Navigating Russia Sanctions: US, EU And Japan Update

US, EU and Japanese sanctions targeting Russia are becoming increasingly aligned as a result of each jurisdiction's continued tailoring of sanctions targeting Russia. In each jurisdiction there are now laws which block funds being made available to certain individuals and entities close to the Russian political regime and, more recently, broader rules which aim to restrict Russia's finance, energy and defence sectors. Although the US, EU and Japanese rules are alike in a number of respects, they also diverge in many ways and may not give the same answer to a particular question. This is particularly relevant to international business, where the rules of more than one jurisdiction may be triggered. This client publication updates our previous note on the topic1,and highlights the key issues and differences in the US, EU and Japanese rules that financial institutions should be aware of.

This client publication is comprised of the following three parts:

1. US, EU and Japanese Sanctions - What You Need to Know;

2. Overview of Recent US, EU and Japanese Sanctions; and

3. Consolidated US, EU and Japanese Sanction List.

1. What You Need to Know

Sanctions should not necessarily prevent business with Russia outright, provided that care is taken not to breach applicable rules. Sanctions risk can be mitigated by a range of measures, including documentary protections such as representations and/or undertakings to ensure that the proceeds of a loan are not used to finance business in breach of sanctions. Legal advice should be sought in difficult cases (particularly where there is a cross-border element), given that the precise impact of sanctions on any transaction will always be fact specific. In addition to the US, the EU2 and Japan, the following countries currently have Russia sanctions programmes in place as a result of the situation in Ukraine: (i) Albania; (ii) Australia; (iii) Canada; (iv) Iceland; (v) Liechtenstein; (vi) Moldova; (vii) Montenegro; (viii) Norway; (ix) Ukraine; and (x) Switzerland. The diagram below indicates in blue the global spread of Russia sanctions: Despite recent convergences in US, EU and Japanese rules, fundamental differences remain and the rules should not be seen as giving similar answers in every case. To give a few examples: (i) EU rules catch debt issuances by designated energy sector entities which have a de minimis maturity of >30 days, whereas US rules only catch issuances by designated energy sector entities which have a maturity of >90 days (however, EU rules relating to issuances by non energy sector entities are aligned vis à vis US rules in both having a >30 day maturity requirement); (ii) EU rules on investing and trading in Crimea and Sevastopol are far stricter than US and Japanese sectoral rules, effectively preventing all such activity in those regions; and (iii) country lists of sanctioned persons and entities are not identical. International businesses must consider the full scope of potentially applicable sanctions rules which may extend beyond the rules of one jurisdiction. For example, a US company in Tokyo with trading operations in Germany would need to consider the scope and impact of US, EU and Japanese sanctions. US rules apply to "US Persons,"3 notwithstanding their location. Further, EU sanctions apply outside of the EU to any legal person or entity in respect of any business done in the EU, and to any EU nationals wherever they are located. Any non Japanese branches located in Japan would be subject to Japanese sanctions. EU sanctions...