Grey areas surrounding ownership or control of businesses pose a challenge to Irish companies seeking to comply with sanctions against Russia, experts say.
EU and Irish law forbid Irish people or businesses from transferring any economic assets to individuals sanctioned following Russia’s invasion of Ukraine last February.
Dárta Tentere, policy officer the European Commission, told the A&L Goodbody Corporate Crime and Regulation summit heard on Wednesday that the EU intended reviewing then possibly extending current anti-Russian sanctions.
Lawyers say that grey areas, particularly surrounding whether sanctioned individuals may own or control a business, pose an ongoing challenge to compliant Irish enterprises.
Kate Harnett, A&L Goodbody senior associate, told the solicitors’ firm’s summit that Irish businesses are trying hard to comply with the sanctions.
However, they face difficult questions in determining if a designated person owns or controls a company or other entity with which they are dealing.
Louise Byrne, A&L Goodbody partner, explained after the discussion that the EU defined ownership as more than 50 per cent of a business.
“But control is much more fluid, that is where it can be really difficult,” she said.
Ms Byrne said a designated person could remove themselves from a company’s board, but they could still be talking to or dealing with people on the board or in the organisation. She added that someone can control a business through another person.
Opaque corporate structures, trusts, share transfers and other transactions can all pose problems for businesses seeking to comply with the law, Ms Harnett pointed out.
The phrase “economic asset” covers many things from cash to intellectual property. A recent British case found allowing a Russian winery to enter a competition qualified as allowing it benefit from an economic asset, even if it did not win, as the publicity would aid the business.
Ms Harnett told the symposium that breaching EU sanctions was a criminal offence under Irish law. Penalties can include up to three years in jail or fines of €500,000.
She acknowledged these may not seem harsh but pointed out that the “sting in the tail” for businesses would be the bad publicity and the damage that a court case would do to their reputations.
Businesses that most frequently run into difficulty include financial services, funds, insurance and aviation.
However, Ms Harnett pointed out that sanctions were an issue for virtually anyone involved in international trade. Complying with the law required very detailed due diligence, she cautioned.
Michael O’Kane, partner with London firm, Peters & Peters, argued “you have to ask yourself, if the gardaí came and investigated, have I done everything that the gardaí would do, and a bit more?”.
Ms Tentere said the European Commission’s first priority was to review how well the current sanctions regime was working and then to consider whether they should be extended or strengthened.
She did not rule out the possibility that the EU could ultimately create an overall sanctions authority. However, Ms Tentere stressed that national competent authorities remained the first point of contact for businesses.
The Republic’s competent authorities are the Central Bank, the Department of Enterprise, Trade and Employment and, the Department of Foreign Affairs. An Garda Síochána investigates alleged breaches of anti-Russian sanctions.
