Worldwide: Ongoing Legal Developments In Response To The Situation In Ukraine

As anticipated in our Commentary,"Imposition of Sanctions Measures in Response to the Developing Crisis in Ukraine" and our updating Alerts, "Further Legal Developments in Response to the Situation in Ukraine" and "Continuing Legal Developments in Response to the Situation in Ukraine," international sanctions imposed against Russian and Ukrainian parties in response to events in Ukraine have continued to expand and evolve. This Commentary summarizes the most recent developments.

United States 

On July 16, 2014, the U.S. Department of the Treasury expanded its implementation of Ukraine-related sanctions under executive orders issued by President Obama in March 2014, targeting a number of companies in the Russian financial, energy, and arms sectors, as well as several Russian government officials, separatist groups within Ukraine, and a Crimean shipping company.

Sectoral Sanctions Identifications List. As discussed in our March Alert "Continuing Legal Developments in Response to the Situation in Ukraine," Executive Order 13662 provides the Secretary of the Treasury, in consultation with the Secretary of State, broad authority to target individuals and entities operating in any sector of the Russian Federation economy. On July 16, 2014, the Secretary of the Treasury used this authority for the first time to impose sectoral sanctions on two large Russian financial institutions and two major Russian energy companies. These sectoral sanctions are set forth in two directives issued by the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC"). All persons designated pursuant to these directives are listed on OFAC's newly created Sectoral Sanctions Identifications List (the "SSI List").

Under Directive 1, U.S. persons are prohibited from transacting in, providing financing for, or otherwise dealing in new debt of longer than 90 days' maturity or new equity for state-owned Vnesheconombank and Gazprombank. 

Under Directive 2, U.S. persons are prohibited from transacting in, providing financing for, or otherwise dealing in new debt of longer than 90 days' maturity for Rosneft, the largest Russian oil company, and Novatek, the largest Russian independent gas producer.

Although Directives 1 and 2 contains a number of undefined terms and potential ambiguities, OFAC has issued several FAQs in connection with these directives that provide some clarification:

 

  • The term "debt" includes bonds, loans, extensions of credit, loan guarantees, letters of credit, drafts, bankers acceptances, discount notes or bills, or commercial paper.
  • The term "equity" includes stocks, share issuances, depositary receipts, or any other evidence of title or ownership.
  • The prohibitions do not apply to any debt or equity issued prior to the sanctions' effective date (July 16, 2014) by, on behalf of, or for the benefit of the entities operating in the financial and energy sectors that are identified in the directives.
  • The prohibitions also do not apply to debt instruments with maturities of 90 days or less issued by or on behalf of the entities identified in the directives, even if the debt instruments are issued after the sanctions' effective date.
  • These prohibitions extend to new debt of longer than 90 days' maturity—and, in the case of entities listed under Directive 1, new equity—by, on behalf of, or for the benefit of any entities or property in which a listed entity holds a 50 percent or greater ownership interest.
  • Neither Directive 1 nor Directive 2 blocks the property or interests in property of any of the listed entities.
  • U.S. persons should reject any transactions or dealings prohibited under these directives and, to the extent required by OFAC's Reporting Procedures and Penalties Regulations, must report any rejected transactions to OFAC within 10 business days.
  • U.S. banks are not prohibited from maintaining correspondent accounts with, or processing U.S. dollar-clearing transactions for, the listed entities, provided the activities do not involve transacting in, providing financing for, or dealing in prohibited debt or equity.  


In addition, OFAC has issued a general license permitting transactions by U.S. persons that involve derivative products whose value is linked to an underlying asset that falls within the scope of Directive 1 or Directive 2.

Newly Designated Entities and Individuals. On July 16, 2014, the Secretary of the Treasury also placed five individuals and 11 entities on its List of Specially Designated Nationals and Blocked Persons ("SDN List") pursuant to the authority granted to the Secretary in Executive Orders 13660 and 13661. The complete list of designated entities is available on OFAC's website.

Pursuant to these designations, all of these individuals' and entities' assets, property, and interests in property that are in the United States, hereafter come within the United States, or are or hereafter come within the possession or control of any U.S. person are blocked, and all U.S. persons are prohibited from dealing with these designated individuals. As noted in prior general guidance from OFAC, U.S. persons are also prohibited from dealing with any entity in which a designated person (under the U.S. sanctions regime) owns, directly or indirectly, a 50 percent or greater interest, regardless of whether the entity itself is specifically designated.

On July 16, 2014, in concert with the additional sanctions announced by OFAC, the U.S. Department of the Commerce's Bureau of Industry and Security added the 11 entities that OFAC placed on its SDN List to the Entity List. BIS designated these entities based on a determination that they are involved, or pose a significant risk of becoming involved, in activities contrary to the national security and foreign policy interests of the United States. Designation on the Entity List imposes a license requirement, with a presumption of denial, for the export, re-export, or foreign transfer of items subject to the Export Administration Regulations to the designated entities.

European Union

On July 16, 2014, a special meeting of the European Council was convened, inter alia, to discuss the situation in Ukraine. It agreed to expand the legal basis of the restrictive measures, paving the way for broadening the scope of the measures, in particular by the listing of legal entities.

As a result, Council Decision 2014/475/CFSP of July 18, 2014 and Council Regulation (EU) No 783/2014 of July 18, 2014 were adopted, expanding the scope of the EU's asset freeze to the following categories:

 

  • Natural persons responsible for, actively supporting, or implementing actions or policies that undermine or threaten the territorial integrity, sovereignty, and independence of Ukraine, or stability or security in Ukraine, or that obstruct the work of international organizations in Ukraine, and natural or legal persons, entities, or bodies associated with them;
  • Legal persons, entities, or bodies supporting, materially or financially, actions that undermine or threaten the territorial integrity, sovereignty, and independence of Ukraine; or
  • Legal persons, entities, or bodies in Crimea or Sevastopol whose ownership has been transferred contrary to Ukrainian law, or legal persons, entities, or bodies that have benefited from such a transfer. 


Until now, the Russian persons made subject to the asset freeze were individuals only. Although the EU now has the possibility to list legal entities, a first list of entities and persons to be listed under the enhanced criteria is yet to be adopted. Such a list is expected before the end of July.

In addition to the enhanced criteria for the listing, the European Council agreed on the following measures:

 

  • A request to the European Investment Bank ("EIB") to suspend the signature of new financing operations in the Russian Federation;
  • The coordination of EU Member State positions within the European Bank for Reconstruction and Development ("EBRD") Board of Directors with a view to suspending the financing of new operations in the Russian Federation;
  • The discontinuation of the agreement of February 20, 2014 on export licenses. The agreement related to the suspension and reassessment of certain export licenses by EU Member States and was discussed in our Commentary, "Imposition of Sanctions Measures in Response to the Developing Crisis in Ukraine";
  • An invitation to the European Commission to reassess EU–Russia cooperation programs with a view to taking a decision, on a case-by-case basis, on the suspension of the implementation of EU bilateral and regional cooperation programs;
  • A request to the European External Action Service to present proposals for additional measures in particular on restricting investments in Crimea and Sevastopol; and
  • An expectation that the International Financial Institutions will refrain from financing any projects that explicitly or implicitly recognize the annexation of Crimea and Sevastopol. 


By means of Council Regulation (EU) No 692/2014 of June 23, 2014, the EU imposed restrictions on imports of goods originating in Crimea or Sevastopol. Restrictions were also placed on the provision, directly or indirectly, of financing or financial assistance, as well as insurance and reinsurance, related to the import of such goods.

Australia

As we discussed in our March 2014 Alert "Continuing Legal Developments in Response to the Situation in Ukraine," Australia announced in March 2014 that it would impose an autonomous sanctions regime in response to the Russian threat to the sovereignty and territorial integrity of Ukraine. The Australian autonomous sanctions regime was anticipated to come into effect, after a standard amendment and public comment process, several months after its announcement.

On June 19, 2014, Australia's Autonomous Sanctions (Designated Persons and Entities and Declared Persons—Ukraine) List 2014 (the "Ukraine List") entered into effect. The Ukraine List gives effect to the March 19 and May 21, 2014 announcements by the Minister of Foreign Affairs with respect to the imposition of financial sanctions and travel bans against designated persons and entities. At present, 50 persons and 11 entities have been designated for targeted financial sanctions or travel bans on the Ukraine List. The details of these persons and entities have been published in the Australian Department of Foreign Affairs and Trade's Consolidated List.

As the situation in Ukraine continues to evolve, Jones Day will continue to keep significant developments under review.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions