OFAC further extends EN+ and RUSAL related licences

Logo_of_the_U.S._Office_of_Foreign_Assets_Control_(OFAC)Today, OFAC has issued 3 general licences related to EN+ Group and RUSAL, which further extend the expiration date of their previous versions from 12 November 2018 to 12 December 2018. See General Licences 13E, 14B, and 16B. See OFAC Notice and US Treasury press release.

OFAC extends EN+ and RUSAL general licences until 12 Nov.

US Treasury Building2Last week (21 September), OFAC extended the expiration date of three General Licences relating to EN+ Group and RUSAL. See OFAC Notice.

General Licences 13D, 14A, and 16A amend their previous versions by extending the expiration date from 23 October 2018 to 12 November 2018 for transactions related to the companies and their subsidiaries. The US Treasury press release states that these licences were extended to “allow sufficient time to review” the proposals EN+ and RUSAL put to the US Government regarding “substantial corporate governance changes that could potentially result in significant changes in control” (see previous blog).

Earlier this month (14 September), OFAC also published two new FAQs to provide guidance on the term “maintenance”, which is used in General Licences 14, 15 and 16.

New CAATSA-related Executive Order; 33 persons added to CAATSA list of Russian defence & intelligence sectors; 2 Chinese persons sanctioned

US-Russia3Last week (20 September), US President Donald Trump issued a new  Executive Order to further the implementation of certain CAATSA-related sanctions with respect to the Russian Federation. See new OFAC FAQ, Presidential Statement and Special Press Briefing for further details. In addition, the US Secretary of State has taken two actions to implement his delegated authorities pursuant to section 231 of CAATSA and to “further impose costs on the Russian Government for its malign activities”.

First, the Secretary of State has added 33 additional persons to the section 231(d) CAATSA list of those “being a part of, or operating for or on behalf of, the defense or intelligence sectors of the [Russian government]”. This action increases the number of persons identified to 72 (39 persons were originally identified in October 2017 – see previous blog). This list does not itself impose sanctions, but any person who knowingly engages in a “significant transaction” with any of the identified persons will be subject to mandatory sanctions, pursuant to section 231(a) of CAATSA.

Second, in consultation with OFAC (see Notice here), the Secretary of State has sanctioned Chinese entity Equipment Development Department (EDD) and its director, Li Shangfu, for “knowingly engag[ing] in significant transactions with a person that is a part of, or operates for or on behalf of, the defense sector of the [Russian government]”. According to the US Department of State Fact Sheet (which includes the additional 33 identified persons), China took delivery from Russia of ten Su-35 combat aircraft in December 2017 and a batch of S-400 (a.k.a. SA-21) surface-to-air missile system-related equipment in January 2018. Both transactions were negotiated between EDD and Russia’s main arms export entity, Rosoboronexport; an entity identified on the aforementioned section 231(d) CAATSA list. The following 5 sanctions have been selected from section 235 of CAATSA to be imposed on EDD:

  1. A denial of export licences;
  2. A prohibition on foreign exchange transactions under US jurisdiction;
  3. A prohibition on transactions with the US financial system;
  4. Blocking of all property and interests in property within US jurisdiction; and
  5. The imposition of sanctions on an EDD principal executive officer, namely, its director Li Shangfu, which include a prohibition on foreign exchange transactions under US jurisdiction, a prohibition on transactions with the US financial system, blocking of all property and interests in property within US jurisdiction, and a visa ban.

This is the first time the US has sanctioned anyone under section 231 of CAATSA for knowingly engaging in a significant transaction with a person identified as “being a part of, or operating for or on behalf of, the defense or intelligence sectors of the [Russian government]”.

EU Court upholds sanctions on Russian defence company Almaz-Antey

CJEU1.pngThe EU General Court has dismissed Russian defence company Almaz-Antey’s application to annul its 2016-2017 listing under the EU’s sectoral sanctions on Russia – see judgment here (13 September). The same Court dismissed the company’s action against its 2015-2016 listing (see previous blog).

The Court held (inter alia) that the stated objective of the sanctions regime was to increase the costs of Russian acts undermining the territorial integrity, sovereignty and independence of Ukraine, and to promote a peaceful settlement of the crisis. That such an objective was consistent with the objective of maintaining peace and international security, in accordance with the EU’s external action objectives. Furthermore, with regard to the principle of proportionality, the importance of the objectives pursued had justified the possibility that, for certain operators, which were in no way responsible for the situation in Ukraine, the consequences may be negative, even significantly so. Consequently, interference with the Almaz-Antey’s freedom to conduct a business and the right to property could not be considered disproportionate in the circumstances.

EU Court upholds sanctions on Russian banks & energy companies

CJEU1The EU General Court has dismissed actions to annul the EU’s sanctions that relate to Russian banks and energy companies: DenizBank, Sberbank, VTB Bank, Vnesheconombank, PSC Prominvestbank, Rosneft, and Gazprom Neft. The Court held (in brief summary) that:

a.      These measures (even though they are not the asset freeze provisions) are targeted sanctions to which the due process requirements (reasons etc) apply.

b.      Those duties had been sufficiently complied with.

c.       The measures were not incompatible with the EU-Russia Partnership Agreement or other trade agreements because they were justified by the EU’s security interests.

d.      The measures were not an unjustified or disproportionate restriction on fundamental rights even though the operators they targeted had nothing to do with Russia’s actions in Ukraine.

EU prolongs Russia ‘territorial integrity’ sanctions for 6 months

EU6As foreshadowed last week, the EU has prolonged its sanctions on Russia over “actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine” for a further 6 months, until 15 March 2019. The measures consist of an asset freeze and travel ban on 155 people and 44 entities. See Council Decision (CFSP) 2018/1237, Council Implementing Regulation (EU) 2018/1230, and EU press release.

UK asks UN and EU for further Russian sanctions

Theresa MayThe UK, US, France, Germany and Canada issued a joint statement today saying that they had full confidence in the UK’s assessment that the Salisbury chemical weapons attack was carried out by Russian military intelligence and approved at a senior government level. The statement was issued just before a UN Security Council meeting at which the UK is expected to put the case for further sanctions against Russia. Theresa May has also said she will “push for new EU sanctions regimes against those responsible for cyber attacks and gross human rights violations”. Russia has denied involvement in the attack.

EU to extend Russia ‘territorial integrity’ sanctions for 6 months

EU5Yesterday, EU ambassadors agreed to extend for 6 months the EU’s sanctions on Russia for “actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine”. These measures consist of an asset freeze and travel ban on 155 people and 44 entities. The legal acts will be published in the Official Journal in the coming days.