expanded to include Russian defence and oil companies, rather than just nominated Russian banks. Russian oil giants Rosneft, Transneft and Gazprom have all fallen under the new regulations, as well as defence manufacturers Oboronprom, United Aircraft Corporation, and UralVagonZavod.

Further sanctions also include a ban on the export of ‘dual-use technologies’ (products that can be used for both civilian and military purposes), and a prohibition on the supply of European associated services (such as drilling and well-testing) to Russian oil exploration industries. The sanctions are also said to add to the current individual targeted sanctions, however the list of names has yet to be released.

The new sanctions follow the proposals put forward in the recently leaked Commission paper entitled ‘Outline of proposals for a second round of restrictive measures on Russia’. Notably, the options paper also makes reference to Russian sporting and cultural events as possible future targets for sanctions, including the 2018 FIFA World Cup, which is set to be hosted by Moscow.