The state of sanctions law at the beginning of February 2025 and the 15th package of EU-Russia sanctions

1. The 15th EU sanctions package against Russia – further amendments to EU sanctions law

We would like to start our overview of relevant topics and recent developments in EU sanctions law as a European response to Russia’s war of aggression against Ukraine, which is contrary to international law, with a few observations on the 15th EU sanctions package. On 16 December 2024, the EU member states once again agreed on a comprehensive package of sanctions. The focus has been on very different regulatory contents, which we will address below, with a focus on the following aspects. The fundamental structure of the sanctions regulations has remained unchanged. Personal sanctions are regulated by EU Regulation 269/2014, as amended by EU Regulation 2024/3189. Further sanctions under EU Regulation 833/2014 have been amended by EU Regulation 2024/3192. These regulations are in force since 17 December 2024.

We would like to highlight the topics of disinvestment, the measures regarding the shadow fleet and how to deal with the development of Russian jurisdiction and the protection of EU central securities depositories. Regarding the first two topics, we would like to refer you to our comments on the 12th EU sanctions package and especially to our comments on the shadow fleet. The existence of this so-called shadow fleet was not as well-known at the time as it is today – media-effective incidents have contributed to this.

2. Background and handling of the shadow fleet

Initially, there is nothing of significance to add to our comments on the 12th EU sanctions package regarding the definition of terms and the extent of the problem with the so-called shadow fleet.

The lack of abstract identification of a ship as part of the so-called shadow fleet suggests that intensifying observations and listing individual identified ships is a welcome approach.

From an abstract point of view, it should be noted that the ships, which often do not fly the Russian flag, have the right under international law to use the high seas in accordance with the principle of Freedom of the high seas as set out in Art. 87 of the United Nations Convention on the Law of the Sea (UNCLOS). As Art. 88 UNCLOS makes clear, international law envisages a peaceful use.

Preventively and based on international law, it will not easily be possible to ban the shadow fleet from the world’s oceans within the existing framework of internation regulations. Whether this means being defenceless against hybrid warfare is currently the subject of intense debate. The peaceful use of the oceans and of the waters regulated by coastal states is the basis of the freedoms granted. From an abstract point of view, it should be noted that the ships, which often do not fly the Russian flag, are to be granted the right of innocent passage under international law. In this respect, it is extremely welcome when individual ships are listed after identified sanctions violations, so that they can be directly affected by state measures at least after their listing if they move in waters under EU jurisdiction. Without going into detail, it should be mentioned at this point that the operational handling of these ships is also significantly affected by the fact that the US, at the end of the Biden administration, placed extensive listings of individual ships by its Office of Foreign Assets Control (‘OFAC’).

In contrast to EU sanctions law, the reach of US sanctions law is not limited by the requirement of a nexus to state sovereign rights.

This alone makes the listing of individual ships under OFAC even more significant for these ships than a listing by the EU.

The EU has listed 52 additional vessels as part of the 15th EU sanctions package, bringing the total to 79. This figure makes it clear that only a small fraction of all vessels attributable to the shadow fleet have been targeted so far.

This justifies our comment that a consistent expansion of the list would be welcome. By way of comparison, the OFAC-administered list currently includes more than 450 ships.

It is worth mentioning at this point that some flag states are reacting to the listings and withdrawing the flag from the affected ships. According to media reports, Barbados has withdrawn the flag from 46 ships at the end of last month based on the UK sanctions. The Panamanian ship registry has acted in the same way concerning 68 ships, as far as is known.

Being able to present a valid flag and being able to present valid and accepted insurance are basic requirements for commercial shipping operations. In our remarks on the twelfth EU sanctions package, we had already described the international agreements under which there is an obligation to provide proof of insurance. If this obligation is not fulfilled by ships of the shadow fleet, further measures should be considered. For example, Article 7 of the Bunkers Convention provides for the presentation of other financial security, such as a bank guarantee. It is crucial that the Contracting States of the Bunkers Convention are entitled to request consultations with the certifying State if it believes that the insurer or other guarantor named in the insurance certificate is financially unable to meet the obligations under the Bunkers Convention. It seems necessary to investigate this in any case for all ships affected by the US, UK or EU sanctions, firstly to comply with the obligations of Art. 7 para. 12 of the Bunkers Convention and secondly to draw the attention of flag states that have insufficiently reviewed the existing insurance cover in view of the requirements of the Bunkers Convention, to be made aware through the consultation process that a financial security does not exist that is in line with the Convention.

In view of the principle of freedom of the high seas as enshrined in international law, including the Convention on the Law of the Sea, there is currently no effective way of removing ships that are not transiting coastal waters or the exclusive economic zone of a coastal state from circulation, despite the particular hazard they pose. Consistent sanctioning of individual ships and port state control therefore appear to be the most effective means currently available to coastal states for containing the risks associated with the shadow fleet.

3. Divestment measures

Another issue that is worth mentioning in the context of the 15th EU sanctions package, also in connection with the 12th EU sanctions package, is the extension of the deadline for divestment measures. We have already commented on the fact that these divestments often go hand in hand with the enrichment of Russian, often state-affiliated or state institutions and actors and, conversely, lead to considerable economic losses for companies that withdraw investments from Russia. The possibility of obtaining exemptions for the absence of disinvestment measures has been extended beyond 31.12.2024 to 31.12.2025. In this respect, reference should be made to the provisions of Art. 5 aa para. 3 lit. d, the general official authorisation option of para. 3 a and Art. 11 para. 4 and Art. 12b para. 1a, 2a, 2b of EU Regulation 833/2014.

4. Protection against unjust mechanisms of the Russian judicial system – Art. 11c of EU Regulation 833/2014

Art. 11c of EU Regulation 833/2014 is a welcome new regulation.

This new regulation is to be classified as a protective mechanism against Russian court practice of unlawfully usurping jurisdiction. The background to this is a law (N 171-FZ) that was enacted in 2020 and amended Art. 248.1. and 2 of the Russian Arbitration Procedure Code.

As a result of these amendments, Russian courts claim exclusive jurisdiction over disputes involving Russian companies that are subject to foreign sanctions. Consequently, it is possible for Russian companies to submit disputes with economic operators based in the EU to Russian courts for decision and to additionally obtain an injunction known as an anti-suit injunction, which prohibits the continuation of proceedings conducted abroad. This approach is not linked to the requirement to conduct proceedings in the main action in Russia and provides for the payment of a penalty directly to the other party in the event of non-compliance.

At this point, it is worth mentioning that similar proceedings have been initiated against larger companies based in the EU. In Germany, Section 328 of the Code of Civil Procedure would prevent enforcement. The provision of Article 11c of EU Regulation 833/2014 prohibits the recognition and enforcement of corresponding court rulings from Russia in EU member states. Ultimately, Article 11c of EU Regulation 833/2014 is to be understood as a specific formulation of the concept of ordre public. While this regulation is to be welcomed, attention is drawn to the risks associated with Russian court practice of enforcing judgments handed down in such an unlawful manner outside the EU. It should also be noted that Russia has mutual legal assistance and extradition agreements with several third countries.

5. Protection of EU central securities depositories

Central securities depositories (‘CSD’) have an important role to play in the freezing of Russian assets. They hold large sums of Russian financial assets, which constitute frozen assets and the interest on which is not considered to be covered by the protection of property under international law. This classification is disputed by Russia and, given the enormous importance of EU-based CSDs, it is not surprising that EU-based CSDs are increasingly exposed to Russian retaliation and litigation. Art. 6b (5j) of EU Regulation 269/2014 addresses this development. It allows CSDs to request the release of cash to counter precisely these challenges. The protection is designed to be quite comprehensive and considers, for example, the situation in which an account has been debited without the prior consent of the relevant CSD due to a law, decree, regulation, court or administrative decision or other measure that is directly or indirectly attributable to the Russian Federation.

Regarding the interest regime already mentioned, the EU’s legal opinion is expressed with a non-liability clause and the claim that can be asserted against CSDs is limited to interest due under the contract. Any further profits generated by the investment of capital are therefore not subject to liability.

6. Amendments to the FAQs of the BMWK and the EU Commission

We would like to draw your attention to the updated FAQs that have been made available by both the EU Commission and the Federal Ministry for Economic Affairs and Energy since our last article on EU sanctions law.

The FAQs published by the EU Commission address the definition of ‘knowingly and intentionally’ in Art. 9 of EU Regulation 269/2014 and Art. 12 of EU Regulation 833/2014, i.e. the prohibitions on circumvention. The FAQs also refer to the ECJ decision in the criminal case against Mohsen Afrasiabi and others. In essence, it can therefore be said that an approving acceptance is considered sufficient for the subjective fulfilment of the offence.

Furthermore, the non-liability clauses, Art. 10 of EU Regulations 269/2014 and 833/2014, are explained. Accordingly, a successful defence of lack of knowledge is ruled out if the usual due diligence obligations have not been fulfilled by an economic operator established in the EU. Reference is made to the relevant guidelines for the implementation of enhanced due diligence measures to prevent the circumvention of sanctions.

The second paragraph of Article 3p, Section 4 of EU Regulation 833/2014, which is associated with the 14th sanctions package, is explained. The jewellery goods listed in Appendix XXXVIIIA, Part C are therefore not subject to the planned sanctions until further notice. When these rules were being drafted, there were already concerns regarding their feasibility and the verifiability of violations. This concerns jewellery made in third countries using Russian diamonds of a certain size. The FAQs provide a detailed description of the relevant rules and describe how the documentation requirements can be met in detail and how protection can be achieved for jewellery that has already been purchased. This is linked to the requirement for assessment and certification.

Clarification of what is meant by ‘appropriate remedial measures’ within the meaning of Article 12g (3) of EU Regulation 833/2014 is likely to be welcomed by all economic operators based in the EU who use a so-called no Russia clause. The current FAQ provides further guidance on this. It explains the scope of the ‘no re-export to Russia clause’ in detail.

The European Commission’s FAQ document now comprises more than 430 pages and is therefore more detailed than the explanations provided by the BMWK, which can be accessed via the following link (as of 04.02.2025) and provides explanations for a total of 72 different sub-items that often play a particular role in the interpretation of EU sanctions:

https://www.bmwk.de/Redaktion/DE/FAQ/Sanktionen-Russland/faq-russland-sanktionen.html

These explanations are not to be understood as conclusive and comprehensive. They provide a guideline. EU citizens and in particular economic operators in the EU should always consider whether and to what extent they consider it necessary to obtain tailored legal advice. Especially when it comes to fulfilling due diligence obligations, government agencies always emphasise that an individual assessment of all circumstances and risks is expected.

Given the level of detail in the regulations, if you do identify a need for advice, you should consider obtaining legal counsel; overview publications cannot replace advice in individual cases. This also applies to this article.

Do you have further questions on these or other topics? Our experts will be happy to support you with solutions tailored to your individual needs.