OFAC fines ExxonMobil $2,000,000 for sanctions violations

OFAC has fined US oil and gas company ExxonMobil $2,000,000 for violating US sanctions relating to the Ukraine crisis.  Between 14 May and 23 May 2014, the presidents of ExxonMobil’s US subsidiaries are said to have dealt with designated person Igor Sechin, president of Russian oil company Rosneft. Exxon signed 8 legal documents with Mr Sechin related to oil and gas projects in Russia, but has said that it believed the sanctions only prohibited doing business with Mr Sechin as an individual and not in his capacity as president of Rosneft. The deals were signed during US Secretary of State Rex Tillerson’s tenure as Exxon’s chief executive.

At the time the contracts were signed, there was a FAQ on the OFAC website stating that it was prohibited to enter into contracts signed by a SDN.  OFAC stated in its enforcement notice that although the guidance said that “different interpretations may exist among and between the sanctions programmes” OFAC administers, the FAQ clearly indicated that OFAC had in another sanctions programme involving SDNs viewed the signing of a contract with an SDN as prohibited, even if the company on whose behalf the SDN signed was not prohibited. Exxon disputes this, and has brought a lawsuit in the US attempting to stop the fine. It claims that OFAC is trying to retroactively apply a new interpretation of the sanctions that did not apply at the time the deals were signed.

Judgments on duties of EU when listing for Ukraine misappropriation

We reported in January 2016 (here) that the EU Court had annulled the designations of Mykola Azarov and Sergej Arbuzov, both former Prime Ministers of Ukraine, because the only basis for saying that they were “responsible for misappropriating Ukrainian state funds” was a letter in March 2014 from Ukraine’s Prosecutor General that gave no details of the matters alleged against them and the nature of their alleged responsibility for misappropriation of assets.

The EU Court has now upheld their re-listings on the basis that there was sufficient evidence that they are “subject to criminal proceedings by the Ukrainian authorities for the misappropriation of public funds or assets”.  Judgments here; Cases T-221/15 Arbuzov and T-215/15 Azarov.  The General Court rejected grounds for annulment based on insufficient reasons, rights of defence, misuse of powers, and disproportionate breach of fundamental rights. It held that the EU Council has to check that the listed person is facing criminal proceedings for misappropriation of state funds in Ukraine, but it does not have to question the evidence underlying those proceedings or the procedure (particularly since Ukraine is a member of the Council of Europe & ECHR) and it is up to the EU to decide it if needs additional evidence or clarification.

Siemens sues to stop Russian Crimea turbines

Siemens has brought proceedings in the Moscow Arbitration Court against Russian Technopromexport (a subsidiary of Rostec) for exporting Siemens-built power turbines to Crimea in apparent violation of EU sanctions and a written agreement between the companies not to do so. EU sanctions prohibit (inter alia) companies from exporting goods and technology for use in the energy sector to Crimea.

Delayed US sanctions bill on Iran & Russia resumes passage through House

Earlier this month, the US Senate voted in favour of new sanctions on Iran and Russia set out in the Countering Iran’s Destabilising Activities Bill (see previous blog).  The US constitutional requirement that any bill that raises revenue for the government originates in the House delayed its passage, but the Senate has now sent a revised version to the House that resolves this issue. Because of the delay, the House will not vote on the bill until after the G20 summit on 7-9 July.

The bill mandates the imposition of sanctions against people and entities who materially contribute to Iran’s ballistic missile programme (the President currently has a discretion to impose those sanctions by executive order).  This provision includes the imposition of secondary sanctions, which apply to non-US people and entities. It also authorises the President to impose asset freezes and travel bans for human rights violations in Iran, and asset freezes on people and entities associated with Iran’s Revolutionary Guard Corps or anyone that knowingly contributes to the sale or transfer of arms or related services to Iran. In addition, it requires the President to account for any discrepancies between US and EU sanctions on Iran in a report to Congress every 180 days.

The bill would expand existing sanctions on Russian people involved in human rights abuses, impose sanctions on people conducting cyberattacks on behalf of the Russian government, supplying weapons to Syria’s government or who interfered in the 2016 US elections, and consolidate sanctions on Russia’s energy and financial sectors currently imposed by executive order. It would also restrict the US President’s ability to ease sanctions on Russia without Congressional approval.

EU renews Russia sanctions

As foreshadowed last week (see previous blog), the EU Council has decided to renew its economic sanctions against Russia for another 6 months, until 21 January 2018.  The sanctions target Russia’s financial, energy, and defence sectors, and access to dual-use goods. The EU press release is here. See Council Decision 2017/1148 amending Council Decision 2014/512/CFSP.

EU to renew Russia sanctions

EU President Donald Tusk announced yesterday that the EU has decided to renew its economic sanctions on Russia, imposed in response to Russia’s annexation of Crimea in 2014, for 6 months. They are currently due to expire on 1 August 2017.

These “phase 3” sanctions target Russia’s financial, energy, and defence sectors, restrict trade in dual-use goods and some Russian banks’ access to EU capital markets. The EU has said sanctions on Russia should continue until Russia complies with the Minsk agreements.

EU renews Crimea & Sevastopol sanctions

The EU has renewed its territorial sanctions on Crimea and Sevastopol for another year, until 23 June 2018.  The sanctions include prohibitions on the import of products originating in, export of certain goods and technologies to, investment in, and tourism in Crimea and Sevastopol. The sanctions are a response to what the EU says is “the illegal annexation of Crimea and Sevastopol by the Russian Federation”. On renewing the sanctions (statement here), the EU Council reiterated that the EU “remains fully committed to fully implement its non-recognition policy” of any competing claim to Ukraine’s sovereignty over the regions.

See Council Decision (CFSP) 2017/1087 amending Council Decision 2014/386/CFSP.

EU court rejects free speech challenge by Kiselev to Russia designation

The General Court of the EU has rejected an application to annul the inclusion of Dmitrii Kiselev on the EU’s restrictive measures. Judgment here; Case T-262/15 Kiselev v Council.  Mr Kiselev was included in March 2014 on the EU’s asset freezing & travel ban measures for being a State-appointed propagandist supporting the deployment of Russian forces in Ukraine. The Court has held (in summary) that:

  1. The EU’s Russia sanctions do not breach the EU / Russia Partnership Agreement because Russia’s actions in Ukraine fall within the exceptions for “war or serious international tension constituting threat of war”.
  2. The phrase “active support” for the Russian Government’s actions in Ukraine should be interpreted as referring to “persons who – without being themselves responsible for the actions and policies of the Russian Government destabilising Ukraine and without themselves implementing those actions or policies – provide support for those policies or actions” and covers only forms of support which are significant enough to “contribute to the continuance of” Russia’s “actions and policies destabilising Ukraine”.
  3. Including Mr Kiselev was a justified and proportionate restriction on his freedom of expression. He had given active support by portraying events in Ukraine in a light favourable to the Russian Government. Less restrictive measures such as a system of prior authorisation would not  have been as effective in pursuing the aim of “bringing pressure to bear on Russia’s decision-makers responsible for the situation in Ukraine”.