On June 29, 2024, the European Union ("EU") adopted new restrictive measures (sanctions) against Belarus in view of the regime's involvement in Russia's war of aggression against Ukraine. These measures aim at aligning sanctions against Belarus with those already in place against Russia, and thereby address sanctions circumvention stemming from the high integration between the Russian and Belarusian economies. In particular, some of them mirror restrictions introduced as part of the 14th sanctions package against Russia adopted on 24 June 2024 (e.g., compliance requirements, best efforts obligations, "No-Belarus clause"). For more information on the 14th Russia sanctions package, please see our previous alert.
The new EU sanctions were implemented through one Council Decision and one Council Regulation.
1. Compliance Requirements and Enforcement Guidelines
a. Extended Reach of EU Sanctions
- New best-efforts obligation for EU parent companies
towards their foreign subsidiaries – EU operators
are now required to undertake their best efforts (see the chart
below) to ensure that any entity established outside the EU that
they own or control does not participate in activities that
undermine the restrictive measures provided for in Regulation
765/2006.
| Definition of "best efforts" |
| Best efforts include all actions that are suitable and necessary to prevent the activities that undermine the restrictive measures provided for in Regulation 765/2006. |
| Characteristics of "best efforts" |
Best efforts should be built on a risk-based approach. EU
operators should calibrate the best efforts in view of:
|
| Examples of "best efforts" |
Best efforts can include, inter alia, the implementation of
appropriate policies, controls, and procedures to mitigate and
manage risk effectively, considering factors such as:
|
b. Definition of the Circumvention
- Clarification of standard for sanctions circumvention – Consistently with the 14th package of sanctions against Russia, the prohibition on sanctions circumvention provided for in Regulation 765/2006 was amended to be aligned with the interpretation of the Court of Justice of the EU in Case C-72/11, Afrasiabi and Others. This prohibition now expressly provides that the requirements of knowledge and intent are met not only where a person deliberately seeks the object or effect of circumventing sanctions against Belarus, but also where a person participating in an activity having this object or effect is aware that such participation may have that object or that effect, and accepts that possibility
c. "No-Belarus Clause" Mechanism
- New obligation to contractually prohibit the re-export
of sensitive goods to Belarus – EU exporters will be
required to contractually prohibit re-exportation to Belarus and
re-exportation for use in Belarus when selling, supplying,
transferring, or exporting to a third country (except to partner
countries (Annex Vba of Regulation 765/2006) which are the same in
the Russian program) firearms and similar devices (Annex XVI of
Regulation 765/2006), aviation and space items (Annex XVII of
Regulation 765/2006), jet fuel and additives (Annex XXVIII of
Regulation 765/2006), common high priority
("CHP") items (Annex XXX of Regulation
765/2006), or firearms and ammunition (Annex I of Regulation
258/2012).
- The agreement with the third-country counterpart must contain
adequate remedies in the event of a breach of a contractual
obligation. In the event of a breach, exporters will be required to
notify their national competent authority
("NCA"), as soon as they become aware of
the breach.
- Wind down exemption for the performance of contracts concluded before 1 July 2024 until their expiry date
- Exemption for specific goods – The obligation to include the so-called "No-Belarus Clause" does not apply to the execution of contracts relating to goods falling under CN codes 8457 10, 8458 11, 8458 91, 8459 61, and 8466 93 (Annex XXX of Regulation 765/2006).
- Exemption for public contracts – This
obligation does not apply to public contracts concluded with a
public authority in a third country or with an international
organization.
- Notification obligation – Exporters shall inform their NCA of any public contract that benefited from this exemption within two weeks of its conclusion.
- The agreement with the third-country counterpart must contain
adequate remedies in the event of a breach of a contractual
obligation. In the event of a breach, exporters will be required to
notify their national competent authority
("NCA"), as soon as they become aware of
the breach.
d. New Risk-Based Compliance Obligations for CHP Operators
- New obligation to implement a risk-based compliance
program for CHP operators – As of 2 January 2025, EU
operators, including the foreign entities they own or control, who
sell, supply, transfer or export CHP items (Annex XXX of Regulation
765/2006) will be required to implement a risk-based compliance
program (see our summary in the chart below).
| Scope of application of compliance program requirements | ||
| Targets | Deadline | Exemptions |
| EU operators selling CHP items | As of 2 January 2025, | Not applicable to EU operators selling, supplying or transferring CHP items only within the EU or to partner countries (Annex Vba of Regulation 765/2006) |
| Non-EU entities (i) owned or controlled by EU operators and (ii) selling CHP items | Not applicable to foreign subsidiaries of EU operators that the latter are not being able to control, due to reasons that they did not cause themselves | |
| Compliance Program Requirements | ||
|
||
e. Enforcement Guidance
- Voluntary self-disclosure ("VSD"), as a mitigating factor – The VSD of violation of restrictive measures provided in Regulation 765/2006 may be taken into account by Member States as a mitigating factor, in accordance with their respective national law.
- New cooperation obligation – With due
respect for the confidentiality of communications between lawyers
and their clients, as well as the confidentiality of information
held by judicial authorities, EU operators are now required to:
- Supply any information which would facilitate the implementation of Regulation 765/2006 to their NCA within two weeks of acquiring this information; and
- Cooperate with the NCA in any verification of such information.
- New legal basis for compensation claims in Member State courts – EU operators are now entitled to recover, in judicial proceedings before the competent courts of the Member State, any damages incurred as a consequence of claims lodged with foreign courts in connection with any contract or transaction the performance of which has been affected by Regulation 765/2006, provided that the operators concerned do not have effective access to the remedies in the relevant jurisdiction.
- Professional secrecy – Documents held by the Council of the EU, the European Commission ("Commission") and the High Representative of the Union for Foreign Affairs and Security Policy concerning the enforcement of the restrictive measures set out in Regulation 765/2006, or the prevention of the violation or circumvention of those measures, are now subject to professional secrecy. The disclosure of such information is presumed to harm the security of the EU or its Member States or the conduct of their international relations.
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