Professional and business service limited exception continued until 30 September

Both UK and EU Russian sanctions prohibit UK and EU persons from providing a range of ‘professional and business’ services to entities incorporated or constituted under the laws of, or based in, Russia.

EU entities benefit from the ability to continue to provide certain services under an exception within the EU Russian sanctions, which was scheduled to expire on 20 June but has been extended until 30 September. The exception applied to the provision of business and management consulting services intended for the exclusive use of legal persons, entities, or bodies established in Russia owned by, or solely or jointly controlled by EU companies, EEA companies or “Annex VIII” partner country companies, including, for example, the UK and USA.

Unless the exception is extended again, after 30 September, EU firms relying on the exception will need to have an ‘authorisation’ to lawfully proceed, the equivalent term for a licence in the UK.

The UK equivalent restriction has never included this exception, and a licence has always been needed.

‘Professional and business services’ include accounting; auditing, including statutory audit; bookkeeping or tax consulting services; business and management consulting; public relations services; architectural and engineering services; legal advisory services; and IT consultancy services.

Andreas Haak, EU trade law sanctions expert at Pinsent Masons, said: “To the extent that companies from EU member states are involved in the provision of sanctioned professional and business advisory services in reliance on the exception, it is advisable to use the time afforded its extension to prepare for its expiry and assess the current grounds within the EU Russian sanctions under which authorisation to continue may be granted.  Engagement with the competent authority in their relevant member state may also be prudent.

Haak continues “The EU has stated it in its FAQs on the EU Russian sanctions that it does not foresee granting general authorisations permitting otherwise prohibited certain activities generally, as can be implemented in the UK and US, as that would amount to a de-facto exemption that the Council would need to establish explicitly. Rather, the EU’s approach is to introduce ‘derogations’ that permit the competent authorities of an EU member state to authorise otherwise prohibited activity in certain circumstances. This statement by the EU was made following the issue of a general authorisation by the German Federal Office for Economic Affairs and Export Control, referred to as BAFA, available only to German entities and nationals permitting the provision of the sanctioned services necessary for the exclusive use of legal persons established in Russia that are owned or controlled by an EU company, EEA company or ‘Annex VIII’ partner country company. Notably, any activity conducted under the general authorisation is subject to prior registration and further reporting.”  

Stacy Keen, UK sanctions expert at Pinsent Masons, said: “This is one of the many examples of divergence between the UK and EU Russian sanctions regimes. The UK equivalent restriction has never included an exception for Russian subsidiaries and a licence from the UK’s export control joint unit has been required since the implementation of this restriction for UK persons to lawfully provide such services to Russian entities. A general licence, the equivalent terminology for an EU authorisation albeit general authorisations are not available,  was granted for limited circumstances connected with the related UK legal advisory services restrictions, which is understood to have been introduced to address the unintended consequences of the restriction that were not addressed by the statutory restrictions.”