Our experts break down the latest developments as Chelsea FC owner Roman Abramovich targeted in extended UK clampdown
Further to our recent posts on 7 March and 8 March discussing developments in the UK, EU and US sanctions landscape this week, we cover the latest UK and EU developments in response to the conflict in Ukraine. The most recent US measures are considered in our post on 9 March. As ever, the position continues to change rapidly and we will continue to provide updates via our blog.
New restrictions on insurance and reinsurance in relation to aviation and space goods and technology.
On 8 March, the UK introduced restrictions in respect of insurance and reinsurance of aviation and space goods and technology. Following the introduction of the Russia (Sanctions) (EU Exit) (No 6) (Amendment) Regulations, which introduced a new Regulation 29A into the Russia (Sanctions) (EU Exit) Regulations 2019 (the Russia Regulations), UK persons are prohibited from directly or indirectly providing insurance or reinsurance services relating to aviation and space goods or aviation and space technology (a) to a person connected with Russia or (b) for use in Russia. This prohibition is broadly defined, and will include the provision of insurance or reinsurance to non-Russian aircraft that is for use in Russia.
Aviation and space goods are defined as anything falling within chapter 88 of the Goods Classification Table in the Tariff of the United Kingdom, and will cover aircraft, whereas aviation and space technology is defined as technology for the development, production or use of things falling within chapter 88 of the Goods Classification Table.
A General Trade Licence (Russia Sanctions – Aviation Insurance) was also introduced on 8 March, which allows for the provision of insurance and reinsurance under existing contracts concluded before 8 March 2022 and certain conditions until 28 March 2022.
The EU introduced a similar ban on the provision of insurance and reinsurance services on 26 February although, unlike the UK restrictions, the EU has not introduced a wind-down period and so the provision of insurance and reinsurance services in respect of aircraft to any person in Russia or for use in Russia (Article 3(c) (2) of Council Regulation 833/2014). This prohibition is in effect as of 26 February and there are no licences available.
Aviation and space goods and technology have also been added to the definition of restricted goods and restricted technology such that these goods and technology are now subject to trade sanctions and cannot be exported to Russia or for use in Russia.
Restrictions on entry into UK airspace
The amendments to the Russia Regulations also introduced a criminal offence which prohibits any aircraft registered in Russia or otherwise owned, chartered or operated by a designated person/entity or a person/entity “connected with Russia” to overfly, land or to take off in the United Kingdom, as well as enter UK airspace or leave it by a specific route (Regulation 57J). This offence is in addition to the ban introduced by The Air Navigation (Restriction of Flying) (Russian Aircraft) Regulations 2022 on 25 February.
As with the ban on Russian air carriers from EU airspace, there are exemptions to the prohibition in the event of emergency landings or emergency overflights.
Detention of ships
The UK Government has also expanded the scope of the powers of the Secretary of State to direct the detention of certain vessels to include ships registered in Russia (Regulation 57D(3)(ba)). The previous power had related to ships owned, controlled, chartered or operated by a designated person or person connected with Russia, a ship flying the flag of Russia or a specified ship.
New General Licences
On 9 March, the UK’s Office of Financial Sanctions Implementation (OFSI) published an additional General Licence (GLs) in respect of Belarus, an amendment to nine open general licences to remove Belarus, and a clarification in respect of GL INT/2022/1272278 (in respect of the VTB wind down) as set out below.
OFSI has published GL INT/2022/1322576, which allows Belaeronavigatsia, designated under the Republic of Belarus (Sanctions)(EU Exit) Regulations 2019, to provide, and air traffic management services and data providers registered in the UK to use, aeronautical information publication data for the purposes of flight safety concerning civilian aircraft. The licence also allows for payments to be made to Belaeronavigatsia in respect of such data.
The Export Control Joint Unit published a notice to remove Belarus from nine open general export licences. As a result, companies involved in the export of the relevant goods and services can no longer benefit from these open licences and are required to apply for specific licences if these are available.
Separately, OFSI has published an amendment to GL INT/2022/1272278 which seeks to clarify the position in respect of making funds available to VTB as part of the process of winding down transactions with VTB or any entity that it owns or controls, including its UK subsidiary, VTB Capital. The notice of amendment states that there is no requirement under GL INT/2022/1272278 for funds payable to VTB as a necessary part of winding down relevant transactions to be paid into a frozen account. It is also noted that consideration should be given as to how provisions in respect of ownership and control in the Russia Regulations apply in respect of any such payments to VTB subsidiaries.
The UK designated a further seven individuals on 10 March, including Roman Abramovich. Several individuals who are now subject to a UK asset freeze had previously been designated by the US and the EU (including the President of the VTB Bank management board, Andrei Kostin, and the CEO of Transneft, Nikolai Tokarev).
General Licence INT/2022/1327076 has been issued to allow for the continued operation of Chelsea Football Club, including in respect of the payment of wages, allowances and pensions of employees, including players, the payment of fees, dividends and allowances to directors of the club payable under obligations prior to 10 March, and various payments associated with the regular maintenance of the club and on-going fixtures (with certain limits on expenses introduced). Persons who purchased tickets prior to 10 March 2022 are permitted to attend fixtures, and season ticket holders can continue to make payments if they entered into a payment plan prior to 10 March.
Broadcasters may still broadcast fixtures involving Chelsea, and certain payments in respect of broadcasting and fees related to performance in competitions may be made to the club, although any funds the club receives must be frozen.
New restrictions in respect of the export of maritime navigation and radio communication technology
Council Regulation (EU) 2022/394 amended Regulation (EU) 833/2014 to introduce restrictions on the export of maritime navigation goods and radio communication technology to Russia or for use in Russia (new article 3f), and prohibits the provision of technical assistance, brokering services or other services related to such goods and technology.
As with other export restrictions already in place, it is now prohibited to provide financing or financial assistance related to maritime navigation goods and technology, as listed in Annex XVI, for any sale, supply, transfer or export of such goods or technology, or any related technical assistance, brokering or other services. These further restrictions now expand the list of legal persons, entities and bodies subject to the prohibitions related to investment services, transferable securities, money market instruments and loans.
Certain exceptions apply for humanitarian purposes, health emergencies, or for urgent prevention or mitigation of an event likely to have a serious and significant impact on human health, safety or the environment.
Amendments to restrictions on deposits
As of 26 February 2022, it is prohibited to accept any deposits from Russian nationals, natural persons residing in Russia or legal persons, entities or bodies established in Russia if the total value of deposits per credit institution that exceed €100,000.
Further to Council Regulation (EU) 2022/394, this restriction does not apply to citizens and residents of Switzerland or European Economic Area (EEA) member states. The exemption had previously been limited to citizens and residents of EU member states.
The UK had announced that it would bring in deposit restrictions in respect of deposits exceeding £50,000 but these measures are not yet in place.
Crypto-assets now included in the definition of “transferable securities”
The definition of “transferable securities” in Regulation 833/2014 has now been amended to specifically include crypto-assets.
As a result, crypto-assets are now subject to the sectoral sanctions introduced on 25 February, and effective as of 12 April 2022, in relation to transferable securities of sectorally sanctioned entities (listed in Annexes III, IV, XII, and XIII of Regulation 83/2014).
A further 160 individuals were designated on 9 March and are now subject to an EU asset freeze, including individuals connected with the metallurgical, agricultural, pharmaceutical, telecom and digital industries, and 146 members of the Russian Federation Council.
862 individuals and 53 entities are now subject to EU restrictive measures.
Restrictive measures in respect of Belarus
In addition to measures in respect of Russia, the EU also introduced measures in respect of Belarus on 9 March, in response to the situation in Belarus and the involvement of Belarus in the Russian aggression against Ukraine. Council Regulation (EU) 2022/398 amending Regulation (EC) No 765/2006 includes a number of measures similar to the sanctions imposed against Russia.
Financial markets restrictions
The EU has introduced a prohibition on the listing and provision of services on trading venues registered or recognised in the EU, from 12 April 2022, in respect of any Belarussian legal person, entity or body established in Belarus and with over 50% public ownership. This includes in respect of any crypto-assets of such entities, and is similar to the sectoral sanctions in respect of Russian entities.
Restrictions on the sale of euro-denominated transferrable securities issued after 12 April 2022 or units in collective investment undertaking providing exposure to such securities, to any Belarusian person or resident (with exceptions for EU nationals and residents), and the sale, supply, transfer or export of euro-denominated banknotes to Belarus, to persons in Belarus (including the Government and Central Bank) or for use in Belarus.
The deposit restrictions that apply to deposits by Russian nationals, residents and legal persons now also apply to nationals, residents and legal persons of Belarus (ie, a limit of €100,000 per credit institution). The same exemptions for nationals and residents of an EU Member State, members of the EEA and Switzerland, also apply.
In addition, the EU has excluded certain Belarussian banks from the SWIFT messaging services, namely Belagroprombank, Bank Dabrabyt, and the Development Bank of the Republic of Belarus, as well as their Belarusian subsidiaries.
Restrictions in respect of sovereign debt and assets
The EU has also introduced restrictions on transactions with the Central Bank of Belarus related to the management of reserves and the assets of the Central Bank (although EU Member States may authorise any transaction that is necessary to ensure the financial stability of the EU as a whole or the relevant Member State).
The EU has introduced a prohibition on the provision of public financing or financial assistance for trade with, or investment in Belarus, with exemptions for binding commitments established before 10 March 2022, the provision of public financing or financial assistance up to €10 million per project benefiting small and medium-sized EU enterprises, or public financing or financial assistance for trade in food, and for agricultural, medical or humanitarian purposes.
In addition, the EU has also placed restrictions on flight plans over the territory of the EU and the territory of Belarus (new Article 8ca).
This article first appeared on our blog, FSR and Corporate Crime Notes. Our team will keep bringing you updates here and at our Sanctions Notes blog as they happen