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The US President has signed the Countering America’s Adversaries through Sanctions Act. The EU says that sanctions can be a threat to European companies, as companies from third countries that violate sanctions could become targets of sanction actions. Do the sanctions carry a threat for European companies? What is the procedure for appealing against measures contained in sanctions for European companies that find themselves subjected to sanctions?

The Countering America’s Adversaries through Sanctions Act is a remarkable piece of legislation. It strengthens sanctions against Russian Federation (and Iran and North Korea) in the sense that most changes or amendments to those sanctions proposed by Donald Trump are now subject to congressional review. However, one of the most important and widely discussed repercussions of this document is its influence on countries dealing with Russia in the area of energy resources. The legislation may sanction EU organizations for entering into business with Russia connected to oil and gas.

More precisely, as the legislation in question puts it, the US President may impose sanctions against a person if this person sells, leases, or provides to the Russian Federation, for the construction of Russian energy export pipelines, goods, services, technology, information, or support in excess of certain fair market value thresholds.

There is little that EU companies or even the EU Commission are able to do against the enacted legislation. They have to rely on the discretion of the US President in execution of sanctions in a way that will not hurt America’s allies in the EU. Otherwise, almost the only real (or at least tangible) way to resist the sanctions regime is to apply to the WTO with the notion that EU companies sanctioned for dealing with Russia were treated unfairly and are at a competitive disadvantage. A WTO decision may impose punitive tariffs on the USA.

The only other way to hedge against sanctions is via diplomacy, either work with the US Government to obtain assurances that certain business projects will not be sanctioned, or use the EU Commission’s influence to dispose of targeted sanctions if these were to ever be imposed on EU companies.

Author – Vatslav Makarsky, Partner at INTEGRITES

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