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1 August 2014

The Council of the European Union raises awareness of European investors of the risks relating to commercial activity in the annexed Crimea and extends economic sanctions in view of the situation in the Crimea and Eastern Ukraine

In the last weeks, the EU has approved and published several official statements on the situation in the Crimea and Eastern Ukraine.

On 18 July, the Information Note to EU business operating and/or investing in Crimea/Sevastopol (the “Information Note”) was published on the official website of the Council of the European Union, and on 29 July, the Presidents of the European Council and European Commission announced additional restrictive measures relating to the illegal annexation of the Crimea and the situation in Eastern Ukraine, which was officially published by the EU Council on 30 July (the “Sanctions Statement”).

1. Information Note

The EU Council warns European citizens and investors that the regulatory framework in the Crimea is rapidly changing and remains unclear. Any activity carried out under the Russian legislation in the territory of the annexed peninsula is not recognised by Ukraine and most other countries that follow the policy of “non-recognition” of the illegal annexation of the Crimea by the Russian Federation. The juxtaposition of jurisdictions leads to major legal uncertainty which has a direct impact on business. This concerns, among others, the validity of contracts and licences, the implementation of decisions of the Crimean courts in third countries, available legal remedies, etc.

2. Sanctions Statement

The Sanctions Statement establishes new restrictions for European investors on business activity in the Crimea and Eastern Ukraine and transactions with securities issued by Russian state-owned financial institutions, and prohibits investment in the key economic sectors of the Crimea.

Restrictions on economic activity in the territory of the Crimea and Eastern Ukraine

  • The EU has agreed the introduction of sanctions (travel bans, asset freezes, prohibition of business transactions) for 95 individuals and 23 commercial entities responsible for undermining or jeorpardising the territorial integrity, sovereignty and independence of Ukraine. Due to the extension of the list of companies and individuals subject to the EU sanctions, EU businesses must assess the suitability and legality of transactions with their partners to ensure compliance with the economic restrictions imposed by the EU.
  • As of 25 June, goods originating in the Crimea may no longer be imported into the European Union, unless they are accompanied with a certificate of preferential origin granted by the Ukrainian authorities. The Council also underlined that it may extend or reduce the number of natural or legal persons subject to the sanctions through the adoption of Council Decisions and/or Regulations.

Restrictions on transactions with securities issued by Russian state-owned financial institutions

  • Neither EU citizens nor European companies are allowed to purchase, sell and provide services in connection with the issuance of bonds and other securities with the maturity of more than 90 days by the Russian major state-owned banks, their subsidiaries and commercial entities acting in their name and on their behalf.

Prohibition of investment in the key economic sectors of the Crimea and Sevastopol

  • From 30 July, neither EU citizens nor European companies are allowed to invest into new projects in specific economic sectors in the territory of Sevastopol and the Crimea. In particular, restrictions apply to transport, telecommunications and energy infrastructure and exploitation of oil, gas and mineral resources. Export of equipment, financial and insurance services related to agreements in these fields are also prohibited.

On any queries relating to the situation in the Crimea, please contact Sergey Pogrebnoy, Tatyana Slipachuk or Michael Kharenko, or e-mail us at CrimeanDesk@sk.ua.

If you would like to receive regular updates on the developments in the Crimea, you are invited to subscribe to Sayenko Kharenko’s special Crimea Alert at tskrypka@sk.ua.

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