Sanctions 2024 Comparisons

The sanctions landscape changed fundamentally after Russia’s second invasion of Ukraine on 24 February 2022. A flurry of new sanctions rules were adopted by the EU in a total of 12 sanctions packages in 2022 and 2023. These rules are directly applicable in Denmark and came into force immediately, with few exceptions. Businesses and the public authorities that were tasked with advising on and enforcing the sanctions were given very little guidance from the EU as to the proper application of the sanctions. Hafnia Law Firm therefore experienced clients seeking legal advice on how to understand and apply the sanctions. Given the lack of guidance and the very wide scope of the sanctions rules, the first two years after the war in Ukraine were characterised by considerable industry chaos when it came to sanctions. In 2024, the scene has settled a little with the enactment of new sanctions rules slowing down.

There are no effects from the COVID-19 pandemic, which was considered a closed chapter in Denmark shortly before the war in Ukraine broke out.

Businesses are beginning to grasp the extremely wide scope and the implications of the sanctions adopted against Russia following the outbreak of war in Ukraine. In 2024, it went from legislative chaos to businesses getting back on their feet by gaining a better understanding of sanctions. Many businesses have implemented sanctions compliance programmes that aid in managing sanctions risks. While there are many, many sanctions rules that have been adopted by the EU, enforcement is lacking. The competence within sanctions is spread out between different state authorities. The Danish Business Authority has launched investigations into potential sanctions breaches following news stories by Danish and international media and reporting of potential sanctions breaches by Danish banks, but we are yet to see any criminal cases for breaching the newly enacted Russia sanctions.

All sectors that have international business, such as banking and finance, insurance, shipping and trade, as well as any form of export or import of goods and technology, are particularly affected by sanctions.

The Danish Ministry of Foreign Affairs has listed all competent Danish authorities. As can be seen, competence is divided between many different public authorities. The main authorities (regulators) are the Danish Business Authority, the Danish Financial Supervisory Authority, the Danish Ministry of Foreign Affairs, the Danish Customs Authority and the Danish Maritime Authority.

In practice, the most important reporting obligation is with respect to asset freezing. This is important for banks that routinely freeze payments that benefit designated persons or entities. Such freezing must be reported to the Danish Business Authority. There are other reporting obligations across the more than 40 EU Council Regulations that contain the current EU sanctions (see, for instance, Article 8 of Council Regulation (EU) No 269/2014), and it would exceed the scope of this article to list them all.

1. There has only been one significant court decision on breach of sanctions in the last three years: the Dan-Bunkering case. On 14 December 2021, Dan-Bunkering, Bunker Holding and the CEO of Bunker Holding were convicted of the illegal sale of jet fuel for use in Syria. This was a breach of sanctions adopted by the EU in 2014 against Syria. A total of 172,000 tons of jet fuel was sold and used in Syria. The sale took place to two Russian companies that were procurement agents for the Russian military. The jet fuel was delivered in the Mediterranean Sea. The vessels that received the jet fuel sailed to ports in Syria. The Court found that there was a clear breach of the Syria sanctions and issued fines of DKK4 million and DKK30 million. The Court further confiscated DKK15.6 million equal to the profit earned by Dan-Bunkering. The circumstances of the sanctions breach were particularly egregious given that the sales had taken place over several years and that the jet fuel was found by the Court to have been used by Russian bombers in Syria. It was US authorities that had tipped off the Danish authorities, and the sale of jet fuel continued even after the Danish authorities had questioned the legality of the sales.

2. In terms of significant legal developments, the sanctions enacted by the EU against Russia and Belarus following the second invasion of Ukraine on 24 February 2024 need no mentioning. The scale of the Russia sanctions is unprecedented and imposes risks for all business that have any dealings with Russia. Even businesses that do not have any nexus to Russia need to understand and be aware of the risks involved in breaching the Russia sanctions if the business has cross-border activity, such as shipping companies, exporters, banks, insurance companies, etc.

3. It is important to note a Danish judgment which, though not related to sanctions, illustrates a legal principle of fundamental importance for future criminal cases involving sanctions violations. In November 2022, the Danish Western High Court acquitted a Danish national who had been convicted in the District Court for violating Danish law on fishing quotas. The rules on fishing quotes are rooted in EU law. The District Court had found that the fisherman owned too many fishing quotas and issued a fine of DKK54 million and confiscated amounts of more than DKK200 million from several companies that the fisherman owned or controlled. On appeal, the High Court acquitted the fisherman, his companies and advisers on grounds that it was not set out with sufficient clarity in the law that owning too many fishing quotas was subject to criminal liability. The court referred to Section 1 of the Danish Criminal Code, which expresses the overriding principle of criminal law that in order to prosecute it must be clearly stated in the law that an act or omission is not only illegal but is subject to criminal liability. This principle will be used to defend in future sanctions cases (and is being used as a shield at the moment in various pending cases involving investigations by Danish authorities into potential sanctions breaches). The issue is that EU sanctions are very often extremely wide in scope, and one cannot necessarily determine from the wording of the legislation what specific acts or omissions are illegal.

It remains to be seen whether the Danish authorities will ramp up their enforcement actions. This is first and foremost a matter of resources.

So far, in practical terms, enforcement has been seen when authorities in Denmark have been tipped off, eg, by media (such as DanWatch), by banks reporting on asset freezes or by foreign authorities (such as in the Dan-Bunkering case). Danish authorities have not been allocated the resources necessary to undertake independent investigations. One could compare this with the dawn raids that have been seen in cases involving suspected competition law breaches. Those are not (yet) reality in Denmark when it comes to sanctions violations. There are provisions which grant legal basis to authorities to make a dawn raid, but it remains to be seen whether and when such powers will be put to use. The Danish police obviously are very well equipped to ransack property and take on criminal cases. The NSK is known for being highly ambitious and efficient, and it remains to be seen to what extent the NSK will take on cases involving suspected breaches of EU sanctions.

Directive (EU) 2024/1226, adopted by the European Parliament and the Council on 24 April 2024, establishes comprehensive rules for defining criminal offences and penalties related to the violation of EU sanctions. This Directive is an important step towards more vigorous and efficient enforcement of EU sanctions in all EU member states; however, the Directive will not be binding for Denmark due to the Danish opt-outs. It remains to be seen whether the Directive will be implemented into Danish law by the Danish Parliament and, if not, whether Danish authorities in practice will apply the definitions of criminal offences, etc, set out in the Directive.

Denmark does not designate persons or entities independently of the EU. Designations under EU sanctions are made by the EU’s executive body, the European Council (EC or “Council”). Any requests for delisting therefore must be served within the EU.

There is a procedure for the Council to consider a request for delisting, in which the Council hears the member state(s) that proposed the listing, as well as hearing all other member states.

If a request for delisting is rejected, the designated person may bring proceedings before the General Court of the European Union. The judgment may be appealed to the Court of Justice of the European Union (CJEU).

The CJEU has decided that a third State can also qualify as a “legal person” directly affected by EU sanctions and can bring an action for annulment even though the EU has no reciprocal right before the courts of third States (Venezuela v Council, C-872/19 P).

In the event of a successful delisting challenge, the relevant person or entity will be removed from the sanctions list. This means the person or entity’s assets will be unfrozen, ie, bank accounts can be used again. There is no legal basis for claiming damages, but the person or entity being delisted can have its costs related to the delisting challenge paid by the Council if the delisting challenge is successful.

How long it might take to obtain delisting depends on the time it takes for the EU litigation to complete, including any potential appeal to the CJEU. Previous cases show the delisting procedure has taken between four and 12 months from the application to the CJEU decision. It may take longer depending on the circumstances of the case.

The EU has adopted import and export restrictions against Belarus, Iran, Iraq, Libya, North Korea, Russia, the Russian-controlled oblasts of Ukraine (Crimea and Sevastopol, Donetsk, Kherson, Luhansk and Zaporizjzja), Sudan, Syria and Venezuela. A non-exhaustive summary is set out below (this is written jointly for goods and services):

Russia

1. Dual-use goods and technology (export): Check Annex I of Regulation (EU) 2021/821 of 20 May 2021.

2. Military goods and technology (export): Check Annex VII of Council Regulation (EU) No 833/2014 of 31 July 2014.

3. Firearms and ammunition (export): Check Annex I of Regulation (EU) No 258/2012 of 14 March 2012 and Annex XXXV of Council Regulation (EU) No 833/2014 of 31 July 2014.

4. Item for use in the oil and gas industry (export): Check Annex II of Council Regulation (EU) No 833/2014 of 31 July 2014. See also Annex X of Council Regulation (EU) No 833/2014 of 31 July 2014.

5. Goods and technology suited for use in aviation or the space industry (export): Check Annex XI of Council Regulation (EU) No 833/2014 of 31 July 2014.

6. Maritime navigation goods and technology (export): Check Annex XVI of Council Regulation (EU) No 833/2014 of 31 July 2014.

7. Iron and steel products (import): Check Annex XVII of Council Regulation (EU) No 833/2014 of 31 July 2014.

8. Luxury goods (export): Check Annex XVIII of Council Regulation (EU) No 833/2014 of 31 July 2014.

9. Goods generating significant revenues for Russia (import): Check Annex XXI of Council Regulation (EU) No 833/2014 of 31 July 2014.

10. Goods which could contribute in particular to the enhancement of Russian industrial capacities (export): Check Annex XXIII of Council Regulation (EU) (EU) No 833/2014 of 31 July 2014.

11. Road transport within the territory of the EU: Check Article 3l of Council Regulation (EU) No 833/2014 of 31 July 2014.

12. Crude oil and petroleum products (import): Check Annex XXV of Council Regulation (EU) No 833/2014 of 31 July 2014.

13. Credit rating services to Russia and Russian persons: Check Article 5j of Council Regulation (EU) No 833/2014 of 31 July 2014.

14. Accounting, auditing, bookkeeping, business and management consulting or public relations services to the Government of Russia or companies in Russia: Check Article 5n of Council Regulation (EU) No 833/2014 of 31 July 2014.

15. Architectural and engineering services, legal advisory services and IT consultancy services to the Government of Russia or companies in Russia: Check Article 5n of Council Regulation (EU) No 833/2014 of 31 July 2014.

Belarus

1. Firearms and other arms, military goods and technology, etc (export): Check Annex XVI of Council Regulation (EC) No 765/2006 of 18 May 2006; see also Article 1b of Council Regulation (EC) No. 765/2006 of 18 May 2006 and Article 1 of Council Decision 2012/642/CFSP of 15 October 2012.

2. Dual-use goods (export): Check Annex I of Council Decision 2012/642/CFSP of 15 October 2012.

3. Equipment which might be used for internal repression (export): Check Annex III of Council Regulation (EC) No 765/2006 of 18 May 2006.

4. Tobacco products (export): Check Annex VI of Council Regulation (EC) No. 765/2006 of 18 May 2006.

5. Mineral products (oils, petcoke, etc) (import): Check Annex VII of Council Regulation (EC) No 765/2006 of 18 May 2006.

6. Potassium chloride products (potash) (import): Check Annex VIII of Council Regulation (EC) No 765/2006 of 18 May 2006.

7. Wood products (import): Check Annex X of Council Regulation (EC) No 765/2006 of 18 May 2006.

8. Cement products (import): Check Annex XI of Council Regulation (EC) No 765/2006 of 18 May 2006.

9. Iron and steel products (import): Check Annex XII of Council Regulation (EC) No 765/2006 of 18 May 2006.

10. Rubber products (import): Check Annex XIII of Council Regulation (EC) No 765/2006 of 18 May 2006.

11. Certain machinery products (export): Check Annex XIV of Council Regulation (EC) No 765/2006 of 18 May 2006.

12. Goods and technology suited for use in aviation or the space industry (export): Check Annex XVII of Council Regulation (EC) No 765/2006 of 18 May 2006.

Syria

1. Crude oil and petroleum products (import): Check Article 6 of Council Regulation (EU) No 36/2012 of 18 January 2012.

2. Military goods, technology, arms or related materiel (export): Check Annex IA of Council Regulation No 36/2012 of 18 January 2012.

3. Aviation or jet fuel (export): Check Annex Va of Council Regulation No 36/2012 of 18 January 2012.

4. Luxury goods (export): Check Annex X of Council Regulation No 36/2012 of 18 January 2012.

5. Syrian-denominated banknotes and coinage to the Central Bank of Syria (export): Check Article 11 of Council Regulation (EU) No 36/2012 of 18 January 2012.

Iran

1. Crude oil or natural gas (import): Check Article 3a of Council Decision 2010/413/CFSP of 26 July 2010.

2. Gold, diamonds, etc (import): Check Article 4c of Council Decision 2010/413/CFSP of 26 July 2010.

3. Military goods and technology (export): Check Annex II of Council Regulation (EU) 2023/1529 of 20 July 2023 and Annexes III and VIIA of Council Regulation (EU) No 267/2012 of 23 March 2012.

4. Raw materials (gold, diamonds, aluminium, steel, graphite) (export): Check Articles 4e and 26f of Council Decision 2010/413/CFSP of 26 July 2010 and Article 15 a of Council Regulation (EU) No 267/2012 of 23 March 2012.

5. Telecommunications equipment (export): Check Annex IV of Council Regulation (EU) No 359/2011 of 12 April 2011.

North Korea

1. Military goods, technology, arms and related technology (import and export): Check Annex II of Council Regulation (EU) 2017/1509 of 30 August 2017.

2. Aviation fuel (export): Check Annex III of Council Regulation (EU) 2017/1509 of 30 August 2017.

3. Gold, titanium ore, vanadium ore and rare-earth minerals (import): Check Annex IV of Council Regulation (EU) 2017/1509 of 30 August 2017.

4. Coal, iron and iron ore (import): Check Annex V of Council Regulation (EU) 2017/1509 of 30 August 2017.

5. Petroleum products (import): Check Annex VI of Council Regulation (EU) 2017/1509 of 30 August 2017.

6. Copper, nickel, silver and zinc (import): Check Annex VII of Council Regulation (EU) 2017/1509 of 30 August 2017.

Sudan

1. Military goods and technology (export): Check Article 1 of Council Decision 2014/450/CFSP of 10 July 2014.

Libya

1. Military goods, arms and related, equipment used for internal repression (export): Check Article 1 of Council Decision (CFSP) 2015/1333 of 31 July 2015.

2. Goods which could be used for smuggling of migrants and trafficking in human beings (export): Check Annex VII of Council Regulation No 36 of 18 January 2012.

3. Military goods, arms and related equipment used for internal repression (import): Check Article 3 of Council Decision (CFSP) 2015/1333 of 31 July 2015 and Annex IA of Council Regulation No 36 of 18 January 2012.

4. Crude oil and petroleum products (import): Check Article 6 of Council Regulation (EU) No 36 of 18 January 2012.

Venezuela

1. Military goods, arms, equipment used for internal repression or related goods (export): Check Articles 1 and 3 of Council Decision (CFSP) 2017/2074 of 13 November 2017.

Iraq

1. All proceeds from all export sales of petroleum, petroleum products and natural gas from Iraq, as listed in Annex I of Council Regulation (EC) No 1210/2003, as of 22 May 2003 shall be deposited into the Development Fund for Iraq under the conditions set out in UNSC Resolution 1483 (2003) and, in particular, paragraphs 20 and 21 thereof.

2. Any export from Iraq or other dealings in Iraqi cultural property and other items of archaeological, historical, cultural, rare scientific and religious importance shall be prohibited: Check Annex II of Council Regulation (EC) No 1210/2003 of 7 July 2003.

Specifically relating to the import of timber, EU companies also need to be aware of the EU Timber Regulation (Regulation (EU) No 995/2010 of 20 October 2010), which sets out due diligence procedures to be undertaken for companies involved in the trading of timber in the EU.

See 5.1 Services.

There are no publicly available Danish court decisions which confirm that sanctions are a bar to performance of contractual obligations, but, in our opinion, sanctions may well constitute force majeure, subject to the circumstances of the case and the provisions of the contract.

Pursuant to Article 11 of Council Regulation (EU) No 269/2014 and Council Regulation (EU) No 833/2014, no claims in connection with any contract or transaction whose performance has been affected by the Russia sanctions shall be satisfied, if such claims are made by any Russian person, entity or body or by another person, entity or body acting on their behalf. Similar provisions apply across EU sanctions; see, for instance, the Belarus sanctions pursuant to Council Regulation (EC) No 765/2006, Article 8d.

These provisions mean that, if a contract or transaction is contrary to sanctions, a party in Russia or Belarus (or any party acting on their behalf) may not sue the non-Russian/non-Belarusian party for performance.

Even beyond the scope of these provisions, eg, if the transaction does not involve parties in countries subject to sanctions, issues of force majeure could arise if a contract or transaction is affected by the imposition of sanctions.

Enforcement issues have not been dealt with by the Danish courts.

There are no competent bodies for making designation decisions in Denmark. Sanctions designation takes place within the EU.

The development of sanctions regimes within the EU is a complex process involving different actors. All decisions to adopt, amend, lift or renew sanctions are taken by the Council following examination in the relevant Council working groups. EU member states are responsible for the implementation of all sanctions within their respective jurisdictions.

The High Representative of the Union for Foreign Affairs and Security Policy contributes through his/her proposals to the development of the Common Foreign and Security Policy (CFSP). Together with the Council, the High Representative ensures the unity, consistency and effectiveness of action by the EU in the area of the CFSP.

The European External Action Service (EEAS) assists the High Representative/Vice President in fulfilling his/her mandate and has a key role in the preparation, maintenance and review of sanctions, as well as in the communication and outreach activities concerning these in close co-operation with member states, relevant EU delegations and the European Commission.

In the legislative process in the Council regarding sanctions, the EEAS has a particular role to play. This includes preparing, on behalf of the High Representative, proposals for a decision and, jointly with the Commission, proposals for regulations which are subsequently reviewed and adopted by the Council. Decisions are binding on the member states themselves. Regulations are directly applicable within the EU and are binding on individuals and entities, including economic operators.

For its part, the Commission presents proposals, jointly with the High Representative, for regulations. Once regulations are adopted, the Commission works to facilitate their implementation in the EU and addresses questions of interpretation by economic operators.

The Commission is responsible for ensuring the uniform application of sanctions.

There are no provisions in Danish law specifying the indirect designation of persons or entities as a result of their being “owned or controlled” by a directly designated person.

The sanctions regimes, eg, against Russia, Iran or Belarus, contain provisions requiring the freezing of assets that are owned or controlled by designated persons or entities.

Entities that are “owned or controlled” by designated persons or entities may themselves become designated. However, any such designation will only be made as matter of policy and to make clear to the market that the person or entity in question is sanctioned. The point is that, even without any express designation, any person or entity that is owned or controlled by a sanctioned person or entity will already be subject to sanctions.

The criterion for “ownership” to be taken into account when assessing whether a legal person or entity is owned by another person or entity, is whether (i) the “owning” person or entity possesses more than 50% of the proprietary rights of the other person or entity, or (ii) the “owning” person or entity has a majority interest in the other person or entity (see the definition provided for in Council (EC) Regulation 2580/2001, Article 1). If this criterion is satisfied, it is considered that the legal person or entity is owned by another person or entity.

The criteria to be taken into account when assessing whether a legal person or entity is controlled by another person or entity, alone or pursuant to an agreement with another shareholder or other third party, could include, inter alia:

(a) having the right or exercising the power to appoint or remove a majority of the members of the administrative, management or supervisory body of such legal person or entity;

(b) having appointed solely as a result of the exercise of one’s voting rights a majority of the members of the administrative, management or supervisory bodies of a legal person or entity who have held office during the present and previous financial year;

(c) controlling alone, pursuant to an agreement with other shareholders in or members of a legal person or entity, a majority of shareholders’ or members’ voting rights in that legal person or entity;

(d) having the right to exercise a dominant influence over a legal person or entity, pursuant to an agreement entered into with that legal person or entity, or to a provision in its Memorandum or Articles of Association, where the law governing that legal person or entity permits its being subject to such agreement or provision;

(e) having the power to exercise the right to exercise a dominant influence referred to in point (d), without being the holder of that right;

(f) having the right to use all or part of the assets of a legal person or entity;

(g) managing the business of a legal person or entity on a unified basis, while publishing consolidated accounts;

(h) sharing jointly and severally the financial liabilities of a legal person or entity, or guaranteeing them.

If any of these criteria are satisfied, it is considered that the legal person or entity is controlled by another person or entity, unless the contrary can be established on a case-by-case basis.

The fulfilment of the above criteria of ownership or control may be refuted on a case-by-case basis.

If ownership or control is established in accordance with the above criteria, the making available of funds or economic resources to non-listed legal persons or entities which are owned or controlled by a listed person or entity will in principle be considered as making them indirectly available to the latter, unless it can be reasonably determined, on a case-by-case basis using a risk-based approach, taking into account all of the relevant circumstances, including the criteria further outlined in the Council’s Best Practice Guidelines, that the funds or economic resources concerned will not be used by or be for the benefit of that listed person or entity.

Source: The Council’s Best Practice Guidelines issued in Brussels on 27 June 2022, paragraphs 61-66