Menu
Russian sanctions update and the impact of Brexit

Insights / / Russian sanctions update and the impact of Brexit

Sanctions continue to have a significant impact on the energy industry and while the focus since the start of the year has mainly been on the lifting of the majority of the EU’s sanctions against Iran, there have been recent developments in relation to the restrictions imposed as a result of the Russia/Ukraine conflict. In addition, the UK’s decision to leave the European Union following the referendum, raises a number of questions about the future EU sanctions landscape.

We give a brief update below.

Russia/Ukraine

In July 2014 EU Regulation 833/2014 came into force imposing economic sanctions on Russia. These were imposed as a consequence of Russia’s failure to comply with EU demands regarding the annexation of Crimea and Sevastopol. This Regulation targeted the military, oil and financial services industry and was further amended by EU Regulation 960/2014 in September 2014 and EU Regulation 1290/2014 in December 2014.

The Regulation prohibits making available, directly or indirectly, a wide range of technologies (primarily used in energy projects) originating inside or outside the EU, to anybody in Russia or to anyone outside Russia for use in Russia, without prior authorisation. It is also prohibited to provide, directly or indirectly, associated services necessary for certain categories of exploration and production projects in Russia (including its Exclusive Economic Zone and Continental Shelf). It is also prohibited to directly or indirectly purchase, sell, provide investment services or assistance in the issuance of, or otherwise deal with, transferable securities and money-market instruments with certain maturities in relation to certain entities who have been designated as being subject to sectoral sanctions.

These restrictions are set to expire on 31 July 2016, however, EU ambassadors have, in the last couple of weeks, agreed to extend the restrictions until January 2017.

In addition to the above, an EU-wide asset freeze and travel ban was also imposed in March 2014 on those undermining the territorial sovereignty or security of Ukraine and those supporting or doing business with them under EU Regulation 269/2014 and in relation to those responsible for misappropriating State Funds pursuant to EU Regulation 208/2014. These targeted asset freezes and travel bans on Russia/Ukraine have recently been extended and are not due to expire until 15 September 2016.

Crimea/Sevastopol

Pursuant to UN General Assembly Resolution 68/262 of 27 March 2014, Crimea and Sevastopol continue to be considered part of Ukraine. The EU authorities have continued to condemn what is considered to be the illegal annexation of Crimea and Sevastopol and restrictions were introduced by the EU in 2014 in response to this annexation, effectively trying to restrict trade and assistance to the region, including assistance to the energy industry in the territory.

In June 2014 the EU adopted Council Decision 2014/386/CFSP and Council Regulation (EU) No 692/2014 which has subsequently been amended by Decision 2014/507/CFSP and Regulation 825/2014. In December 2014, the latest EU Regulation on Crimea/Sevastopol came into effect (Regulation 1351/2014). The restrictions contained in this Regulation replaced a number of the earlier restrictions, and were more extensive in scope.

Pursuant to the current restrictions it is prohibited to import goods into the EU that have originated in Crimea/Sevastopol and to provide directly or indirectly financing or financial assistance, insurance and reinsurance related to such import.

It is also prohibited to sell, supply, transfer or export certain goods and technology to any natural or legal person, entity or body in Crimea/Sevastopol or for use in Crimea/Sevastopol that relate to the following industry sectors:

  1. Transport;
  2. Telecommunications;
  3. Energy; and
  4. The prospection, exploration and production of oil, gas and mineral resources.

In addition, it is prohibited to provide technical assistance, or brokering, construction or engineering services directly relating to infrastructure in Crimea/Sevastopol. There are also a number of restrictions that curtail investment in Crimea/Sevastopol including restrictions on real estate in the region, ownership or control of entities in Crimea/Sevastopol and the creation of any joint venture.

These restrictions have recently been renewed until 23 June 2017.

EU sanctions post Brexit

The UK’s departure from the EU will have an impact on the sanctions landscape. While nothing will change in the immediate future (as with other areas of EU law the UK will continue to implement EU Regulations for 2 years after the UK has officially notified the EU of its wish to leave), going forwards the UK will be able to forge its own economic sanctions but will be unable to influence the decisions of the EU. This will add an additional layer of complexity.

In relation to the sanctions against Russia in particular, the UK’s influence has been crucial. The UK was one of the key member states that pushed for the restrictions against Russia and it has also recently supported extending the restrictions despite opposition from other EU members. Whether the EU will continue to pursue such restrictions once the UK leaves the EU remains to be seen.

While it is not clear what path the UK will take in relation to sanctions post-Brexit, it is probable that the UK will continue to favour the use of economic sanctions as a tool of foreign policy. Further, without the need to achieve agreement between 28 member states the UK will be free to impose whatever restrictions it considers appropriate and will be able to act quickly.

Whatever happens in the UK/EU discussions over the next few years it is clear that the sanctions landscape will remain a complex one. Compliance officers, particularly those working in companies affected by UK jurisdiction, will now have to contend with potentially differing US, EU and UK sanction regimes.

Related sectors:

Related news & insights

Insights / Is civil litigation a proper tool to stop climate change?

02-12-2021 / Energy & Infrastructure

The case of Saul Luciano Lliuya vs RWE - an example of a pending climate litigation case in Germany

Is civil litigation a proper tool to stop climate change?

Insights / Doctrine of merger does not apply where judgment is for declaratory relief only

01-11-2021 / Energy & Infrastructure

Zavarco plc v Tan Sri Syed Mohd Yusof Bin Tun Syed Nasir [2021] EWCA Civ 1217

Doctrine of merger does not apply where judgment is for declaratory relief only

Insights / Climate Change Litigation Continueth – The Scottish Case: Greenpeace v. BEIS and the OGA (and BP too)

15-10-2021 / Energy & Infrastructure

The Scottish Court of Session has declared that dealing with the global environmental impact of the consumption of oil is a political matter for the UK Government, not a legal issue for the UK Courts in considering the validity of approval to drill new oil wells in a single field.

Climate Change Litigation Continueth – The Scottish Case: Greenpeace v. BEIS and the OGA (and BP too)

News / AfCFTA and Energy & Infrastructure

11-10-2021 / Energy & Infrastructure, Maritime

This article is the third in a series of articles looking at the impact of the African Continental Free Trade Area (the “AfCFTA”) on various practice areas and industry sectors that our clients operate in. This article focuses on Energy and Infrastructure and addresses some of the key questions our clients have asked us.

AfCFTA and Energy & Infrastructure

Insights / Supreme Court clarifies lawful act of duress

21-09-2021 / Energy & Infrastructure

In Times Travel (UK) Ltd v Pakistan International Airlines Corporation (Rev 2) [2019] EWCA Civ 828, the Supreme Court confirmed the existence of the doctrine of ‘lawful act duress’ under English law and its limited scope in commercial transactions.

Supreme Court clarifies lawful act of duress

News / Shell agrees pay out to Nigerian community to settle long-running oil spill dispute

17-08-2021 / Energy & Infrastructure

In 1991, the Ejama-Ebubu people began a legal campaign to hold Shell Nigeria (“Shell”) accountable for an oil spill that occurred in 1970. Shell accepted that these oil spills had occurred, but argued that these were caused by “third parties” during the Biafran war, for which Shell should not be held liable. Almost 20 years later, in 2010, a Nigerian Federal court ordered Shell to pay 17 billion naira to the Ejama-Ebubu community. Shell has unsuccessfully attempted to challenge this ruling over several years and, in November 2020, the Nigerian Supreme Court ruled that Shell could no longer appeal the decision.

Shell agrees pay out to Nigerian community to settle long-running oil spill dispute