The final form of the sixth package of EU sanctions against Russia and Belarus was confirmed by the EU Council on 3 June 2022 (following weeks of negotiation on the scope of the sanctions in respect of Russian crude oil and petroleum products) and was published in the Official Journal on 9 June. This is not expected to be the final round of sanctions - we are likely to see additional economic and financial sanctions imposed by the EU on Russia and Belarus as the situation evolves, and we expect this to be a priority for the Czech Republic when it takes over the EU Council Presidency on 1 July 2022.

In addition to bringing a further 65 individuals and 18 entities into the scope of the sanctions against Russia, and an additional 12 individuals and 8 entities into the scope of the sanctions against Belarus, key elements of the sixth package include:

Professional Services 

A prohibition has been introduced on the direct or indirect provision of professional services (accounting, audit, bookkeeping or tax consulting services, or business and management consulting or public relations services) to the Russian Government or to legal persons, entities or bodies (‘entities’) established in Russia.

The recitals to Council Regulation (EU) 2022/879 give more colour on the scope of this prohibition, highlighting that:

  • accounting, audit, bookkeeping or tax consulting services” covers recording commercial transactions for businesses, examining accounting records and financial statements, business tax planning and consulting, and preparing tax documents;
  • business and management consulting or public relations services” covers:
    • advisory, guidance and operational assistance services provided for business policy and strategy purposes and the overall planning, structuring and control of an organisation;
    • management fees, management auditing, market management, human resources, production management and project management consulting;
    • advisory, guidance and operational services related to improving the client’s image and its relations with the general public and other institutions.

There are three key carve-outs:

  • providing services that are necessary to terminate pre-4 June 2022 contracts by 5 July 2022;
  • services that are strictly necessary for the defence of legal proceedings;
  • services for the exclusive use of entities established in Russia but owned, solely controlled, or jointly controlled, by an entity in an EU Member State.

Trusts

The deadline under Article 5m of Regulation (EU) No 833/2014 to cease providing certain services to certain Russian-linked trusts and similar legal arrangements has been extended to 5 July 2022 (and may be further extended by competent authorities in certain limited circumstances).

A further derogation from the Article 5m prohibition has been added: competent authorities may authorise the provision of services which would otherwise be prohibited by Article 5m where those services are necessary for the operation of trusts whose purpose is the administration of occupational pension schemes, insurance policies or employee share scheme, charities, amateur sports clubs, and funds for minors or vulnerable adults.

SWIFT

Three more Russian banks (Sberbank, Credit Bank of Moscow, and Russian Agricultural Bank) and one additional Belarussian bank (the Belarusian Bank for Development and Reconstruction) have been added to the list of banks to whom SWIFT services cannot be provided.

Asset Freeze Derogation 

A further derogation option from the asset freeze for funds and economic resources has been introduced where those funds or economic resources are strictly necessary for:

  • the provision of electronic communication services by EU telecommunications operators;
  • the provision of associated facilities and services necessary for the operation, maintenance and security of such electronic communication services, in Russia, in Ukraine, in the EU, between Russia and the EU, and between Ukraine and the EU; or
  • EU-based data centre services.

Transactions with State-Owned (Annex XIX) Companies 

Three further derogations have been introduced from the prohibition on transacting with a Russian State-owned company listed in Annex XIX (or a non-EU entity that is more than 50% owned by an Annex XIX entity, or an entity acting on behalf or at the direction of one of the above):

  • the receipt of payments due by those entities under contracts performed before 15 May 2022;
  • transactions, including sales, that are strictly necessary for the wind-down, by 5 September 2022, of a joint venture or similar legal arrangement concluded before 16 March 2022, involving one of the above entities; and
  • transactions related to the provision of electronic communication services, data centre services, and the provision of services and equipment necessary for their operation, maintenance, security, including the provision of firewalls, and call centre services, to a Russian State-owned entity.

Oil

A complete import ban has been introduced on all Russian seaborne crude oil and petroleum products. Pre-existing contracts for crude oil will be allowed for 6 months (8 months in the case of petroleum products). There are temporary exemptions for Member States with a pipeline dependency on Russia, but the onward transfer, transport or sale of those products is prohibited. Bespoke, time-limited, derogations have also been granted to Bulgaria, Croatia and the Czech Republic.

The provision of financing, financial assistance, broker services and technical assistance in respect of the purchase, import or transfer of Russian seaborne crude oil and petroleum products is now prohibited, subject to some transitional periods.

The purchase, import, and transfer of seaborne crude oil and certain petroleum products that originate elsewhere and only transition through Russia will be allowed (subject to a proviso that this permission maybe withdrawn if attempts are made to use it to circumvent the sanctioned activities).

Deposits/Crypto-Asset Restriction

A prohibition was previously introduced on accepting deposits from, or providing crypto-asset wallet, account or custody services to, Russian nationals, Russian corporates, or individuals residing in Russia. Competent authorities may allow a further derogation from this where the exclusive purpose is the payment of fees or service charges for the routing holding or maintenance of frozen funds or economic resources.

Transferable Securities Restriction 

A prohibition is already in place on selling transferable securities, or units in collective investment undertakings with exposure to such securities, to (among others) any natural person residing in Russia. To date, this has not applied to nationals of/those resident in EU Member States. That exemption has been expanded to nationals of/those resident in EEA member countries and Switzerland.

Goods and Technology

In respect of both Russia and Belarus, the scope of:

  • the prohibition on the sale, supply, transfer or export, directly or indirectly, of dual-use goods and technology; and
  • the prohibition on the sale, supply, transfer or export, directly or indirectly goods and technology which might contribute to the military and technological enhancement of Russia or Belarus, or to the development of their respective defence and security sectors,

has been expanded.

The list of controlled items that could contribute to the technological enhancement of Russia’s defence and security sector has also been widened.

Broadcasting

The EU broadcasting activities of three additional Russian media outlets have been suspended, and there is a ban on advertising products or services on any sanctioned media outlet.

Transport

The exemption from the prohibition on the transport of goods by road transport undertakings established in Russia to diplomatic and consular representations of the EU and its Member States has been expanded to all diplomatic and consular representations of Russia.


The provisions relating to penalties in each of the key Council Regulations have been amended to clarify that Member States can provide for criminal penalties for sanctions breaches, and to require Member States to set out how the proceeds of sanctions breaches are to be confiscated. The related Irish regulations already provided for criminal penalties, and we can expect to see developments on the latter point. This follows the European Commission’s 25 May 2022 announcement of proposals to:

  • modernise the EU’s asset recovery rules by adding breaches of EU financial sanctions to the list of ‘EU crimes’, thereby allowing for a common EU-wide base threshold for criminal offences and penalties; and
  • develop a new directive with stronger rules on asset recovery and confiscation.

For more information, please get in touch with your usual Arthur Cox contact.