EU paves the way for exits from Russia
European companies wishing to exit Russia have been met with legal headaches if their Russian subsidiary owns items subject to EU sanctions, as the sanctions also prohibit the indirect sale of such items for use in Russia. Today, the EU introduces an important exception to the EU sanctions which will aid EU companies in leaving the Russian market.
Today, the EU has adopted its 9th sanctions package. Among a series of new prohibitive measures, including the addition of further persons and entities on the sanctions list, new export prohibitions, and transaction bans on additional banks, the EU has also adopted a new exception from the prohibitions on sale, supply and transfer of certain sanctioned goods and technologies, meant to resolve the legal complications that European companies who wished to divest their Russian subsidiaries have been facing.
As a sale of shares in a Russian company which owns sanctioned goods or technologies - according to the EU Commission and some national competent authorities' interpretations - could be said to constitute an indirect sale of such sanctioned goods or technologies for use in Russia, many EU companies have been unable to successfully exit the Russian market.
However, the EU now introduces the possibility for the national competent authorities in its member states to grant authorisations for the sale, supply or transfer of sanctioned goods and technologies until 30 September 2023, provided that such sale, supply or transfer is strictly necessary for the divestment from Russia or the wind-down of business activities in Russa.
Three conditions must be fulfilled to grant an authorisation:
- The sanctioned goods or technology must be owned by a national of a member state, a legal person, entity or body incorporated or constituted under the law of a member state, or legal persons, entities or bodies established in Russia that are owned by, or solely or jointly controlled by, a legal person, entity or body incorporated or constituted under the law of a member state (i.e. the goods or technology must be owned by EU persons/companies and their Russian subsidiaries).
- The competent authorities providing the authorisation must not have reasonable grounds to believe that the goods or technologies might be for a military end-user or have a military end-use in Russia.
- The concerned goods and technologies must have been physically located in Russia before the relevant prohibitions against the sale, transfer, supply or export of such goods or technology entered into force (i.e., the goods and technologies must not have been exported to Russia in violation of the sanctions).
The new sanctions package includes a similar authorisation for the import of certain sanctioned goods and technologies from Russia.
While this is great news for EU companies wishing to exit the Russian market, EU companies should still be aware of the Russian presidential decree no. 618 "On a special Procedure for the Execution (Implementation) of Specific Kinds of Transactions between Certain Individuals", pursuant to which companies from "unfriendly states" must obtain an authorisation from the Russian authorities before selling Russian LLC's. We refer to our previous insight in this regard.
Read Council Regulation (EU) 2022/2474 of 16 December 2022 amending Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia’s actions destabilising the situation in Ukraine