Sanctions introduced by the European Union and Poland in response to the violation of Ukraine’s territorial integrity are intended to exert pressure on the aggressors. Which entities can be included on sanctions lists? Which goods are prohibited from being supplied to Russia and Belarus? What are the legal foundations for these actions? These and many other issues regarding the applicable sanctions are explained by Maciej Maroszyk, Chief Operating Officer at TC Kancelaria Prawna.
EU sanctions lists
The European Union has expanded its packages of sectoral and individual sanctions against the Russian Federation and Belarus, supplementing previous restrictions imposed since 2014 in response to the annexation of Crimea and the failure to implement the Minsk agreements. Their goal is to limit cooperation in areas affecting the development and financing of these countries’ military potential.
The restrictive measures applied are based on individual, economic, and visa restrictions. They are implemented in the form of, among other things, freezing the financial funds and economic resources of the entity subject to legal restrictions, as well as freezing the exercise of rights from shares and other securities and dividends. There is also a prohibition on making any financial funds or economic resources available to these persons or entities or for their benefit. It is also prohibited to knowingly and intentionally participate in activities whose object or effect is to circumvent the imposed sanctions. Additionally, economic entities on the list are excluded from public procurement or tenders, and specific individuals are subject to entry into the register of foreigners whose stay in the territory of a member state is undesirable.
Sanctions are imposed on specific individuals – all members of governments and their families, as well as oligarchs, businessmen, propagandists, people spreading disinformation, and individuals operating in the main sectors of the Russian economy who support military aggression. The restrictive measures also apply to economic entities on the list operating, among others, in the financial services and corporate sector, energy, transport, or advanced technology products. The bans also apply to entities spreading disinformation – state media and pro-Kremlin sources of information.
– Let us remember that the topic does not end with specific individuals on the list. The obligation to comply with sanctions applies to persons located in the territory of the European Union, including its airspace, citizens of European Union member states regardless of their place of residence, and any legal person, group, or entity registered or conducting business in the territory of a given member state – notes Maciej Maroszyk.
An exception to these orders – both Polish and EU – are resources meeting the basic needs of the persons against whom the sanctions are directed, legal aid costs, and humanitarian needs – transport of medical supplies, food, or energy raw materials.
Polish sanctions regulations
In order to counter support for the Russian Federation’s aggression against Ukraine, which began on February 24, 2022, Poland applies restrictive measures against individuals and economic entities included on the sanctions list. It constitutes an expanded version of the EU list, supplemented with additional individuals and economic entities. Sanctions are applied in the case of entities that directly or indirectly support the war in Ukraine and repression against civil society. The decision to include them may also apply to those who are directly related to persons or economic entities on the list, in particular due to personal, organizational, economic, or financial ties.
– Importantly, a temporary compulsory management has also been established over companies included on the national sanctions list. These actions are intended to enable the continuity of their operation, leading to the disposal of shares that, due to personal or capital ties, may be used to support Russian aggression against Ukraine or human rights violations in Russia and Belarus – says Maciej Maroszyk, Chief Operating Officer at TC Kancelaria Prawna.
What happens in the event of non-compliance with sanctions? The expert from TC Kancelaria Prawna explains that Polish law provides for the possibility of applying severe penalties for violations of specific regulations. This happens when individuals or economic entities fail to fulfill the obligation to freeze financial funds or economic resources, do not provide information required by EU regulations, or knowingly and intentionally seek solutions to circumvent the restrictive measures specified in the provisions of EU regulations. In this situation, they are subject to a financial penalty of up to PLN 20 million. It is imposed by the Head of the National Revenue Administration by way of a decision – explains the Chief Operating Officer of TC Kancelaria Prawna.
What is prohibited, what is allowed?
Sectoral sanctions imposed by the European Union and Poland primarily include a ban on the export of certain goods from the European Union to Russia and restricted access to key dual-use technologies, i.e., those used for both civilian and military purposes. In turn, restrictive measures imposed on Belarus mainly concern a ban on the export of the most profitable commodity groups to the EU.
– The legal regulations currently in force in the European Union have led, among other things, to the end of imports from Russia of coal, gas, a number of iron and steel products, gold and jewelry, chemical and mineral products, fertilizers, wood products, machinery products, and construction products. At the same time, the export of dual-use goods and technologies that could strengthen the military and technological potential of Russia and Belarus has been banned. The group of embargoed goods also included marine equipment, devices and technologies for the energy sector (in particular for oil extraction and refining), aircraft, spacecraft and their parts, and even luxury goods – lists the expert from TC Kancelaria Prawna.
Moreover, restrictions and bans have also been introduced regarding investment in the Russian energy and mining sector and the provision of a number of services to Russian entities – including the export, sale, supply, and transfer to Russia of all aircraft and other aerial vehicles and their parts and equipment, or performing any repairs and maintenance and providing financial services in connection with them. Russian foreign exchange reserves in the EU are also being blocked, and the largest Russian banks have been excluded from the SWIFT system, i.e., the dominant international settlement system in the world.
Exceptions to which the ban does not apply include certain commodity groups – live animals, milling products, dairy and food products, including meat, offal, fish, crustaceans, vegetables, fats, confectionery products not containing cocoa, food preparations, but also alcoholic and non-alcoholic beverages, tobacco, essential oils, syrups, and body wash liquids. Also not covered by the ban are furniture products, glass, ceramic products, land transport vehicles (other than railway or tram rolling stock and their parts and accessories), and even nuclear reactors, boilers, equipment, and mechanical devices.
Effectiveness of sanctions
Do the imposed restrictive measures have an impact on these countries? As Maciej Maroszyk points out, on the one hand, they are very strongly felt by Russians, and – according to many economists – the country is falling into an economic collapse. On the other hand, however, some ordinary Russians claim that they do not need Western goods to live, as due to the difficult situation in the country, access to them was already difficult before.
– The imposed sanctions, of course, hit the Russian economy – all its largest sectors are blocked, imports are more expensive, and exports are failing. However, Russia still relies on its raw material deposits, hence, in fact, completely cutting off their oil and gas – which Poland has done – may actually increase the actual, real value of these sanctions. Unfortunately, we have to wait for the results – concludes Maciej Maroszyk from TC Kancelaria Prawna.
Important information for Polish entrepreneurs
And how does the current situation relate to Polish entrepreneurs? In light of the applicable sanctions, they must verify the connections of their contractors with economic entities from Russia or Belarus – even if a given company does not directly cooperate with entities on the list. Although this is a legal obligation, as the expert from TC Kancelaria Prawna points out, more than half of Polish entrepreneurs have not taken any action in this direction, which puts them at risk of being included on the sanctions list.
Besides the specter of imposing restrictive measures, Polish companies have also been affected by the closure of many supply chains and changes in existing directions of activity. Are there solutions to counteract the negative consequences of the introduced restrictions?
– A way to do this is to obtain a permit or exemption from the appropriate public authorities to perform a specific activity based on EU legal acts – says the expert from TC Kancelaria Prawna and adds: – To this end, a very detailed and rigorous verification of legal relations and the connections of a given entrepreneur with an economic entity that has been subject to restrictive measures is carried out. This will help determine whether there is a possibility of mitigating the effects of sanctions felt by the affected company.
Source: TC Kancelaria Prawna.