Sanctions a legal labyrinth to business lawyers
CROSSFIRE OF SANCTIONS CAUSES UNCERTAINTY AMONG BUSINESS LAWYERS
Business lawyers do not like uncertainty. Nevertheless, business lawyers repeatedly describe various sanction regimes vague. Furthermore, opposing regimes also cause headache to international businesses.
Despite the existing believe that sanctions are a relevant topic and risk only in a financial sector, sanctions have become imperceptibly a common business risk. Therefore, all companies have to identify and manage various sanction regimes to minimize possible financial and negative effect of violation of sanctions. Furthermore, sanction lists are modified and changing on a daily basis, moreover, they are planned and implemented by different governmental and international bodies. Therefore, these lists are not always aligned between different regimes.
Legal labyrinth of sanctions is a reality to multinational and -jurisdictional companies. Therefore, we have gathered a short guidance regarding relevant questions of sanctions and how to comply with them.
What are sanctions? | Introduction
Sanctions are preventive measures to influence the policies or actions of certain high-risk persons, groups or states when such policies or actions are considered a threat to international peace and security.
They target the government of a specific state and persons or entities affiliated with that government, or they can also be directed at certain groups. In addition, sanctions can be imposed to restrict the availability of products, services, materials, technologies or know-how used in the activity being targeted by them.
Sanction regimes | Legal labyrinth
There are existing various sanction regimes implemented by different sanctioning bodies like the European Union, the UN Security Council, US Office of Foreign Assets Control (OFAC), HM Treasury among others.
For example,
- The EU consolidated list of sanctions applies to all corporate entities constituted in a member state;
- OFAC sanction list applies to corporate entities constituted in the US, any entity that trades in US dollars, uses US goods or components, has a US parent, subsidiary or affiliate, works through a local agent or supplier with a US connection;
- The UN Security Council sanction list applies to all UN Nation states.
Beyond these, companies may also need to consider other sanctioning bodies depending on the territories in which they trade, currencies they trade in and their partnerships, alliances exist.
Further to the above, counter sanctions exist which gives to the legal labyrinth a new dimension. For example, Russia has introduced counter sanctions.
Checklist for businesses | Key to master various regimes
Destination country | Subject to sanctions
Firstly, clarify whether the export destination country is a subject to any sanctions. In addition, it should be noted that providing information related to technology or products which are subject to export restrictions can also be prohibited regardless of where the provision of information takes place. Therefore, in case the recipient of above information is a person residing in a sanctioned country or a company registered in such country, or if the information is intended for use in such country thorough sanction screening is necessary to be conducted.
Product | Level of risk involved
Secondly, check whether the exported product is subject to any restriction. Considering that sanction lists may vary, it is necessary to review all applicable regimes thoroughly to determine whether the exported products are subject to restriction and if so, whether fully or partially.
Business partner | Review background
Thirdly, review whether your business transactions involve persons or entities named on a sanctions list. The transfer of any funds or resources to designated individuals and entities, whether directly or indirectly, is prohibited. Additionally, companies owned or controlled by sanctioned entities or sanctioned persons, as well as customers who have a relationship with a sanctioned entity are also presenting a business risk.
Compliance | Choose conservative view
Fourthly, establish a well-documented trade compliance policy and easy-to-understand procedures. Clearly communicate these policies and procedures to employees and third parties that operate on behalf of the company, for example, sales agents. Update policies and train employees on regular basis.
Our recommendations | To do -list
Finally, we have gathered herein below our recommendations when drafting and creating Trade Compliance policy for your company.
- Review sanction regimes applicable to your business
- Draft and execute sanction compliance policy – update frequently
- Incorporate sanction screening tool to operational processes
- Execute best practices principles that include applicability of strong defense argumentation
- Choose conservative view and approach when interpreting sanction regimes
Contact relevant business law partner to support and provide industry know how at the time corporate policies are drafted.
Our, LKOS Law Office, specialists are at your disposal should you have any questions regarding sanctions, trade quotas or international trade.
Contact your current contact person or our specialist in this field Oscari Seppälä for further information or by phone (+358 40 672 4285).
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About us | LKOS Law Office
LKOS Law Office is an internationally recognised high-quality boutique business law office established in Helsinki, Finland. We provide legal services to foreign and domestic companies. Furthermore, our NewLaw -concept secures that we serve all of our clients individually and by way of exceeding their preliminary expectations regarding business law services. Further to this, we are a reliable partner in a rapidly changing business environment.
In case you are interested in hearing more about our services and personnel, please do not hesitate to contact us by email or visit LKOS Law Office webpage for further information.
*This article is for general information purposes only and does not constitute a legal advice.
