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New EU sanctions against Belarus – significant tightening in response to its use as a “circumvention country” and liability

published on 18 July 2024 | reading time approx. 8 minutes

The sanctions against Belarus have so far been much less far-reaching than those against Russia in many areas. While the sanctions against Russia have been regularly tightened and supplemented (for example, the 14^th package of sanctions against Russia was adopted on 24 June 2024), there have been only a few minor additions to the sanctions against Belarus in the past twelve months. However, new EU sanctions against Belarus came into force on 30 June 2024, which in some areas represent a significant escalation and alignment with Russian sanctions and in some cases even go beyond previous Russian sanctions.

According to the EU presidency, the declared aim was to prevent Belarus from being used as a way of circumventing Russian sanctions in the future and thus to make the sanctions against both countries more effective.

In addition, however, it also contains important clarifications on controversial issues – such as the question of the standard for the responsibility of EU companies for the actions of subsidiaries in Belarus that violate sanctions, as well as the mitigating effect of self-reporting.

The following new regulations are particularly noteworthy:

Sanctions against specific services provided to certain Belarusian individuals (in particular the Belarusian state and its representatives)
Obligation of EU companies to introduce control measures and measures to prevent Belarusian subsidiaries from circumventing sanctions
Obligation to use a so-called “no Belarus clause” in contracts of EU exporters for certain goods
Extension of import bans and the export ban on dual-use goods and advanced goods and technologies, as well as further export restrictions on goods that could contribute in particular to strengthening Belarus' industrial capacities, and on luxury goods
Ban on transit deliveries of sensitive goods through Belarusian territory
A more comprehensive ban on road transport of goods within the EU territory for Belarusian transport companies
In order to facilitate the withdrawal of investments from the Belarusian market, there are new exemptions from the applicable import and export bans. These allow the delivery or transfer of certain goods or their import into the Union for this purpose until 2 January 2025
In the future, full and timely self-reporting of a violation of restrictive measures may be taken into account as a mitigating factor

Detailed description

PROHIBITION OF SERVICES

Specific services provided to certain Belarusian persons will be prohibited in the future for companies and other persons from EU member states.

The following services are affected:

accounting, auditing, including the audit of financial statements, bookkeeping or tax services, management consulting or public relations services
architectural and engineering services
legal and IT consultancy
market and opinion research services, technical testing and analysis services and advertising services
software for business management and software for industrial development and manufacturing
related services such as technical assistance, intermediation, financing, etc.

However, the ban only applies to services provided to the following recipients:

the Republic of Belarus, its government, public bodies, corporations or agencies
any natural or legal person, entity or body acting on behalf of or at the direction of the Republic of Belarus, its government, its public bodies, corporations or agencies

However, even for services provided to the above-mentioned recipients, the following exceptions and transitional arrangements apply:

These restrictions do not apply to the provision of services that are strictly necessary for the termination of contracts concluded before 1 July 2024 that do not comply with the new restrictions, or for ancillary contracts necessary for the execution of such contracts, until 2 October 2024.
Exemption for subsidiaries until 2 January 2025 – the prohibitions do not apply until 2 January 2025 to the provision of services intended for the exclusive use of legal persons, organisations or institutions established in Belarus, which are owned or controlled by a legal person, organisation or institution established under the law of a Member State, a Member State of the European Economic Area, Switzerland or a partner country.
The prohibition on services does not apply to tax, audit, accounting and legal services
- if the provision of the services is absolutely necessary for the exercise of the right of defence in legal proceedings and the right to an effective remedy,
- if the provision of the services is absolutely necessary to ensure access to court, administrative or arbitration proceedings in a Member State or to ensure the recognition or enforcement of a judgment or arbitral award issued in a Member State, provided that the provision of the services is in accordance with the objectives of this Regulation.
However, prohibited services may continue to be provided for certain purposes, provided that the competent authorities authorise the provision of such services under the conditions they deem appropriate.

FACILITATED DEDUCTION OF INVESTMENTS

In order to facilitate the withdrawal of investments from the Belarusian market by economic operators from the Union, temporary derogations from the prohibitions on the import and export of goods and the provision of certain services imposed by Regulation (EC) No 765/2006 are introduced by Decision (CFSP) 2024/1864.

The exemption allows the sale, supply or transfer of certain goods or their import into the Union until 2 January 2025 and applies only to goods that were already physically in Belarus at the time the relevant prohibitions entered into force. The services may be provided only to the legal persons, entities or bodies resulting from the withdrawal of investments and solely for their benefit.

INCREASED DUE DILIGENCE REQUIREMENTS FOR EU COMPANIES

Under the new regulation, EU parent companies must use their best endeavours to ensure that their subsidiaries in third countries are not involved in activities that would lead to a result that the sanctions are intended to prevent.

EU companies that sell battlefield goods to third countries must introduce due diligence mechanisms from 2 January 2025 to identify, assess and mitigate the risks of re-export to Belarus.

“NO-BELARUS CLAUSE”

EU exporters are obliged to include a so-called “No Belarus Clause” in their contracts from 1 July 2024. Such a clause must contractually prohibit the re-export of sensitive goods and technologies, battlefield goods, firearms and ammunition to Belarus or the re-export for use in Belarus.

EXPORT BAN

The export ban on dual-use goods and advanced goods and technologies has been extended, as have other export restrictions on goods that could contribute to strengthening Belarus' industrial capacity in particular.

Further restrictions will also be introduced on the export of goods and technologies for maritime shipping and luxury goods to Belarus.

IMPORT BAN

The direct or indirect import, purchase or transfer to the EU of gold and diamonds from Belarus, as well as helium, coal and mineral products, including crude oil, has been banned. The latter measure is complemented by a new export ban on goods and technologies suitable for oil refining and liquefaction of natural gas.

Contracts concluded before 1 July 2024 may be fulfilled until 2 October 2024. Exemptions may be requested in duly justified cases, for example where the health and safety of people is at stake. If certain supplies and services are necessary for the conduct of business in Belarus, exemptions may be requested until 31 December 2024.

TRANSPORT AND TRAFFIC

The ban on transporting goods by road in the EU with trailers and semi-trailers registered in Belarus is being extended. This now also applies if these are towed by lorries registered outside Belarus.

In future, operators in the EU who are 25 per cent or more owned by a Belarusian natural or legal person will be prohibited from transporting goods on EU roads. This also applies to transit traffic.

The transit of dual-use goods and technologies, goods and technologies that could contribute to the military and technological armament of Belarus or to the development of its defence and security sector, goods that could contribute to the strengthening of Belarusian industrial capacities, goods and technologies for use in the aerospace industry, and weapons exported from the EU via the territory of Belarus is prohibited.

“BEST EFFORTS” DEFENCE

Economic operators from the European Union shall make best endeavours to ensure that legal persons, entities or bodies established outside the Union and owned or controlled by them do not engage in activities that undermine the restrictive measures provided for in Regulation (EC) No 765/2006.

The term “best efforts” is to be understood as meaning all measures that are appropriate and necessary to achieve the objective of preventing the undermining of the restrictive measures contained in Regulation (EC) No 765/2006. These measures may include, for example, the implementation of appropriate policies, controls and procedures to mitigate and manage risks effectively, taking into account factors such as the third country of establishment, the sector of activity and the nature of the activity of the legal person, entity or body owned or controlled by the Union operator.

At the same time, “best efforts” should be understood as including only measures that are feasible for the Union economic operator, given its nature, size and the relevant factual circumstances, in particular the degree of effective control over the legal person, entity or body established outside the Union.

Such circumstances include the case where the Union economic operator is unable to exercise control over a legal person, entity or body owned by it for reasons beyond its control, such as the legislation of a third country.

PROTECTION OF EU COMPANIES

In the future, EU economic operators should be able to claim compensation for damages caused to Belarusian individuals and companies as a result of the implementation of the sanctions and the expropriation, provided that the national of a Member State or the company concerned does not have effective access to legal remedies, e.g. under the relevant bilateral investment agreement.

VOLUNTARY DISCLOSURE

Where a natural or legal person voluntarily discloses a breach of restrictive measures in a complete and timely manner, the competent national authorities should be able to take due account of such disclosure when imposing sanctions.

LEGAL FRAMEWORK

The new sanctions regime is based on the following legal acts, which entered into force on 30 June 2024:

Council Regulation (EU) 2024/1865 of 29 June 2024 amending Regulation (EC) No 765/2006
Council Decision (CFSP) 2024/1864 of 29 June 2024 amending Decision 2012/642/CFSP