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by John Helmer, Moscow 

Buried in the small print and legalese of the new European Union (EU) sanctions announced on June 24 is the re-establishment of the old European and American empires’ operation of privateering. That’s piracy on the high seas licensed by the monarch or the head of state on condition that the proceeds are shared with court and state officials.

In short, state war for private profit — grand larceny by the Great Powers if they can get away with it.

To make sure of that, the EU has issued “Council Decision (CSFP) 2024/1738”  which allows the thieving to be done in secret. In Article 1 of Monday’s document, the EU authorizes “the release of certain frozen funds [Russian], after having determined that the transfer of such funds is: (a) between two natural or legal persons, entities or bodies that are not listed in the Annex to this Decision”. That’s the stealing.  

And here is the cover-up: Article 4a is amended to read that the operation: “shall be subject to professional secrecy and shall enjoy the protection afforded by the rules applicable to the Union institutions. That protection shall apply to the proposals from the High Representative for the amendment of this Decision and to any preparatory documents related to them.”

This is the EU summary version of the new sanctions package.  Note that it disguises the privateering provisions as “specific initiatives to protect EU operators from expropriation and to respond to other illegitimate actions of the Russian state, including the theft of intellectual property.”

An EU press release is also camouflage, describing the purpose of the new measures “to allow EU operators to claim compensation from damages caused by Russian companies due to sanctions implementation and expropriation. It also creates the instrument to draw up a list of company subject to a transaction ban for meddling with arbitration and court competence.”  

The reaction in Moscow will be a counterattack on EU corporate and individual assets within Russian reach. This is spelled out in a report by Kommersant, the Moscow business newspaper, published on Monday. Read the verbatim piece translated into English here.   There is no reporter byline; illustrations have been added.

Source: https://www.kommersant.ru

June 24, 2024
With the courts wide open
The Europeans who lost in the courts in the Russian Federation are waiting for the EU

European citizens and companies from which Russian counterparties have collected penalties in the courts of the Russian Federation have been allowed to file counterclaims in the EU. The mechanism is provided for in the new package of sanctions. Russian state property cannot be seized by claims of private individuals, but recovery can be applied to private assets in the EU and other countries.

Lawyers assess the measure as a “mirror response” to Article 248.1 of the Arbitration Procedure Code of the Russian Federation (APC) on the transfer to the courts of the Russian Federation of disputes involving persons affected by sanctions. The EU has also banned any transactions with Russian individuals who have resorted to the mechanism, even if they are not on the blacklist.

Amendments to EU Regulation No. 269/2014  of June 24 stipulate the “expediency of introducing a provision” that will allow individuals and legal entities from the EU to receive compensation from Russian citizens and organizations that “caused damage to them.” We are talking about damage to companies owned or controlled by Europeans, and losses incurred “in connection with a contract or transaction, the implementation of which was affected by measures introduced by Regulation No. 269/2014.” The regulation makes it possible to claim compensation in the courts of EU countries.

Article 11a clarifies that damages include, among other things, legal costs incurred as a result of proceedings in the courts of third countries regarding a contract, the performance of which was directly or indirectly affected by sanctions imposed under regulation 269/2014.

Filing a claim and recovery of damages is possible provided that the plaintiff “does not have effective access to legal remedies within the relevant jurisdiction.”

The amendments provide for compensation for damage caused to European citizens and companies by the consideration of claims against them from Russian persons in courts outside the EU, explains Mergen Doraev, partner at the EMPP Law Office.    First of all, he clarifies, “we are talking about the consequences of disputes in the courts of the Russian Federation.” “This refers to a contractual dispute when the fulfillment of an obligation is complicated or excluded due to sanctions, and a European person does not have access to legal remedies in this jurisdiction,” adds Artem Kasumyan, a lawyer at the Delcredere Bar Association.

Sanctions law specialists, left to right, Mergen Doraev,  Artem Kasumyan,   and Kira Vinokurova.   US-trained Doraev has long experience as a lawyer to the Russian state nuclear companies, ARMZ and Tenex, as well as to Severstal and Rusal.  

“The task is to provide Europeans with a remedy which,  in theory, will be able to balance a similar mechanism provided to Russian businessmen through the Commercial Procedure Code  [CPC] norm [Article 248.1 appeared in 2020  — Kommersant) on the exclusive jurisdiction of the Russian courts in sanctions disputes,” explains Mr. Doraev. The article allows Russian persons who are under sanctions or affected by them to transfer a dispute with a foreign counterparty to the Russian Federation.

“If a Russian subsidiary under Article 248.1 of the CPC transferred the dispute to the Russian Federation and the court recovered a certain amount from the European counterparty, now the latter can go to court in Europe to recover damages related to the process and the loss,” explains Artyom Kasumyan.    He believes that “the European courts will be very willing to admit that in the Russian Federation, persons from the EU do not have access to effective remedies.”

In Russia, the decisions of the European courts in such cases “most likely will not be executed,” emphasizes Kira Vinokurova, a partner of the Pen & Paper law firm in Moscow.   

However, they can be executed in the EU and other countries. Regulation 269/2014 in Article 5 (1) explicitly provides that the competent authority of an EU state may authorize payment from frozen accounts of sanctioned persons if the funds are the subject of a decision rendered by an EU court, says Ms. Vinokurova.

Considering that earlier Russian individuals had recovered funds from Europeans in a domestic court if they had property in Russia, “as a result, something like a forced asset exchange may occur,” believes Artyom Kasumyan. “But in any case, we are not talking about the possibility of satisfying private claims from the funds of the frozen sovereign assets of the Russian Federation,” Mr. Doraev clarifies.

Also, Mr. Kasumyan notes, the plaintiffs can apply for the execution of the EU court’s decision in other jurisdictions if the assets of the Russian defendant are found there. “Theoretically, the execution of the decision of the EU court in another foreign country is possible,” admits Kira Vinokurova. “But it will depend on the national law of the state where it is planned to execute the decisions, and in the United States, for example, on a particular state.”

Another punishment for Russian persons who forced Europeans to sue in the Russian Federation under Article 248.1 of the CPC is recorded in Article 5ab of the EU regulation. The norm prohibits making any transactions with them “directly or indirectly.” “De jure, this is interference in the jurisdiction of Russian courts,” Mergen Doraev believes. For those who are already under EU sanctions, the norm does not matter much, but lawsuits were filed by those who are not included in the black lists. According to Mr. Doraev, “for many participants in foreign economic activity in the Russian Federation, the measure will serve as a warning, since it will entail a break in cooperation with European counterparties.”

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