German Legal Advise for Russian Companies under the EU Sanction Regime
Updated: Apr 5
The EU's eighth package of sanctions against Russia also affects legal advice. In principle, German law firms are now prohibited from providing legal services to Russian clients. However, the ban is not as far-reaching as it seems and there are many exceptions that come into question. In this article, you can find out more about the lane for German legal advice to Russian companies and individuals.
Article 5n of Regulation (EU) No 833/2014
Regulation (EU) No 833/2014 'concerning restrictive measures in view of Russia's actions destabilizing the situation in Ukraine' (official title) entered into force on August 1, 2014. The Council of the European Union justified the Regulation 'as a response to the illegal annexation of Crimea and Sevastopol' (Recital 1). The Regulation was then amended and extended several times, especially after Russia's invasion of Ukraine on February 24, 2022. The prohibition of legal advisory services was introduced by Amendmend Regulation (EU) 2022/1904 with effect of October 7, 2022 and supplemented by Regulation (EU) 2022/2474 and Regulation (EU) 2023/1214 with effect of December 17, 2022 and June 24, 2023. Paragraph 2 of Article 5n of Regulation (EU) No 833/2014 reads: 'It shall be prohibited to provide, directly or indirectly, architectural and engineering services, legal advisory services and IT consultancy services to: (a) the Government of Russia; or (b) legal persons, entities or bodies established in Russia.' This paragraph 2 is the key rule when it comes to advising Russian clients in German law matters.
Legal Advisory Services vs. Legal Representation
According to Recital 9 of Regulation (EU) 2022/1904, the term ‘legal advisory services’ covers the provision of legal advice to customers in non-contentious matters, including commercial transactions, involving the application or interpretation of law, participation with or on behalf of clients in commercial transactions, negotiations and other dealings with third parties, and preparation, execution and verification of legal documents. The distinguishing line is laid down in Paragraphs 5 and 6 of Article 5n of Regulation (EU) No 833/2014 stating that the prohibition of legal advisory services shall not apply to the provision of services that are strictly necessary for the exercise of the right of defense in judicial proceedings and the right to an effective legal remedy and it shall also not apply to the provision of services which are strictly necessary to ensure access to judicial, administrative or arbitral proceedings in a Member State of the European Union, such as Germany, as well as for the recognition or enforcement of a judgment or an arbitration award rendered in a Member State, provided that such provision of services is consistent with the objectives of this Regulation (EU) No 833/2014 and Regulation (EU) No 269/2014. Recital 9 of Regulation (EU) 2022/1904 states more precisely that any representation, advice, preparation of documents or verification of documents in the context of legal representation services, namely in matters or proceedings before administrative agencies, courts or other duly constituted official tribunals, or in arbitral or mediation proceedings shall be permitted. It is therefore still permissible for German lawyers to advise Russian companies in the context of legal representations. It is legal practice in Germany that the dividing line between advice and representation is not to be understood quite literally. In connection with court proceedings, pre-trial advice also remains possible, for example on the question of whether to take legal action at all. The rule of thumb is probably: whenever a claim is in dispute, legal advice remains permissible. As far as Paragraph 6 states that such provision of services shall be consistent with the objectives of the sanctions regulations, it should be understood as meaning that advice on the targeted circumvention of sanctions is prohibited.
Legal Persons, Entities, and Bodies vs. Natural Persons
A German attorney-at-law is prohibited from providing legal advisory services to the Government of Russia, or legal persons, entities or bodies established in Russia. Natural persons, meaning private individuals are generally not covered by the scope. Even persons on one of the EU sanction lists, in particular that in Annex I of Regulation (EU) No 269/2014, do not fall under the prohibition to provide legal advisory service. The same applies to private individuals who act on a commercial basis, such as architects or doctors and even Russian lawyers, as long as he is not part of a law firm or another legal entity.
Direct and Indirect Services
The prohibition to provide legal advisory services to the aforementioned group of persons also covers 'indirect' advice and should be read in conjunction with Article 12 of Regulation (EU) No 833/2014, according to which it is also prohibited to participate, knowingly and intentionally, in activities the object or effect of which is to circumvent prohibitions in Regulation (EU) No 833/2014. In practice this should mean that, e.g., legal advice for a non-Russian subsidiary of a Russian parent company that would be for the benefit of that parent company might infringe EU sanctions law. There are many other forms imaginable that might serve the circumvention of sanctions law, e.g., where an Indian lawyer requests legal advice to pass it through to his Russian client.
Foreign Owned Companies
A German lawyer might however provide legal advisory services intended for the exclusive use of legal persons, entities or bodies established in Russia that are owned by, or solely or jointly controlled by, a legal person, entity or body which is incorporated or constituted under the law of a Member State of the European Union, a country member of the European Economic Area, Australia, Canada, Japan, New Zealand, Norway, South Korea, Switzerland, the United Kingdom, or the United States of America, as prescribed in Paragraph 7 of Article 5n of Regulation (EU) No 833/2014.
Application for Exemption
A German lawyer might be relieved from the prohibition by administrative act of the German Federal Office of Economics and Export Control (BAFA), if the authority deems the provision of legal advisory services necessary for (a) humanitarian purposes, such as delivering or facilitating the delivery of assistance, including medical supplies, food, or the transfer of humanitarian workers and related assistance, or for evacuations; (b) civil society activities that directly promote democracy, human rights or the rule of law in Russia; (c) the functioning of diplomatic and consular representations of the Union and of the Member States or partner countries in Russia, including delegations, embassies and missions, or international organizations in Russia enjoying immunities in accordance with international law; (d) ensuring critical energy supply within the Union and the purchase, import or transport into the Union of titanium, aluminium, copper, nickel, palladium and iron ore; (e) ensuring the continuous operation of infrastructures, hardware and software which are critical for human health and safety, or the safety of the environment; (f) the establishment, operation, maintenance, fuel supply and retreatment and safety of civil nuclear capabilities, and the continuation of design, construction and commissioning required for the completion of civil nuclear facilities, the supply of precursor material for the production of medical radioisotopes and similar medical applications, or critical technology for environmental radiation monitoring, as well as for civil nuclear cooperation, in particular in the field of research and development; or (g) the provision of electronic communication services by Union telecommunication operators necessary for the operation, maintenance and security, including cybersecurity, of electronic communication services, in Russia, in Ukraine, in the Union, between Russia and the Union, and between Ukraine and the Union, and for data centre services in the Union.
Contact me
Kronsteyn Law Firm specializes in legal advice on German securities, banking and investment law. Please feel free to contact me, so we can evaluate whether the specific legal advice you need is permitted under the EU sanctions regime.
Attorney-at-law, LL. M. (UCL)
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