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Capital punishment: EU issues new sanctions against Russia

20 August 2014

The escalation of political tensions between the EU and Russia, in particular following the downing of Malaysian Airlines flight MH17 over Eastern Ukraine, has led to the introduction of a fresh wave of sanctions from the EU. 

It is important for EU-based businesses to be aware of the new regulations, which are more likely to impact on their operations than the EU's earlier measures against Russia. 

What do the sanctions prohibit?

Introduced on 31 July, EU Council Regulation 833/2014 ("Regulation") prohibits the purchase, sale, provision of brokering or other assistance in the issuance of shares or other listed instruments (such as bonds), which have been issued either by state owned banks or financial institutions or by five other prominent Russian banks (Gazprombank, VTB, Sberbank or Rosselkhozbank). 

The Regulation effectively bans EU citizens from purchasing new bonds or shares which have been issued by Russian banks. 

The measure is predicted to have a severe effect on these financial institutions, which rely on access to Western capital markets in order to service their significant debts.

Already, European stock exchanges have taken note of these measures. In order for shares or securities to be listed on any London list, the London Stock Exchange now requires a confirmation that the new shares will not be allotted to any of these Russian banks. 

In addition to the restrictions related to transferable securities or money-market instruments, the Regulation imposes the following further restrictions:

  • an arms embargo 
  • an export ban on dual-use goods for military end users, and 
  • measures to curtail access to certain technologies.

What are the penalties for non-compliance?

The Regulation provides that it will be for EU Member States to introduce penalty regimes to ensure Europeans respect these measures.  The UK has implemented the Regulation through The Ukraine (European Union Financial Sanctions) (No.3) Regulations 2014.

This statutory instrument, which entered into force on 1 August 2014, makes it a criminal offence to ignore the EU's sanctions. 

For individuals, infringements are punishable by an imprisonment for a term not exceeding two years, or a fine, or both. Companies who infringe may be fined.  Directors or officers of the company who consented, or connived, in the contravention may also be imprisoned or fined.

This article was written by Robert Bond.

For more information contact Robert on +44 (0)20 7427 6660 or robert.bond@crsblaw.com