Sanctions – is your company on the receiving end?

With the war roaring in Ukraine, focus has been turned on sanctions for Danish companies operating or trading across the borders. But how will the sanctions affect your company if you do business outside the borders of Denmark? It is important to be aware of this question, which we will try to answer in this blog post.

All companies doing business across the borders may be subject to sanctions and must, therefore, act in accordance with all relevant sanctions. Besides the business as such, this also applies to the company’s controlled subsidiaries, employees, advisors, as well as the company’s business relations.

This means that, if you are doing business across the borders, you must be aware whether your business may be subject to sanctions in one way or the other and, subsequently, establish processes to help you comply with the sanctions.

In most cases, sanctions are used to exert economic pressure on one or more nations that do not act as they ‘should’ according to the sanctioning countries.

One example of recently imposed sanctions occurred in connection with Russia’s attack on Ukraine. Several sanctions have been imposed by the EU, the US and the UK aimed at Russia, its primary supporters and its economy in the hope that the sanctions will pressurise Russia’s economy and make its leaders stop the war.

More specifically, it means that it is prohibited for you, as an EU citizen, to buy or sell Russian caviar at the moment, and that companies registered in the EU are prohibited from selling Russia large, heavy vehicles with a weight over the rear axle of more than 9 tonnes.

Another example is the imposing of sanctions on Iran by the EU, the UK and the US (and previously the UN) to exert economic pressure on the country to stop its continuous development of nuclear weapons.

Sanctions law differs somewhat depending on which country you are from, which country or countries your business operates in, and how it operates.

In the EU, the law is very clear for Danish companies and their subsidiaries in the rest of the EU. Applicable EU sanctions are based on EU regulations, which are direct legal documents and therefore apply to all EU citizens and companies, i.e. all Danes, Danish companies and all business they do in Denmark and within the EU.

Does your company want to do business in US dollars, to trade with American companies and/or the American State, or does your group of companies have a company registered in the US? Then, you must comply with the sanctions on which the American State has passed legislation.

Does your company want to trade with companies registered in the UK (England, Scotland and Wales), with the British authorities, or does your group of companies have a company registered in the UK? Then, you must comply with the sanctions on which the British authorities have passed legislation.

Last but not least, the UN Security Council issues UN sanctions which do not apply until – and if – the Danish State confirms them, which it often does.

We have already mentioned that sanctions are imposed by nations to stop a particular behaviour that is considered undesirable.

Below, we list some of the areas that sanctions may affect. They may, for example, affect:

• The various sectors of a country, such as banks and other financial institutions
• A country’s state-owned companies, members of government, the primary supporters of the government or other leading persons (such as oligarchs in Russia), leading military personnel and any family members of persons thus sanctioned
• The import and export of products to and from the sanctioned country, such as the purchase and sale of Russian oil and caviar as previously mentioned.

Entry bans, freezing of assets abroad, as well as the prohibition against doing business in specific countries.

In addition, a sanctioned person must not be a leading employee or the controlling owner of a foreign company. This could trigger a possible sale since the company in question could not otherwise operate without an owner and management.

Freezing of companies’ assets as well as preventing companies from operating outside the borders of their country, preventing sanctioned banks from operating internationally and preventing sanctioned companies or the sanctioned state from getting access to foreign currencies.

Products that may be used either directly or indirectly for warfare (such as large trucks), products and technology that may be used either directly or indirectly for production of, for example, nuclear weapons, or products that may generate an income for the sanctioned country such as the sale of oil and gas.