May 15, 2023

EU publishes new FAQ on Russia-related sanctions and EU entities possibly owned or controlled by sanctioned persons

On May 10, 2023, the European Commission published a new Frequently Asked Question related to asset freezes and prohibitions on making funds and economic resources available, under Council Regulation 269/2014.  On May 3, 2023, the European Commission also published a guidance note on the implementation of new sanctions-related safeguards to ensure food security.  In the note, the Commission acknowledged that, in past months, asset freezes imposed under Regulation 269/2014 had led to instances where certain EU entities were essentially controlled by a sanctioned individual or entity, several of which concerned the trade in agricultural and food products, including wheat and fertilizer.  The note suggested that safeguards should be implemented to prevent designated persons from exercising control over non-designated EU entities, in order to minimize the impact of sanctions on food insecurity in third countries.

The new FAQ specifically addresses an EU entity that might be owned or controlled by a designated person or entity.  The FAQ considers whether a such a company should be able to request authorization to use a derogation on trade in fertilizers if the company does not consider itself to be owned or controlled by a sanctioned person, but its counterparts do.  The FAQ additionally considers whether submitting such a request for authorization amounts to an acknowledgement by the company that it is owned or controlled by a sanctioned person.  According to the FAQ, companies such as these should be able to apply for an authorization as long as their applications fulfill the criteria in the Regulation.  The Commission also confirmed that the Regulation does not draw any conclusions regarding the company’s ownership or control from an application such as this.

FAQs – Asset Freeze and Prohibition to Make Funds and Economic Resources Available