Continuing Legal Developments in Response to the Situation in Ukraine
As anticipated in our recent Commentary "Imposition of Sanctions Measures in Response to the Developing Crisis in Ukraine" and our updating Alert "Further Legal Developments in Response to the Situation in Ukraine," there have been recent developments that have led to the imposition of further international sanctions as well as responsive measures by the Russian Federation.
This Alert summarizes the key developments following our Commentary and our updating Alert, as of March 25.
On March 20, the United States issued a third executive order—Executive Order 13662—which builds upon existing Executive Orders 13660 and 13661. It grants the U.S. Secretary of the Treasury, in consultation with the U.S. Secretary of State, broad authority to target individuals or entities operating in any sector of the Russian Federation economy, including financial services, energy, metals and mining, engineering, and defense.
No individuals or entities appear to have yet been designated pursuant to Executive Order 13662. However, on the same day the United States issued Executive Order 13662, it designated, and thus blocked, 20 individuals as well as the first entity (Bank Rossiya), pursuant to Executive Order 13661. As noted in the general guidance from the U.S. Department of the Treasury's Office of Foreign Assets Control, U.S. persons are also prohibited from dealing with any entity in which a designated person (under the United States sanctions regime) owns, directly or indirectly, a 50 percent or greater interest, regardless of whether the entity itself is specifically designated.
It has been reported that U.S. regulated payment services providers have stopped card and payment services to Bank Rossiya's account holders as a result of these developments. It has also been reported that since March 1, the U.S. Department of Commerce's Bureau of Industry and Security has suspended licensing of exports to Russia. It remains unclear when licensing will recommence.
The European Union added a further 12 individuals to the list of persons designated under existing Council Regulation No 269/2014 of March 17 by Council Implementing Regulation (EU) No 284/2014. The effect is that the European Union has implemented the same travel restrictions and asset freezes against these 12 persons as reported in our last Alert. This requires, among other matters, that (subject to few limited exceptions), all funds and economic resources belonging to, owned, held, or controlled by such designated persons are frozen, and that no funds or economic resources will be made available to them, whether directly or indirectly, within the ambit of the jurisdiction of the European Union's sanctions regime.
The United Kingdom (UK) Export Control Office has suspended all extant licenses and application processing for licenses for direct export to Russia for military and dual use items destined for units of the Russian armed forces or other state agencies that could be or are being deployed against Ukraine. Export licenses to third countries for goods that may be incorporated into equipment for export to Russia (where there is a risk that the end product will be used against Ukraine) are also affected.
On March 12, Australia announced that it would impose targeted financial sanctions and travel bans against individuals determined to be instrumental to threatening the sovereignty and territorial integrity of Ukraine. As of March 24, Australia's financial sanctions and travel bans are expected to cover 12 Russian and Ukrainians individuals. While the Australian government has not yet identified these individuals, it is expected that the Australian list will likely include many individuals already designated by the United States and European Union.
As a general matter, the Australian sanctions regime, as administered and enforced by the Department of Foreign Affairs and Trade ("DFAT"), regulates activities by Australian citizens wherever they might be located. Although Australia's autonomous sanctions regime permits a broad range of possible sanctions measures to be imposed, current Australian sanctions related to events in Ukraine are targeted in scope. These sanctions, however, are not yet fully in force. Implementing autonomous sanctions involves a two-step process under Australian law and is anticipated to require a month or so to complete. First, the Autonomous Sanctions Regulations 2011 must be amended to provide the authority to impose sanctions targeting the relevant category of individuals or entities. Prior to enacting the amended regulations, DFAT is likely to follow its usual practice of issuing draft amendments to the Autonomous Sanctions Regulations 2011 for public comment. Second, once the Autonomous Sanctions Regulations 2011 have been amended, DFAT will update its Consolidated List of persons and entities to which Australian sanctions apply to include the 12 designated Russian and Ukrainian persons.
Canada has also amended its sanctions to include additional Russian and Ukrainian individuals on March 18 and again on March 21. With these latest rounds of sanctions, Canada has imposed sanctions on more than 30 individuals and one entity, Bank Rossiya.
In an apparent response to recent U.S. and Canadian sanctions, Russia has put in place travel bans against nine U.S. officials and members of the United States Congress, as well as 13 Canadian officials, preventing them from travelling to Russia.
Following the cessation of operations with Bank Rossiya by U.S. regulated payment services providers, the State Duma (the Russian parliament's lower chamber) is considering an amendment to the Federal Law on the National Payment System, which would (i) prohibit providers of payment, clearing, and settlement services from unilaterally terminating services necessary to ensure money transfers except as may be required by applicable rules and Russian law; (ii) obligate operators of payment systems to use only settlement and clearing centers located in Russia; and (iii) with the exception of international money transfers, prohibit transfer abroad by settlement and clearing centers of information related to money transfers within Russia.
As recent events have demonstrated, the situation may evolve quickly, and Jones Day will continue to keep significant developments under review.
For further information, please contact your principal Firm representative or one of the lawyers listed below. General email messages may be sent using our "Contact Us" form, which can be found at www.jonesday.com.
Sean T. Boyce
Steven W. Fleming
Michael P. Gurdak
Fahad A. Habib
Saudi Arabia / Washington
+966.12.616.1666 / +1.202.879.3663
Elizabeth A. Robertson
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