The new EU sanctions packages: influence on international business

The new EU sanctions packages: Impact on International Business: A Practical Guide to Sanctions Risk Management

Mainstream

The new EU sanctions package is not just another list of bans. It is an event that changes the contractual obligations, logistics, financial flows and regulatory risks of the company at once.

The question is not whether the business will violate the new restrictions. The main question is whether the business will be able to legally apply them correctly without losing counterparties, without stopping payments and without being investigated in several jurisdictions.

The effective response to the next EU sanctions package starts with three checks:

1. What sectoral, personal and “anti-circumvention” measures have been introduced.
2. How they affect specific contracts, supply chains, and a company’s financial routes
3. What transition periods, licensing mechanisms and compliance solutions are available immediately.

If these three issues are not addressed centrally and in advance, businesses risk blocking payments, unilateral termination of contracts, denial of service to banks, personal liability of management and, in the worst case, an investigation for circumventing sanctions.

When international business faces the impact of new EU sanctions packages

New sanctions packages require an immediate reassessment of the business if:

• The company exports or imports goods that fall under the expanded Dual-Use list and “goods that contribute to the strengthening of industrial potential”;
• The supply chain includes companies from third countries, traditionally used for bypass schemes.
• Contractors are directly or indirectly related to sanctioned persons, including cases of ownership of less than 50%;
• products are used in sectors subject to new technological bans (energy, aviation, maritime transport, luxury goods, software, construction, engineering, financial services);
• Transactions are made through banks requesting a “No Russia clause” or end-use certificates.
• long-term contracts concluded before the next package are in force;
• Management or beneficiaries have citizenship or tax residency in countries subject to increased personal sanctions.
• The company plans to restructure, divest from assets or sell the business affected by sanctions.

The mistake most companies make

Many companies, after the next package of EU sanctions, start with the question:

“What are the prohibitions on our products?”

That's the wrong first question.

The right question is:

“How does the new package change the entire business risk architecture and what actions will provide maximum protection against regulatory claims, shutdowns and commercial losses?”

Sometimes the best result is an immediate suspension of individual deliveries using a “suspension clause” and notification to the counterparty. Sometimes, it is urgent to obtain a license from the competent authority of a Member State. Sometimes, a chain restructuring through a third country, with simultaneous enhanced compliance checks to rule out charges of circumvention. Sometimes, a complete exit from the market with all transitional provisions and no triggers for investigation.

Reaction to the new package is not a legal exercise in reading regulations. It is a commercial strategy for keeping the business.

Step 1. Understand the structure of the new package

The first thing to learn is not news headlines or generalized customer mailings, but the source: Regulations of the Council amending the basic acts, notably Regulation (EC) No 833/2014 and Regulation (EC) No 269/2014.

Key elements of the new package:

• which articles of the basic regulations have been changed;
• Expansion of lists of goods and technologies (Annex VII, VIII, XI, XXIII, etc.) Regulation 833/2014;
• new grounds for inclusion of individuals and legal entities in the sanctions lists;
• sectoral measures: ban transit, provision of services, licensing of intellectual property, cloud services, engineering, accounting and architectural services;
• Anti-bypass mechanisms: due diligence obligations of operators, banning deliveries in case of awareness of a possible redirection to Russia, the obligation to include in contracts No Russia clause;
• new bans on the purchase, import or transportation of sanctioned goods (including LNG, steel semi-finished products, diamonds, some oil products of Russian origin);
• measures against ships involved in circumvention of price ceilings and illegal transportation;
• Transitional periods for the termination of operations, the deadlines for the completion of old contracts;
• geographical expansion: - inclusion of new partners in the list of systemic risk countries to circumvent sanctions.

Each package is a multi-layered design, not just adding 100 items to the list.

Step 2. Determine what specific restrictions affect the company’s business

After reading the regulations, it is necessary to apply it to a specific operational landscape.

The following questions must be answered:

• whether the company’s products are subject to new product codes or descriptions, taking into account not only the final product, but also components, software and technology;
• Whether the company provides prohibited services (e.g. IT consulting, legal services, architectural design, enterprise management services) to residents of Russia or for use in Russia;
• whether the company has a direct or indirect business relationship with new sanctioned lists, including through chains of ownership, nominee directors or trusts;
• Whether financial flows pass through Russian banks or their subsidiaries abroad;
• whether the business of shipping, insurance, reinsurance, freight or bunkering, where new restrictions are imposed;
• Whether the company provides services or financing that facilitates the circumvention of sanctions, including advisory services on workaround schemes.

Missing one affected category may lead management to consider the transaction legal, while the regulator sees a direct violation.

Step 3. Checking the “anti-circumvention” provisions and obligations of exporters

Each new EU package strengthens mechanisms to prevent circumvention. With the 12th and 13th packages, this became a central theme.

Key anti-bypass elements:

• Article 12g of Regulation (EC) No 833/2014: Obligation to prohibit re-export to Russia and use of certain goods and technologies in Russia (No Russia clause);
• The duty of operators to take “best available measures” to identify and prevent circumvention risks;
• The exporter’s awareness of possible circumvention makes the transaction illegal even without the contractor’s formal inclusion in the sanctions lists.
• The need to implement enhanced due diligence in relation to third countries through which trade is carried out.

This means that the standard “sanctions” clause in the contract is no longer sufficient. A business must have a working end-use and end-recipient control system, documented and regularly updated.

Step 4. Check personal sanctions and property control

Any new package expands the lists of individuals and legal entities. The EU sanctions apply to:

• (a) persons included in Annex I to Regulation (EC) No 269/2014;
• legal entities controlled by such persons (the criterion of control is wider than 50% of ownership, including the ability to exert decisive influence);
• persons and organizations acting on behalf of or on behalf of the persons involved.

The mistake of many companies is to limit the check of a direct counterparty. It is necessary:

• identify the entire chain of owners to the ultimate beneficiary;
• check the management of the counterparty for links with sanctioned persons;
• monitor changes in the composition of shareholders after the introduction of the package, so as not to be in a situation of de facto control by a blocked person.

If the contract does not provide for the right of immediate termination in the event of a contractor or its ultimate beneficiary falling under sanctions, the company may be forced to choose between breach of contract and violation of the sanctions regime.

Step 5. Analyze the financial and banking implications

Each new package of sanctions immediately affects the work of banks and payment systems. It is necessary to evaluate:

• Does not the bank service the company or the corresponding bank of persons who have fallen under blocking sanctions;
• Whether banks require certificates of the final recipient, information about the supply chain, confirmation of the absence of a “Russian trace”;
• how vulnerable are payments in euros and other currencies to deviation at the level of correspondent banks due to excessive compliance (de-risking);
• Whether restrictions on the provision of correspondent accounts, currency exchange services or payment processing are applicable.

Even if the transaction is formally authorized, the bank can block it or terminate the banking service agreement if it considers the sanctions risks of the company unacceptable. Therefore, the business must prepare a security file in advance: legal opinion, transaction structure, licenses and regulatory confirmations.

Step 6. Use transition periods and licensing mechanisms

The Council of the European Union often provides for transitional provisions:

• for the performance of contracts concluded before the date of entry into force of the package, within a certain period (wind-down period);
• for the alienation of assets and exit from business;
• Payments required to complete the authorized transactions.

The mistake is to either ignore these periods before the operations are completed, or to act outside them, believing that old contracts are protected unconditionally.

In addition, the competent authorities of the Member States may issue licences for transactions prohibited by sanctions, including:

• for humanitarian purposes;
• to wind down the business;
• to protect the interests of the EU company;
• in exceptional cases, at the general discretion of the authority.

Licensing is a separate track that should run in parallel with the restriction analysis.

Step 7. Review contracts and strengthen sanctions clauses

With each new package, the strength of the standard sanctions clauses is tested for strength. An audit is required of:

• provisions on assurances and guarantees (no sanctions risks for the counterparty and its beneficiaries);
• the right to unilateral suspension and termination upon the imposition of new sanctions affecting the transaction;
• mechanism of notification of change of sanctions status;
• obligations to provide end-use certificates and end-recipient;
• provisions on the allocation of losses and force majeure that exclude or limit liability for non-performance caused by compliance with sanctions;
• the terms of applicable law and forum to avoid conflict of law and enforcement of a contract in a jurisdiction that does not recognise EU sanctions.

Contracts entered into before the new packages are introduced should be checked for a grandfather clause – and if they do not, the legal risks of immediate supply disruption should be assessed.

Step 8. Compliance audit of supply chains and third countries

Due diligence can no longer be a one-off procedure. The new package of sanctions requires updating the entire risk map.

It is necessary:

• Identify all countries of transit and transshipment of goods;
• Verify the end user and end use by documents, not by the counterparty’s claims;
• to implement enhanced monitoring of supplies to countries with abnormally increased volumes of imports of sanctioned goods;
• analyze the beneficiaries of intermediaries, distributors, traders;
• assess whether the vessels used by the company are included in the lists of vessels suspected of circumventing sanctions (annexes to the regulations);
• conduct random “stress tests” of transactions for possible requests from national competent authorities.

It is desirable to issue such an audit with legally privileged channels so that the conclusions do not turn out to be a ready-made evidence base against the company itself.

Step 9. Prepare a scenario in case of investigation or request of the regulator

Each new package increases the likelihood of further requests, on-site inspections and administrative investigations by the national sanctions authorities of the Member States. The company must in advance:

• determine the person responsible for the sanction compliance;
• Collect and organize dossiers on key contracts affected by restrictions;
• prepare an internal legal position on the legality of continuation or termination of activities;
• assess the risks of criminal and administrative liability for officials;
• develop a protocol of interaction with regulators;
• In case of doubt, consider voluntary self-disclosure, which mitigates liability in some jurisdictions.

The investigation of the circumvention of sanctions is not a hypothetical scenario. National authorities are actively pursuing violations, and an inappropriate company response to requests can make matters worse than the initial transaction.

Step 10. Incorporate monitoring of new packages into business processes

EU sanctions packages are issued regularly. Waiting for a regulation to be published without a monitoring system is a strategy that will lead to an incident.

It is necessary:

• to establish legal monitoring of draft regulations, leaks, signals of the European Commission and national authorities;
• implement automatic screening of counterparties and transactions on updated lists;
• conducting a quarterly sanctions stress test of the business portfolio;
• Training commercial, logistics and financial teams;
• create a mechanism for the quick blocking of the counterparty or sending a request for a license within 24-48 hours after the package enters into force.

Businesses that view sanctions packages as external noise rather than as an operational factor are inevitably moving into a regulatory response zone.

The impact of the new sanctions package on various aspects of business: comparative

How to strengthen the position of business before the introduction of new sanctions packages

The best protection against the consequences of the next package is built long before it is published.

It is recommended:

• to include in international contracts a detailed sanctions clause covering future restrictions, the right of suspension, automatic termination and allocation of losses;
• Create scenarios of sanctions shock: Test how much of the revenue, contracts, and supply chains are critically dependent on markets and counterparties that may be banned at once.
• diversify supply routes and banking channels, avoiding excessive concentration in one jurisdiction
• systematically conduct compliance audits of the current portfolio for early signals of bypass risk;
• Maintain the end-use register and end-use certificates;
• obtain preliminary opinions of the national competent authority (where possible) on model transactions in order to reduce reaction times when a new package is introduced;
• to conclude agreements with banks on the rules for the exchange of information and the procedure for unlocking payments in sanction cases.

Investments in such preparation are paid off by the first failed business block.

Typical mistakes of international business in responding to new EU sanctions packages

1. Evaluate the package by media headlines, not by the text of the regulations.Missed transition periods, exceptions, licensing opportunities.
2. The company believes that if there is no direct ban, the transaction through a third country is legal. From the 13th and 14th packages, it stopped working.
3. An exporter who does not include a reservation in contracts with partners from third countries violates the very fact of exporting certain goods, even without proven re-export.
4. Limit check of the counterparty to the list of persons.Does not check the control by the sanctioned person, the possibility of influence, beneficiaries.
5. The Company continues to execute without the right to suspension or termination, and is faced with the choice: Violate the contract or violate sanctions.
6. Disregard licensing mechanisms because of their duration.Running a licensing after a problem often results in a waste of time. The license track must start immediately.
7. Many force majeure clauses do not cover sanctions or contain references to a right that may not exonerate.
8. The team continues to work “as usual”, and risk management exists only in the presentation for the bank.

Checklist for the company after the announcement of a new EU sanctions package

Before making commercial decisions, you need to answer 15 questions:

1. What regulations have been changed and from what date?
2. What new products, technologies or services are banned?
3. What specific product codes and descriptions are affected?
4. Are there new personal sanctions against the owners, management or beneficiaries of the contractors?
5. Are there transitional periods for the completion of operations and for what period?
6. What contracts are covered by wind-down or require licensing?
7. Is the No Russia clause required to be introduced immediately in existing and new contracts with third-country partners?
8. What payments that are in processing can be blocked?
9. How will the banks respond and what should they be provided with?
10. Are there high risk countries in the supply chain that appear in the Annexes to the Regulation?
11. Does the company provide prohibited services (consulting, architecture, IT, accounting) to Russian persons or for use in Russia?
12. Does the continuation of deliveries violate anti-circumvention provisions due to awareness of a possible diversion?
13. Is it necessary to apply for a license to the national competent authority?
14. What are the risks of personal liability of directors and compliance officers?
15. What is the priority scenario for maintaining the business: Suspension, adaptation or full exit?

What a strong strategy for adapting to the new sanctions package looks like

A strong strategy usually includes five levels:

1. Regulatory Intelligence & Legal Assessment Instant legal review of the new regulations, identification of all affected contracts, transactions, counterparties, goods.

2. Business Impact Analysis Assessment of Commercial Impacts: Stopping shipments, delaying payments, losing counterparties, needing to replace suppliers or markets.

3. Contract & Supply Chain Restructuring Activation of sanctions clauses, termination or suspension of contracts, review of supply chains, introduction of additional levels of control.

4. Update of compliance policies, screening systems, due diligence procedures, introduction of the mandatory “No Russia clause”, staff training.

5. Licensing & Regulatory Engagement – Simultaneous launch of licensing procedures, preparation of a protective position for regulators, building a dialogue with national authorities and banks.

Without a fifth level, businesses are left without official protection, and any independent interpretation of the law can be considered a violation.

FAQ

How quickly do new EU sanctions come into force?Normally from the time of publication in the Official Journal of the EU, unless the regulation itself specifies a delay. Waiting for a publication without a plan is risky.

Can I continue deliveries under old contracts after a new package?Only if the regulations explicitly provide for a transition period and the contract is concluded before a certain date. In the absence of transitional provisions or after their expiration, further deliveries are prohibited.

The ban excludes any actions that have the purpose or result of circumventing sanctions, even if formally the goods do not fall under the direct ban. It obliges companies to implement preventive measures and punishes for being aware of possible circumvention.

With the 12th package for certain goods – yes, it is a legal obligation of an exporter from the EU when concluding contracts with partners from third countries. The absence of a reservation is in itself a violation.

In certain cases, the national competent authority may issue a license, for example, to wind down operations or protect the interests of an EU company. Each case is assessed individually and a full file is required.

It is necessary to promptly provide a legal justification confirming the legality of the transaction, and if necessary, request an explanation or license from the regulator. Inaction leads to the freezing of funds.

EU sanctions may act as super-mandatory rules in EU countries and, depending on the conflict of laws analysis, affect the performance of a contract in arbitration or court. The direct extraterritorial effect, similar to the US sanctions, is smaller, but it is impossible to ignore them.

What to do if a new contractor company is not listed, but is associated with a sanctioned person? If the sanctioned person has the ability to exert decisive influence, transactions with such a company may be considered as an indirect violation. Detailed due diligence and, in case of doubt, a request to the competent authority is recommended.

Is it possible to do business with Russian subsidiaries of European groups that have not been subject to blocking sanctions?It is possible, but only within non-prohibited sectors and provided that the subsidiary is not used to circumvent sectoral bans. Stronger end-use control is needed.

Related services

• EU sanctions law, export controls and international compliance
• International Trade, Supply Chains and Contract Law
• Sanctions, Export Control and Business Compliance Investigations
• Regulatory Risk Management in the EU and the US
• Asset protection and business restructuring under sanctions
• Corporate Investigations and Personal Responsibility of Management

Related material

• EU sanctions against Russia: full review of existing restrictions
• “No Russia clause”: Practical guidance on implementation in contracts
• Export control of dual-use goods: Key rules for business
• Anti-Backstep Mechanisms of the 14th Package of EU Sanctions: What has changed for exporters
• How to get a sanction license in the EU: step-by-step
• Sanctions Compliance for International Traders and Logistics Companies
• Parallel exports and re-exports in the sanctions era: legal risks
• Interaction with banks under sanctions: How to Protect Payments
• Personal liability of directors for breach of EU sanctions

Conclusion

The new EU sanctions packages are not a static list, but a dynamic legal environment that changes the rules of the game for international business every few months. The response to the package can no longer be a legal department project in isolation from commercial management.

A strong position is built on three pillars: Immediate legal review of each new package, rapid adaptation of contracts and supply chains, and proactive work with licensing and compliance mechanisms. Companies that treat the next package as another panic attack are losing markets and money. Companies that meet it with a ready-made strategy retain business and reputation in any regulatory turbulence.