Russia/Ukraine sanctions: are you or your clients at risk of breaching the sanctions?
BY LUCY WILLIAMS AND NICOLA MOSTERT – JUL 08, 2022 7:55 AM AEST
Snapshot
- The Federal Government recently imposed a substantial number of broad sanctions measures in response to the Russian threat to the sovereignty and territorial integrity of Ukraine.
- Australian lawyers and their clients may be at risk of breaching the sanctions, particularly if dealing with individuals or companies from Russia, Belarus and Ukraine.
- Lawyers should review their client files in consideration of the sanctions and contact the ASO for assistance if necessary.
Australia’s expanded sanctions regime has recently featured in news headlines following Russia’s further invasion of Ukraine in February 2022.
Sanctioned: since 2014
Since 2014, Australia has imposed autonomous sanctions as a matter of foreign policy pursuant to the Autonomous Sanctions Act 2011 (Cth) (the ‘Act’) and Autonomous Sanctions Regulations 2011 (Cth) (the ‘Regulations’) in response to the Russian threat to the sovereignty and territorial integrity of Ukraine following Russia’s annexation of Crimea.
Commencing in 2014, the Federal government:
- imposed targeted financial sanctions and travel bans on certain Russian and Ukrainian individuals that the Minister was satisfied were ‘responsible for, or complicit in, the threat to the sovereignty and territorial integrity of Ukraine’ (Autonomous Sanctions (Designated Persons and Entities and Declared Persons – Russia and Ukraine) List 2014 (Cth)); and
- prohibited exports and supply to Russia, Crimea and Sevastopol of certain goods or services, particularly relating to arms and infrastructure for the transport, telecommunications or energy sectors or the exploitation of oil, gas or mineral reserves (Autonomous Sanctions (Russia, Crimea and Sevastopol) Specification 2015 (Cth)).
Since February 2022, the Federal Government substantially broadened its sanctions against Russia/Belarus, in particular, by passing legislation that broadened the scope of individuals and entities on which Australia can impose targeted financial sanctions (Autonomous Sanctions Amendment (Russia) Regulations 2022 (Cth)). The sanctions measures now include:
- restrictions on the export or supply of certain goods including arms, aluminium, certain luxury goods and items suited for use in oil exploration or production;
- restrictions on the import, purchase or transport of certain goods including arms, energy products (such as gas, coal or oil) and goods originating from specified areas of eastern Ukraine;
- restrictions on certain commercial activities including dealing with financial instruments or the provision of credit to certain designated Russian or Ukrainian companies and financial institutions;
- restrictions on the provision of certain services, which could extend to the provision of legal advice;
- restrictions on providing assets to or dealing with the assets of designated persons or entities; and
- travel bans on designated persons.
The Federal Government has significantly expanded the list of designated individuals and entities to include senior officials of the Russian government, a number of manufacturing companies, energy producers, media companies, financial institutions including Russia’s central bank and its largest company, Gazprom.
There are serious consequences for contravening a sanctions law. Individuals face up to ten years imprisonment and expensive fines (up to $525,000 or three times the value of the transaction) for breaches while corporations face fines of up to $2,100,000 or three times the value of the transaction (Autonomous Sanctions Act 2011 (Cth), Part 3).
What does this mean for Australian lawyers?
While the sanctions imposed on trade with Russia are unlikely to have a significant impact given Australia’s limited trade relationship with Russia, Australian lawyers must be aware of the impact of these sanctions on their practice and ensure that they and their clients comply with the sanctions.
In particular, Australian lawyers must ensure that they are not in breach of section 13 of the Regulations regarding supply of a ‘sanctioned service’. A sanctioned service includes the provision of advice or a service that assists with, or relates to, the supply of sanctioned goods to Russia or specified areas of eastern Ukraine, or whose supply, sale or transfer is for the benefit of Russia or specified areas of eastern Ukraine. It also expressly prohibits the provision of advice to the state of Russia if it relates to military activity or oil exploration and production.
Further, section 14 of the Regulations prohibits dealings with designated persons or entities and provides that a person contravenes the Regulation if they make an asset available to or for the benefit of a designated person or entity. Prudent lawyers should ensure they are aware of and be able to advise their clients in relation to whether they may be in breach of the Australian sanctions regime when acting on matters which may involve the sale or purchase of assets to or from designated persons or entities. They should also consider whether there are any flow-on benefits to designated persons or entities, for example, if a designated person is a shareholder in a company that is party to a transaction which may result in a subsequent benefit to the shareholders of that company (by way of dividend payments or capital gains).
Australian sanctions are regulated by the Australian Sanctions Offce, which operates an online portal where persons can ask a question about sanctions, request an Indicative Assessment to ascertain whether you are affected by sanctions, and apply for a sanctions permit to enable persons to deal with sanctioned goods or assets in certain circumstances.
If you think you are or may be holding funds in trust that are subject to sanctions, you must hold the asset and inform the Australian Federal Police (‘AFP’) as soon as possible. Asset holders are required by law to provide the AFP with specific information about freezable or controlled assets (Autonomous Sanctions Regulations 2011 (Cth), s 24).
It would be prudent of all lawyers to review their client files and consider whether any clients may be directly sanctioned or are likely to have dealings that may breach the sanctions. Lawyers should also be aware that Lawcover is unable to pay claims which would expose Lawcover to potential breaches of the sanctions law.
This article originally appeared on lsj.com.au