Indian Supreme Court aligns with international arbitration law in enforcing foreign award
Out-Law Guide | 14 Apr 2020 | 11:12 am | 7 min. read
The UK left the EU on 31 January 2020, and is now in a transition period, scheduled to run until the end of 2020.
During this transition period, EU sanctions will continue to be implemented in the UK through EU law.
A number of regulations imposing sanctions broadly mirroring those imposed by the EU have been enacted under the UK's Sanctions and Anti-Money Laundering Act 2018 although they will not come into force until after the transition period. This includes the Russia (Sanctions) (EU Exit) Regulations 2019/855.
EU Russian sanctions apply to all EU businesses and nationals both inside and outside of the EU and to any overseas businesses and individuals when in or doing business in the EU. This means that an EU national working outside of the EU may commit a sanctions related offence, for example, by brokering a deal to supply particular equipment suitable for certain exploration and production projects to a Russian entity or person or for use in Russia in breach of the EU Russian sanctions.
The prohibitions in the EU Russian sanctions can be categorised as follows:
There is a prohibition on the sale, supply, transfer or export, directly or indirectly, of dual-use goods and technology, meaning goods or technology that have both a civilian and military purpose and that are listed in Annex I to Regulation (EC) No 428/2009, to:
The provision of technical assistance, brokering services, financing or financial assistance, directly or indirectly to the above or for the above use, related to such dual-use goods and technology (subject to limited exemptions) is also prohibited. This prohibition extends to "other services" in connection with Annex IV entities.
There is a prohibition, without prior authorisation, on the sale, supply, transfer or export, directly or indirectly, of items - listed in Annex II to Regulation EC 833/2014 – suited to deep water or Artic oil exploration and production or shale oil projects to any entity or person in Russia or for use in Russia, including its Exclusive Economic Zone and Continental Shelf. The provision of technical assistance, brokering services, financing or financial assistance related Annex II items to any entity or person in Russia or for use in Russia, including its Exclusive Economic Zone and Continental Shelf, is also prohibited without prior authorisation.
Authorisation will not be granted if there are reasonable grounds to determine that the relevant items are destined for any of the categories of project listed above, unless there is a justified case of emergency.
There is a separate prohibition on the provision, directly or indirectly, of drilling, well testing and logging and completion services and the supply of specialised floating vessels for deep water or Arctic oil exploration and production or shale oil projects in Russia, including its Exclusive Economic Zone and Continental Shelf. Limited exemptions are available.
There is a prohibition on the provision, directly or indirectly, of technical assistance, financing or financial assistance related to goods and technology listed on the EU's Common Military List to any entity or person in Russia or for use in Russia (prior authorisation can be obtained for certain activities connected to European space activities).
Wider non-sanctions specific restrictions apply within EU Member States on the export of, and dealings related to, goods and technology on the EU's Common Military List.
There is a prohibition on, directly or indirectly, providing investment services for or assistance in the issuance of, or otherwise dealing with transferable securities and money-market instruments with a maturity exceeding 30 days issued after 12 September 2014 (or with a maturity exceeding 90 days when issued between 1 August 2014 and 12 September 2014) by any "Annex III", "Annex V", or "Annex VI" listed entity, currently:
It is also prohibited to, directly or indirectly, make or be part of any arrangement to make new loans or credit with a maturity exceeding 30 days to an "Annex III", "Annex V", or "Annex VI" entity. This prohibition does not apply if the loans or credit have a specific and documented objective to provide financing for non-prohibited imports or exports of goods and non-financial services between the European Union and any third state.
The guidance in respect of the EU Russian sanctions states: "Payment terms/delayed payment for goods or services are not considered loans or credit …. The provision of payment terms/delayed payment may not be used, however, to circumvent the prohibition to provide new loans or credit … Payment terms granted to the entities targeted … which are not in line with normal business practice or which, since 12 September 2014, have been substantially extended may suggest circumvention. Such circumvention would be prohibited under [the EU Russian sanctions]."
These prohibitions also apply to non-EU established entities or bodies more than 50% owned by an "Annex III", "Annex V", or "Annex VI" entity and to entities and bodies acting on their behalf, or acting on behalf or at the direction of the non-EU entities or bodies that the listed entities own.
In February 2020, the Office of Financial Sanctions Implementation issued a civil penalty of £20.4million to Standard Chartered Bank in connection with loans to Denizbank A.Ş, at the relevant time a wholly owned by Sberbank (an Annex III entity), in breach of these EU Russian sanctions relating to loans and credit.
There is also a prohibition on, directly or indirectly, accepting funds or economic resources from, or making them available to, Russian financial sanctions targets designated as such in relation to the threat to the territorial integrity and sovereignty of, or stability or security in, Ukraine, in relation to the misappropriation of Ukrainian state funds or due to human rights violations in Ukraine.
The Russian specific financial sanctions targets are listed in the UK's Consolidated List of Financial Sanctions Targets.
Supplies and dealings with entities more than 50% owned or controlled by financial sanctions targets are also prohibited.
The restrictions in the EU Russian sanctions apply regardless of whether or not the relevant items originate in the EU, which means that sales, transfers and supplies from non-EU countries by EU persons are also prohibited.
Knowingly participating in activities that are designed to circumvent EU Russian sanctions is also prohibited.
Actions by entities or individuals shall not give rise to liability of any kind on their part if they did not know and had no reasonable cause to suspect that their actions would infringe the EU Russian sanctions.
EU member states are to introduce penalty regimes for breaching the EU Russian sanctions that are "effective, proportional and dissuasive". In the UK it is a criminal offence to breach the EU Russian sanctions punishable by periods of imprisonment, unlimited fines or both.
Wider non-sanctions related export controls apply within EU member states on the export of a wider range of goods and technology to Russia, including for example items that feature on the EU's Common Military List and the EU Dual-Use list
In August 2019, the UK's Export Control Joint Unit issued a new national control on the export of submersible vessels and related equipment, software and technology to Russia. This was implemented in “consequence of Russia developing certain capabilities - including the ability to track, access and disrupt undersea communication”, which was deemed to represent a risk to the UK’s national security.
In addition to the EU sanctions specific to Russia, sanctions are also in place in respect of Crimea and Sevastopol. These prohibitions are wide ranging and relate to certain investments, loans, credit, exports, imports, trade and related financing, financial assistance, brokering and technical assistance. There are also specific sanctions that target the tourism sector and infrastructure in the following sectors: transport, telecommunications, energy and exploration and production of oil, gas and mineral resources.
Entities, bodies and individuals have also been designated as financial sanctions targets in respect of the annexation of Crimea and Sevastopol and the destabilisation of Eastern-Ukraine. Entities in Crimea or Sevastopol whose ownership has been transferred contrary to Ukrainian law, and entities, bodies or individuals that have benefited from such a transfer have also been designated as financial sanctions targets.
The financial sanctions targets are also listed in the UK's Consolidated List of Financial Sanctions Targets.
The US has issued wide ranging financial and trade sanctions since 2014 in respect of Russia in connection with actions which undermine the sovereignty of Ukraine. Further sanctions have also been imposed based on concerns of cyber attacks and in response to the chemical attack in Salisbury, England, referred to as the 'Skripal poisoning'.
The US has also imposed almost a total embargo on trade and services with the Crimea Region.
For the most part US sanctions apply to US entities and bodies incorporated under the laws of the US; to US citizens and permanent resident aliens anywhere in the world and to any individuals, entities or bodies whilst in, or carrying out business in, the US. They also apply to dealings with US origin goods, technology, including certain foreign made products incorporating US-origin goods or technology, and involving the US financial system.
However, US sanctions may be relevant to EU businesses and persons with no links to the US through contractual undertakings; it is common for banks, insurers and US based businesses to contractually require general compliance with US sanctions.
Further EU businesses and persons may be subject to enforcement action by the US for dealings with entities, bodies or individuals listed on its Specially Designated Nationals and Blocked Persons List, known as the SDN list, which includes certain entities, bodies and individuals in or connected to Russia, and with any entity owned more than 50% by such entities, bodies or individuals.
The US has also imposed secondary sanctions in respect of Russia which means that non-US parties – including EU businesses and persons – can be subject to enforcement action from the US if they engage in, for example activities that undermine cybersecurity, a transaction with any entity, body or individual that is part of, or operates for or on behalf of, the defence or intelligence sectors of the Russian government or deal in any way with significant investments and supplies related aspects of the Russian energy sector or that contribute to privatisation of Russian state-owned assets.
Enforcement action can also be taken for causing or conspiring to cause any violation of US Russian sanctions and / or facilitating significant transactions for or on behalf of any entity, body or individual subject to US Russian sanctions or their family members.
14 Apr 2020
12 Feb 2015
Indian Supreme Court aligns with international arbitration law in enforcing foreign award