Legal News & Analysis – Asia Pacific – Australia – Regulatory & Compliance

 

OVERVIEW

The Australian government has imposed sanctions following a referendum in Crimea which strongly supported unification with the Russian federation. Announced in March 2014 and effective from June 2014, the sanctions target a number of named Russian and Ukrainian entities and individuals. The funds and economic resources of those listed individuals and entities have now been frozen and travel restrictions have been imposed upon the individuals.

The sanctions are broadly drafted and prohibit dealings with the named individuals/entities and their assets. As the situation in Ukraine develops, the number of individuals and entities listed may expand. The list is regularly updated and businesses dealing with Russian individuals and entities must be aware of it. Businesses operating in Russia or Ukraine should also consider the potential effect of the EU/UK sanctions.

 

Context

On 19 March and 21 May 2014, the Australian Minister for Foreign Affairs announced sanctions in response to the Russian threat to the sovereignty and territorial integrity of Ukraine (Ukraine Sanctions). 

The sanctions were given effect on 19 June 2014, following the commencement of the Autonomous Sanctions (Designated Persons and Entities and Declared Persons – Ukraine) List 2014 (Ukraine List). 

The sanctions take the form of asset freezes, a prohibition on business dealings and travel restrictions against 50 individuals and 11 entities, who have been designated by the Minister as “a person or entity that the Minister is satisfied is responsible, or complicit in, the threat to the sovereignty and territorial integrity of Ukraine.” (designated persons or entities) These include a number of financial institutions, entities engaged in the oil and gas industry and individuals and entities associated with the current situation in Ukraine or President Putin.

Overview Of The Australian Sanctions

regime and the Ukraine Sanctions Australia’s sanctions regime is a dual regime, implementing both the United Nations Security Council (UNSC) sanctions regime and the Australia’s autonomous sanctions regime. 

The UNSC sanctions regime is given effect under Australian law by the Charter of the United Nations Act 1945 (Cth) (UN Act). However, the UNSC has not yet imposed sanctions in respect of the situation in Ukraine and is unlikely to do so.

In addition to the UNSC sanctions, Australia has its own sanctions regime. This sanctions regime is referred to as the autonomous sanctions regime and is implemented under the Autonomous Sanctions Act 2011 (Cth) (ASA), the Autonomous Sanctions Regulations 2011 (Cth) (ASA Regulations) and other ancillary legislation.

What is prohibited by the current sanctions?

In relation to Ukraine, the Australian government has imposed sanctions against designated individuals and entities. These sanctions prohibit a person subject to the ASA and ASA regulations from:

a) directly or indirectly making an asset available to or for the benefit of a designated person or entity (regulation 14); and
b) using or dealing with an asset owned or controlled by a designated person or entity (regulation 15).

Item (a) above is further reinforced by a prohibition upon exports under the Customs (Prohibited Exports) Regulations 1958 (Cth) where the goods are exported for the benefit of a designated person or entity.

The Ukraine Sanctions also prohibit those individuals listed in Part 1 of Schedule 1 from travelling to, entering or remaining in Australia, unless authorised by the Minister.

What are “assets”?

“Assets” are defines broadly to mean assets or property of any kind, whether tangible or intangible, movable or immovable.

The definition also expressly covers legal documents or instruments evidencing title or interest in an asset. 

Controlled assets are assets owned or controlled by a designated person or entity. Individuals and entities that are subject to the ASA must notify the Australian Federal Police if they form the opinion that an asset that they hold is or was a controlled asset (regulation 24).

To Whom Do The Sanctions Apply?

The prohibitions covered by the Ukraine Sanctions have extraterritorial operation but it is limited. The Ukraine Sanctions extend to conduct on board an Australian vessel, or to cases where the person committing the offence outside of Australia is an Australian citizen or a company incorporated by or under a law of the Commonwealth or a state or territory.

What Are The Penalties For Breaching The Sanctions?

An individual or a company commits an offence under the ASA if it has engaged in conduct in contravention of a sanction law. The penalties for breach of the Ukraine Sanctions imposed under section 16 of the ASA are:

a) for an individual, imprisonment for not more than 10 years and / or a fine not exceeding three times the value or the transaction(s) or 2,500 penalty

units (currently A$425,000); and

b) for a company, a fine not exceeding three times the value or the transaction(s) or 10,000 penalty
units (currently A$1,700,000). 

Can I Continue Dealing With A Company Owned By A Designated Person Or Entity?

Not without authorisation.

Under regulation 18 of the ASA Regulations, the Minister may grant a permit authorising the permit
holder to:

 

• make available an asset to a designated person orentity; or
• use or deal with the asset of a designated person or entity,

where it is:

 

• in the national interest; and
• meets certain other very limited conditions (eg contractually required dealings).

 

In respect of contractually required dealings, it only applies to payments required by contracts entered into prior to the imposition of the Ukraine Sanctions upon that designated person or entity.
Designated individuals and entities, or individuals that own or control designated assets (controlled assets designated by the minister) may also apply to have the designation removed.

Consolidated List

A comprehensive list of designated individuals and entities is available on the website of the Department of Foreign Affairs and Trade.

 

This list is regularly updated and can be found here.

 

 

For further information, please contact:

 

Fiona Hudgson, Partner, Ashurst
[email protected]

 

Ashurst Regulatory & Compliance Practice Profile in Australia