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Japan – Navigating Russia Sanctions: Update.

11 November, 2014


This article omits data not pertinent to Japan. To read the original, please click here.

Japanese sanctions targeting Russia are becoming increasingly aligned as a result of each jurisdiction’s continued tailoring of sanctions targeting Russia. In each jurisdiction there are now laws which block funds being made available to certain individuals and entities close to the Russian political regime and, more recently, broader rules which aim to restrict Russia’s finance, energy and defence sectors. Although the US, EU and Japanese rules are alike in a number of respects, they also diverge in many ways and may not give the same answer to a particular question. This is particularly relevant to international business, where the rules of more than one jurisdiction may be triggered. This publication updates our previous note on the topic,and highlights the key issues and differences in the US, EU and Japanese rules that financial institutions should be aware of.


A. What You Need to Know


  • Sanctions should not necessarily prevent business with Russia outright, provided that care is taken not to breach applicable rules. Sanctions risk can be mitigated by a range of measures, including documentary protections such as representations and/or undertakings to ensure that the proceeds of a loan are not used to finance business in breach of sanctions. Legal advice should be sought in difficult cases (particularly where there is a cross-border element), given that the precise impact of sanctions on any transaction will always be fact specific.


  • In addition to the US, the EU (Including the overseas territories of the UK and France) and Japan, the following countries currently have Russia sanctions programmes in place as a result of the situation in Ukraine: (i) Albania; (ii) Australia; (iii) Canada; (iv) Iceland; (v) Liechtenstein; (vi) Moldova; (vii) Montenegro; (viii) Norway; (ix) Ukraine; and (x) Switzerland. 


  • Despite recent convergences in US, EU and Japanese rules, fundamental differences remain and the rules should not be seen as giving similar answers in every case. To give a few examples: (i) EU rules catch debt issuances by designated energy sector entities which have a de minimis maturity of >30 days, whereas US rules only catch issuances by designated energy sector entities which have a maturity of >90 days (however, EU rules relating to issuances by non energy sector entities are aligned vis à vis US rules in both having a >30 day maturity requirement); (ii) EU rules on investing and trading in Crimea and Sevastopol are far stricter than US and Japanese sectoral rules, effectively preventing all such activity in those regions; and (iii) country lists of sanctioned persons and entities are not identical.


  • International businesses must consider the full scope of potentially applicable sanctions rules which may extend beyond the rules of one jurisdiction. For example, a US company in Tokyo with trading operations in Germany would need to consider the scope and impact of US, EU and Japanese sanctions.  Any non Japanese branches located in Japan would be subject to Japanese sanctions.


B. Overview Of Recent Sanctions

Japan joined the US and the EU on 24 September 2014 by also passing sectoral sanctions targeting Russia, which build upon previous rounds of non sectoral sanctions published earlier this year. The Japanese rules should be considered by US and EU branches in Japan to the extent that they have business relating to Russian state owned banks or the export of military goods and technology to Russia.


1. Japanese Non Sectoral Sanctions

The Ministry of Foreign Affairs in Japan issued a public notice on 5 August 2014 (the “Non Sectoral Sanctions Public Notice”)1 targeting 40 individuals and two entities. The Non Sectoral Sanctions Public Notice requires: (i) prior approval by the Ministry of Foreign Affairs for any payments made to designated individuals and entities; (ii) approval for any capital transactions (deposit agreements, trust agreements and loan agreements) with designated individuals and entities; and (iii) approval for the import of products originating in Crimea and Sevastopol. These measures supplement restrictive measures implemented by Japan, announced in a statement issued by the Ministry of Foreign Affairs on 29 April 20142 which banned the travel of 23 Russian nationals and certain trade related initiatives. A list of designated persons and entities is included at Section C of this Client Publication.

2. Japanese Sectoral Sanctions

The Ministry of Foreign Affairs in Japan issued a further public notice on 24 September 2014 (the “Sectoral Sanctions Public Notice”)3 targeting Russia’s finance and defence sectors. Unlike the US and EU sanctions, Russia’s energy sector is not targeted (although two energy companies, PJSC Chernomorneftegaz and Feodosia, are caught by non sectoral sanctions). The financial sectoral restrictions prohibit the investment in securities (including shares and bonds) issued by designated Russian state owned banks with a maturity exceeding 90 days. The list of banks correlates to the original list of five banks listed in EU Regulation 833/2014. These banks are: (i) Sberbank; (ii) VTB Bank; (iii) Gazprombank; (iv) Vnesheconombank; and (v) Rosselkhozbank, and the restriction extends to subsidiaries, defined as an organisation that is “directly owned by [the designated banks] for more than 50% of the total number of shares or the total amount of investment (excluding an organisation having its principal office in Japan).” There is no prohibition on lending to designated entities. The defence sectoral restrictive measures are broadly drafted to prohibit the export to Russia of weapons and weapons technology and military goods or assistance in relation to such goods. Foreign branches in Japan should be aware of the Japanese rules in addition to their obligations under US and/or EU rules, which apply to entities physically outside US/EU territorial boundaries at the time of an offence.


Key Features of Recent Japanese Sanctions: 


Rules Japan
Persons/Entities/Bodies Subject to Sanctions Any “residents” of Japan. The term “residents” means natural persons having their domicile or residence in Japan and judicial persons having their principal office in Japan. The branch offices, local offices or other offices in Japan of nonresidents, irrespective of whether they have legal authority of representation, shall be deemed to be residents even if their principal office is located in a foreign state. Foreign Exchange and Foreign Trade Act of Japan, Article 6.
Authorisation/Key Legislation Public Notice by the Ministry of Foreign Affairs issued on 5 August 2014 based on provisions of the Japanese Foreign Exchange and Foreign Trade Act (“NonSectoral Sanctions Public Notice”). Designated individuals and entities are listed at Section C of this Client Publication.  

Public Notice by the Ministry of Foreign Affairs issued on 24 September 2014, based on provisions of the Japanese Foreign Exchange and Foreign Trade Act (“Sectoral Sanctions Public Notice”).

Key Restrictions The Non-Sectoral Sanctions Public Notice requires approvals for any payments made by a resident in Japan to the individuals and organisations designated in the Public Notice (see Section C of this Client Publication), or any capital transactions (deposit agreements, trust agreements and loan agreements) between residents in Japan and individuals and organisations designated in the Public Notice. 

The Non-Sectoral Sanctions Public Notice also requires approvals for imports of goods made in the Crimearegion and the city of Sevastopol.


Under the Sectoral Sanctions Public Notice, it is prohibited to invest in securities (including shares and bonds) with a maturity exceeding 90 days issued by:


(i) Sberbank;


(ii) VTB Bank;


(iii) Gazprombank;


(iv) Vnesheconombank; or


(v) Rosselkhozbank, or their 50%+ owned subsidiaries.


There is no prohibition on lending to the above entities.


Military Sectoral And Dual-Use


Prohibited to export to Russia weapons, weapons technology, and military goods or assistance in relation to such goods.

Key Definition For the purposes of the Non-Sectoral Sanctions Public Notice: “Goods” means movables other than precious metal, means of payment, securities or other certificates embodying claims, Foreign Exchangeand Foreign Trade Act of Japan, Article 6(1)(xy). 

“Deposit agreements” include instalment savings contracts, instalment deposit contracts, deposit contracts and other contracts specified by the Cabinet Order, Foreign Exchange and Foreign Trade Act of Japan, Article 20(i).


The Sectoral Sanctions Public Notice does not define key terms such as weapons technology


Military Sectoral and Dual-Use Goods Sanctions


The Sectoral Sanctions Public Notice does not define key terms such as weapons technology and are to be interpreted broadly

Licences/Exceptions None
Effective Dates Sanctions apply to capital transactions (deposit agreements, trust agreements and loan agreements), and imports of products made in the Crimea region and the city of Sevastopol from 5 August 2014. 

Prohibition on investment in securities (including shares and bonds) with a maturity exceeding 90 days issued by:


(i) Sberbank;


(ii) VTB Bank;


(iii) Gazprombank;


(iv) Vnesheconombank; or


(v) Rosselkhozbank, applies from 24 September 2014.


Prohibitions apply from 24 September 2014.

Apply to Subsidiaries Yes.
Penalties Imprisonment for not more than three years or a fine of not more than one million yen, or both; provided, however, that three times the price of the subject matter of the violation exceeds one million yen, a fine shall be not more than three times the price. Foreign Exchange and Foreign Trade Act of Japan Article 70(1).
Defences Generally, no defences are available in Japan.


Consolidated Sanctions List: US, EU(UK)4, and Japan:


As of 29 October 2014, the following entities are sanctioned in the US5, EU, and Japan, as indicated by the following
marker: ●.


(Click to enlarge)




End Notes:






As of 29 October 2014, the UK HM Treasury lists correspond identically to the EU lists. However, the UK lists could develop to include individuals/entities additional to individuals/entities identified under EU lists in the future. 

5 This list includes all entities sanctioned by the United States, including those sanctioned by the US Department of the Treasury as a specially designated national and blocked person (SDN) under EO 13660 or EO 13661, and those designated under the US sectoral sanctions identification list (SSIL).




For further information, please contact:


Masahida Ikeda, Partner, Shearman & Sterling

[email protected]


Homegrown International Trade Law Firms in Japan


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