New update provided by our member Jones Day as of 28 February:
Updated: 25-2-2022, information shared by Jones Day. This text may be adjusted.
In respect of EU sanctions, the Presidents of the European Commission and the European Council issued a statement on February 22 in which they announced proposals for what they described as a “first” package of sanctions in response to the recognition as independent entities of, and the dispatch of Russian troops to, the Covered Regions. Following an informal meeting of EU Foreign Affairs Ministers on February 22, a first package of sanctions was formally tabled for adoption by the European Union. The legal acts relating to these sanctions have now been published in the Official Journal today. The published restrictions include:
· The designation of 338 members of the Duma and 26 individual and entities.
o These parties are subject to an asset freeze, and a prohibition to make funds and economic resources available to them.
o They include 3 designated banks:
§ Bank Rossiya;
§ Promsvyazbank; and
§ Vnesheconombank (aka VEB.RF or VEB).
o Relevant affected individuals include Sergei Shoigu (Defence Minister of the Russian Federation), Dmitriy Yuryevich Grigorenko (Deputy Prime Minister of the Russian Federation and Chairman of the Supervisory Council of VTB Bank), Denis Aleksandrovich Bortnikov (Deputy president and Chairman of VTB Bank Management Board), Andrei Leonidovich Kostin (President of the VTB Bank Management Board), Igor Shuvalov (Chariman of the State Development Corporation VEB).
o Notably (and rather exceptionally), as to the 3 designated banks, the restrictions provide for the possibility for Member States to grant a narrowly defined wind-down period until 24 August 2022 for termination of operations and agreements, including correspondent banking relations concluded before 23 February 2022.
· A sectoral prohibition to finance the Russian Federation, its government and Central Bank, aimed at restraining those bodies to access the EU’s capital and financial markets.
o This includes the prohibition to:
§ directly or indirectly purchase, sell, provide investment services for, or assistance in the issuance of, or otherwise deal with, transferable securities and money-market instruments issued after 9 March 2022 by (i) Russia and its government, (ii) the Central Bank of Russia and (iii) any entity or person acting on behalf or at the direction of the Central Bank of Russia;
§ directly or indirectly make, or be part of any arrangement to make, any new loans or credit to any of the bodies or parties mentioned above.
o These prohibitions are subject to limited “grandfathering” clauses (allowing certain activities undertaken under a contract concluded before defined dates) and other exceptions.
· Restrictions targeting trade from the Covered Regions (which are defined as “the non-government controlled areas of the Donetsk and Luhansk oblasts of Ukraine”) to and from the EU. As we expected, with some limited exceptions, these restrictions mirror those that are already in place in respect of Crimea and Sevastopol. These restrictions include:
o Imports: to import into the EU goods originating in the Covered Regions.
o Financing and insurance of imports: to provide, directly or indirectly, financing of financial assistance as well as insurance and reinsurance related to the import of such goods.
o Real estate: to acquire any new or extend any existing participation in ownership of real estate located in the Covered Regions.
o Ownership or control of entities: to acquire any new or extend any existing participation in ownership or control of an entity in the Covered Regions (including through the acquisition of shares).
o Financing of entities: to grant or be part of any arrangement to grant any loan or credit or other financing (including equity capital) to an entity in the Covered Regions, or for the documented purpose of financing such entity.
o Joint ventures: to create any joint venture in the Covered Regions or with an entity in the Covered Regions.
o Investment services: provide certain defined investment services for any of the above activities relating to real estate, ownership and control of entities, financing of entities, and joint ventures.
o Goods and technology suited for use in transport, telecom, energy, and oil, gas and mineral resources:
§ to sell, supply, transfer or export designated goods and technology to any legal entity or natural person in, or for use in, the Covered Regions.
§ to provide technical assistance or brokering services, financing or financial assistance related to such listed goods and technology.
o Infrastructure: to provide technical assistance, or brokering, construction or engineering services directly relating to infrastructure in the Covered Regions in the transport, telecom, energy, and oil, gas and mineral resources sectors.
o Tourism: to provide services directly related to tourism activities in the Covered Regions.
o Many of these prohibitions are subject to narrowly defined “grandfathering clauses” (allowing the execution of contracts concluded before specific dates, in various instances until a specified date), or the possibility for Member States’ authorities to grant other, limited, authorizations.
A Special European Council meeting took place on February 24, 2022, where EU leaders discussed further restrictive measures in close coordination with transatlantic partners. At the time of writing, it appears that the further restrictive measures under discussion will cover the financial sector, the energy and transport sectors, dual-use goods as well as export control and export financing, visa policy, additional listings of Russian individuals and new listing criteria. We anticipate further updates on this next package in the near future.