New EU Sanctions and Counteracting Legal Trends: Key Changes

Key Events in July:

1. 18th EU Sanctions Package:
   • Expanded Lists: Restrictions imposed on 14 individuals, 41 companies, and 22 banks (including T-Bank, Yandex Bank, Ozon Bank, Surgutneftegazbank, DOM.RF, and their >50% owned subsidiaries). A full prohibition on financial transactions replaced previous SWIFT restrictions. Transactions with the Russian Direct Investment Fund (RDIF) and organizations it controls are prohibited.
   • Blow to Investment Arbitration: The EU introduced a norm allowing member states to refuse recognition and enforcement of investment arbitration awards if they violate sanctions regulations (Nos. 269, 833), citing public policy. Experts note this violates the EU countries’ international obligations under Bilateral Investment Treaties (BITs) with Russia.
   • Recovery of Damages from Investors: New Articles 11e and 11f of Regulation 833/2014 allow EU states to recover damages and costs from investors (individuals and legal entities) who initiated investment arbitration against the EU/its members due to sanctions, participated in it, or attempted to enforce an award. This norm is criticized as illogical, as the investor is merely exercising rights granted by BITs, which the state itself is violating.
   • Energy and the “Shadow Fleet”: The price cap on Russian oil was lowered to $47.6 per barrel, with semi-annual adjustments. The import of oil products refined from Russian oil into the EU for third countries is banned (exempting USA, Canada, UK, Switzerland, Norway). Transactions involving the Nord Stream pipelines are prohibited (except for environmental needs). The “shadow fleet” list was expanded by 105 vessels. The effectiveness of these measures is questioned due to circumvention schemes and the Russian business’s adaptation.
2. New Approaches in Russian Courts (Sanctions-Related Disputes):
   • Asset Unfreezing: Courts (e.g., Moscow Commercial Court in Case No. А40-218392/24-47-2425) refuse to award frozen sums until the claimant obtains an official refusal from the regulator (e.g., OFAC) for an unblocking license, even if the chances of obtaining it are low. Assets are considered temporarily restricted, not lost.
   • Anti-Suit Injunctions (Expanded Scope): A practice has emerged of extending anti-suit injunctions (Art. 248.2 of the Russian Commercial Procedure Code) beyond the specific foreign claimant to the entire group of companies and beneficiaries (Case No. А21-16114/2024 against the Renaissance Capital group). Courts view the group as a single business managed from one center, enabling effective enforcement of the injunction.
3. International Arbitration and Recognition of Awards:
   • Priority of Arbitration: The Russian Supreme Court (Case No. А40-148733/2024) overturned a refusal to issue an enforcement writ for an award from the ICAC at the RF CCI, reiterating that state courts cannot review the merits of an arbitral award and can only examine formal grounds for refusal of recognition/enforcement.
   • Recognition of Foreign Awards in Russia: Russian courts strictly require an international treaty or proof of reciprocity to recognize foreign awards (Case No. А56-49800/2024). Proving reciprocity (evidence that similar Russian court decisions are enforced in the foreign country) is difficult, leading to refusals, especially for cases from “unfriendly” countries.
   • Recognition of Awards in the UAE (DIFC): DIFC courts continue their practice of recognizing foreign arbitral awards (including Russian ones, e.g., from the RSPP Arbitration Center) under the “conduit jurisdiction” principle, even without the debtor’s assets in the DIFC. This allows creditors to use the UAE as a platform for subsequent enforcement throughout the country.
4. Other Events:
   • UK: Sanctioned 2 companies and 135 “shadow fleet” tankers, lowered the oil price cap to $47.6. OFSI issued a General Licence to unfreeze assets of non-sanctioned investors blocked due to a sanctions-designated broker in the chain.
   • USA (OFAC): Announced the creation of a “Sanctions Reconsideration Portal” – an online portal for submitting delisting petitions (SDN, etc.), aimed at simplifying the process (public consultation until 25.08).
   • Precedent in Germany: A Russian company successfully reclaimed a prepayment for a contract unfulfilled due to sanctions, obtaining a license from the German Central Bank based on Art. 11(4) of EU Regulation No. 833/2014 (permission for reimbursement to exit the Russian market). This is a rare but significant precedent.
   • Investments for Foreigners: Russian Presidential Decree authorized foreign investors (including from “unfriendly” countries) to buy Russian securities (shares, OFZs, corporate bonds, fund units) on the primary market and open deposits via the special “Type I” account (“Счет «Ин»”), with the possibility of withdrawing income abroad.
   • Compliance in Hong Kong: Hong Kong banks tightened checks on clients with Kyrgyz passports (and other CIS, Caribbean, Vanuatu passports), fearing they are Russians using passports to circumvent sanctions. The key criterion is “substance over form” (actual residency and ties to the passport country).

Key Trends:

• Escalation of EU Sanctions: Focus on complete financial isolation of Russian banks/companies, pressure on investment arbitration, tightening energy restrictions, and combating circumvention (“shadow fleet”).
• Russia’s Counteracting Legal Strategies: Adaptation of judicial practice: stricter requirements for unfreezing assets, broad application of anti-suit injunctions to corporate groups, protection of Russian court and arbitration jurisdiction.
• Problems in International Law: EU norms denying arbitration award recognition/recovery of damages from investors raise concerns about EU countries’ compliance with BITs and international law principles.
• Search for Circumvention Paths and New Jurisdictions: Russian businesses and counterparties seek ways to recover funds (German precedent), enforce awards (via DIFC in UAE), attract capital (Type I account), facing enhanced compliance scrutiny (Hong Kong).