In their recent client alert, “OFAC Issues New Sanctions Targeting Hamas’s Financing Networks,” colleagues Nancy A. Fischer, Aaron R. Hutman, Matthew R. Rabinowitz, Samantha Franks, Arielle R. Heffez and Erin Kwiatkowski discuss two rounds of sanctions imposed by the U.S. government on Hamas, other terrorist groups and Iranian networks in the wake of the October 7 attacks on Israel.
The EU Foreign Subsidies Regulation (FSR) entered into force on January 12, 2023 and will start to apply from July 12, 2023. Under the FSR, the European Commission will have powers to intervene against distortions to competition in the EU internal market caused by companies active in the EU that benefit from foreign subsidies. A new notification regime will be introduced for certain M&A transactions and public tenders that is independent from current EU/national merger control and foreign direct investment notification requirements, and the Commission will have powers to conduct investigations into potentially distorting foreign subsidies.
In response to recent concerns regarding national security, law enforcement and foreign ownership of telecommunications services, the FCC has released an Order and Notice of Proposed Rulemaking (NPRM) relating to international Section 214 authorizations. (International Section 214 authorizations are issued to telecommunications providers that seek to offer international services originating or terminating in the United States.) In “FCC Adopts International Section 214 Authorization Order and NPRM to Address National Security Concerns Posed by Foreign Ownership,” colleagues Glenn S. Richards, Adam J. Sandler and Lee G. Petro examine the order and NPRM more closely.
Many application windows for grants, loans and other incentives have opened since the passage of the Inflation Reduction Act, the CHIPS and Science Act (CHIPS) and the Infrastructure Investment and Jobs Act (IIJA), which provide about $2 trillion in federal funding and offers businesses and organizations a rare opportunity to apply for federal grants or take advantage of other federal incentive benefits.
In “Application Windows Opening for New Federal Funding,” colleagues Nancy Fischer, Elizabeth Vella Moeller and Aimee Ghosh examine these opportunities, along with compliance and eligibility obligations.
On February 24, 2022, the United States (U.S.), European Union (EU), United Kingdom (UK), and other countries issued a barrage of sanctions against the Russian financial sector, cutting off many major banks from the global financial system. These initial measures were coordinated among the US, EU, UK and other G7 countries and largely mirrored one another. As the year progressed, the U.S., EU and UK each imposed new and distinct measures to restrict Russia’s ability to raise capital. Over time, important deviations between jurisdictions began to emerge, creating a vast and multijurisdictional impact on Russia’s financial sector. Russia, in turn, imposed its own measures in an attempt to mitigate that impact. In order for companies to operate in global markets, it became increasingly necessary to understand how to navigate multiple sanctions regimes. Below, we describe several of the key measures levied against the Russian financial sector over the past year.
EU’s Ninth Package
On Friday 16 December 2022 the EU issued its ninth package of sanctions against Russia. Under the new package:
- Asset freezes have been imposed against 174 new individuals and entities including National Media Group, Credit Bank of Moscow, Dalnevostochniy Bank, AVO TV-Novosti, the All-Russia State Television and Radio Broadcasting Company (VGTRK), and various other manufacturing businesses, Russian military leaders, oligarchs, and their family members. The Russian Regional Development Bank is also now subject to a transaction ban.
- The prohibition on broadcasting (or enabling or facilitating the broadcast) of content by Russian media entities has been extended to cover NTV / NTV Mir, Rossiya 1, REN TV, and Pervyi Kanal.
- The prohibition on Russian oil has been amended. Certain products derived from Russian oil exported into Bulgaria on the basis of the Bulgaria-specific derogation now cannot be sold to other countries. However, the Bulgarian authority may licence the supply of Russian crude oil derived products to Ukraine provided the products are for exclusive use in Ukraine, or into third countries where environmental or safety risks prevent the products being stored in Bulgaria. The Hungarian and Slovakian authorities may also licence the sale of oil derived products obtained from Russian oil under the Hungary/Slovakia specific derogations for exclusive use in Ukraine.
- Liquefied Natural Gas (“LNG”) has been taken out of scope of the Article 3m and 3n petroleum products restrictions (due to come into force in February). New reporting obligations have been implemented relating to the purchase of LNG. All transactions related to the purchase, import, or transfer into the EU or a third country of LNG (CN 2709 00 10) originating in or exported from Russia must be notified to the relevant national competent authority within two weeks. This will enable the EU Commission to review the functioning of the measures relating to LNG by June 2023.
- New services bans have been placed on the provision of market research and public opinion polling services, technical testing and analysis services, and advertising services to Russian entities. According to the definitions included in the relevant EU Decision:
- “Market research and public opinion polling services” covers market research services and public opinion polling services.
- “Technical testing and analysis services” covers composition and purity testing and analysis services, testing and analysis services of physical properties, testing and analysis services of integrated mechanical and electrical systems, technical inspection services, as well as other technical testing and analysis services.
- “Advertising services” covers the sale or leasing services of advertising space or time and the planning, creating and placement services of advertising, as well as other advertising services.
A wind down has been included until 16 January 2023 for contracts entered into prior to 17 December 2022. The new restriction is subject to the existing exemption for Russian subsidiaries of EEA, Swiss, or “partner country” companies.
- A new prohibition has been imposed on investments in the Russian “mining and quarrying sector”. The mining and quarrying sector is defined as “a sector covering the location, extraction, management and processing activities relating to non-energy producing materials”. The prohibition bans the acquisition or extension of participation in Russian companies involved in this sector, as well as the granting of loans or financial assistance or the creation of joint ventures with such companies. Associated investment services are also banned. Exemptions are included for Russian subsidiaries of EU companies or for certain mining and quarrying activities related to specific materials listed in the new Annex XXX to Regulation (EU) 833/2014.
- The list of goods which are subject to restrictions (including goods and technology which could contribute to the enhancement of Russian industrial capacities and goods which might contribute to Russia’s military and technological enhancement or the development of its defence and security) has been expanded.
- New entities have been added to the EU’s list of groups associated with Russia’s military and industrial complex (including entities based in Crimea and Sevastopol to avoid circumvention). The designation imposes a presumption of denial for licence requests for exports of certain controlled goods.
- EU credit institutions must supply to their national competent authority (or the EU Commission) by no later than 27 May 2023 a list of deposits exceeding €100,000 held by non-Russian entities that are 50%+ owned by Russian nationals. Such figures must be updated every 12 months.
- The prohibition on holding positions in the governing body now applies to all entities which are publicly controlled or have over 50 % public ownership, or in which Russia, its Government or Central Bank has the right to participate in profits or with which Russia, its Government or Central Bank has other substantial economic relationship and the subsidiaries of such entities (whether or not listed in the relevant Annex). Licensing grounds exist for joint ventures, EU subsidiaries, companies relating to critical energy supply, and companies involved in the transit of Russian oil. Various wind down provisions are also included.
- An extension has been implemented to the existing aviation and space goods and technology ban to now cover engines and parts (CN 8407 10 and 8409 10). New derogations have been included for satellite safety and humanitarian purposes.
- A new general wind-down licensing ground has been included to enable continued trade until 30 September 2023 in restricted goods that were already located in Russia at the time the relevant restriction was implemented provided that the trade is necessary for the divestment from Russia, and certain conditions are met.
- A new asset freeze licensing ground has also been included, allowing for trade with designated persons that play a significant role in the international trade of agricultural and food products, including fertilisers and wheat.
On Thursday 15 December, the UK laid the Russia (Sanctions) (EU Exit) (Amendment) (No. 17) Regulations 2022 before Parliament. The new regulations:
- Extend the UK service ban to now cover: (a) accounting services, (b) advertising services, (c) architectural services, (d) auditing services, (e) business and management consulting services, (f) engineering services, (g) IT consultancy and design services, or (h) public relations services. Notably, legal services are not in scope.
- Introduce new entries to the lists of critical-industry goods and technology, and defence and security goods and technology that are subject to an export ban.
- Prohibit the provision of trust services to designated persons (or for their benefit), and blocks the provision of new trust services to persons connected with Russia (or for their benefit).
- Introduce amendments to existing restrictions on dealing with securities or money market instruments and loans or credit arrangements with a person connected with Russia.
On October 24, 2022, the U.S. Department of Treasury Office of Foreign Assets Control (OFAC) and Department of State (State) announced new sanctions designations for Nicaragua, targeting a key state mining company and amending Executive Order (E.O.) 13851 to expand the U.S. government’s authority to issue sanctions in reactions to abuses by the Ortega-Murillo regime.
On February 24, 2022, the U.S. Department of Commerce, Bureau of Industry and Security (BIS) issued a final rule effective immediately imposing sweeping export control restrictions against Russia in response to Russia’s invasion of Ukraine. On March 2, 2022, BIS issued another final rule effective immediately imposing the same export restrictions against Belarus in response to Belarus’s role enabling Russia’s invasion of Ukraine. These actions are part of a larger set of recent sanctions and export control restrictions imposed by the U.S., UK, EU, Japan and other allies. Please see our prior posts available here, here, here, here, here, and here discussing recent sanctions and export control developments against Russia.
As the Russian invasion of Ukraine continues, the global pressure on the Putin regime intensifies with the EU issuing additional sanctions and export controls on Friday evening (February 25). The legislation implementing the UK’s latest announced sanctions is expected early this week. Both the EU and the UK have added further persons to their respective asset freeze lists, and both have now designated Mr. Putin and his Foreign Minister, Mr. Lavrov.
On December 8, 2021 the EU Commission published its proposal for a new “Anti-Coercion Instrument.” The regulation is being proposed in response to targeted deliberate economic pressures applied to the EU and its Member States in recent years and seeks to deter countries from restricting or threatening to restrict trade or investment to force the EU (or individual Member States) to change their policies in areas such as climate change, taxation and food safety.