The Financial Intelligence Unit (FIU) has observed that legal service providers have a different understanding of the sanctions restrictions that apply to the provision of legal services. Sanctions include both restrictions on the provision of legal services to sanctioned persons1 and restrictions on the provision of legal services to companies and the government of the Russian Federation and the Republic of Belarus. With a view to unifying understanding, the FIU provides clarification on the implementation of the sanctions’ regime on the provision of legal services.
Provision of legal services to a sanctioned person
The FIU draws attention to the fact that, in general, legal services should be considered as economic resources within the meaning of European Union sanctions regulations if they can be used directly or indirectly to obtain funds, goods or services. Therefore, in general the provision of legal services to a sanctioned person is prohibited. At the same time, the application of sanctions shall consider the fundamental rights of individuals, including the right to an effective remedy and to a fair trial2. In the light of the above, the FIU notes that the provision of legal services to a sanctioned person without the authorisation of the competent authority is only permissible if the services are related to the protection of rights and legitimate interests before the institutions and the courts. In the view of the FIU, such services do not constitute an “economic resource” within the meaning of the sanctions’ regulations.
In all other cases, other than those involving the protection of rights and legal interests before the institutions or the courts, it is required to acquire the FIU’s authorisation before the provision of legal services. For example, if a legal service provider intends to provide legal services in non-contentious matters, including commercial transactions, it is necessary to apply to the FIU for an authorisation. The application for an authorisation must include a description of the service, the fees for the service, information on how the fees will be paid, and the the respective exception from the sanctions’ regulations that allows the authorisation. For more information see here.
In all other cases, other than those involving the protection of rights and legal interests before the institutions or the courts, it is required to acquire the FIU’s authorisation before the provision of legal services. For example, if a legal service provider intends to provide legal services in non-contentious matters, including commercial transactions, it is necessary to apply to the FIU for an authorisation. The application for an authorisation must include a description of the service, the fees for the service, information on how the fees will be paid, and the the respective exception from the sanctions’ regulations that allows the authorisation. For more information see here.
It should be stressed that even for the provision of services which are not restricted by sanctions, payment from funds of the sanctioned person is only permissible with the authorisation of the competent authority. Furthermore, pursuant to Article 4(1)(b) of Council Regulation No 269/2014 and Article 1v(1)(b) of Council Regulation No 765/2006, the release of funds may be subject to conditions deemed appropriate by the competent authority, provided that the funds are intended exclusively for payment of reasonable professional fees or reimbursement of legal expenses. Similarly, service providers must ensure that the payment does not breach the obligation to freeze the funds.
Sectoral sanctions on the provision of legal services
When assessing whether the provision of a service to a client is in compliance with European Union sanctions, it is important to consider that compliance must be ensured with both financial and sectoral sanctions. Sectoral sanctions have been imposed against the Government of the Russian Federation and companies incorporated in the Russian Federation, as well as against the Government of the Republic of Belarus and related entities.
Pursuant to Article 5n(2) of Council Regulation No 833/2014, the provision of legal advisory services directly or indirectly to the Government of the Russian Federation or to legal persons, entities or bodies established in the Russian Federation is prohibited. The same restrictions are also set out in Article 1jc of Council Regulation No 765/2006 in respect of the Republic of Belarus, its Government, its public bodies, corporations or agencies or any natural or legal person, entity or body acting on behalf of or at the direction of the Republic of Belarus, its Government, its public bodies, corporations or agencies.
Both regulations provide that the prohibition does not apply to the supply of services which are strictly necessary for the exercise of the rights of defence in judicial proceedings and of the right to an effective legal remedy, nor to the supply of services which are strictly necessary to ensure access to judicial, administrative or arbitral proceedings in a Member State or 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 the Regulation.
The European Commission Guidelines3 indicate that the prohibition on the direct or indirect supply of legal services does not apply to companies established in other countries outside of the Russian Federation, even if they are subsidiaries of companies of the Russian Federation or owned by nationals of the Russian Federation. The use of the term "indirectly" means that it is prohibited for an EU services provider to provide restricted services to EU or other non-Russian entities that are subsidiaries of entities established in Russia if those services would actually be for the benefit of the parent company established in Russia.
In addition, the FIU invites to consult the judgment of the Court of Justice of the European Union in Case C-109/234 and the judgment of the General Court of the European Union in Case T-797/225, which assess the compatibility of sectoral restrictions on the provision of legal services with fundamental rights of the European Union. In its judgment in Case T-797/22, the Court clarified that the restrictions do not prevent a lawyer to carry out a prior assessment of the legal situation in order to understand whether the provision of the service is in conformity with the European Union's sanctions regime6.
The FIU stresses that the provision of legal services which are not in conformity with the European Union sanctions’ regulations may constitute a breach of sanctions punishable under the Article 84 of the Criminal Law.
1 In accordance with Article 1(4) of the Law on International Sanctions and National Sanctions of the Republic of Latvia: https://likumi.lv/ta/en/en/id/280278
2 In accordance with Article 47 of the Charter of Fundamental Rights of the European Union: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:12016P/TXT
3 European Commission Guidelines, response to Section G, Chapter 8, Question 4, p. 349, available at: https://finance.ec.europa.eu/document/download/66e8fd7d-8057-4b9b-96c2-5e54bf573cd1_en?filename=faqs-sanctions-russia-consolidated_en.pdf
4 Available at: https://curia.europa.eu/juris/document/document.jsf?text=&docid=289811&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=19752367
5 Available at: https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:62022TJ0797&qid=1733299244501
6 See paragraphs 62 and 63 of the judgment in Case T-797/22.
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