EU firms must make ‘best efforts’ on sanctions
Lawyers at McCann FitzGerald (MF) have welcomed further clarification from the EU on a new legal obligation aimed at preventing actions that would weaken the effect of sanctions against Russia and Belarus.
Introduced in 2024, the Best Efforts Rule requires EU individuals and organisations that own or control entities outside the EU to use their ‘best efforts’ to ensure those entities do not undermine the Russia and Belarus sanctions regime.
The MF lawyers note that the EU Sanctions Helpdesk provided “helpful” further clarification on the rule last month, after guidance from the European Commission late last year.
The law firm explains that ‘undermining’ is a broad concept that includes actions such as a non-EU subsidiary selling restricted goods into Russia.
‘Relevent circumstances’
‘Best efforts’, MF adds, go beyond the contractual concept of ‘reasonable efforts’ and differ on a case-by-case basis.
The commission defined ‘best efforts’ as “all actions that are suitable and necessary to achieve the result of preventing the undermining of restrictive measures”.
The EU body added, however, that these actions included only those that were feasible for each EU operator in view of its nature, its size, and the relevant factual circumstances.
‘Relevant factual circumstances’ include:
- The degree of effective control over the non-EU entity, bearing in mind that there are situations where control can be limited,
- The risk of prosecution by the third-party country of the non-EU entity’s personnel, and
- The compliance resources available to the EU operator.
Due diligence
The MF layers note that the commission expects EU organisations to carry out adequate due diligence to make themselves aware of the activities of any non-EU entities that they own or control and to ensure that those entities understand the types of activities that risk undermining EU sanctions.
The MF lawyers urge EU operators to actively monitor and influence the behaviour of their non-EU subsidiaries to avoid undermining EU sanctions.
“While only the Russia and Belarus sanctions regimes currently include the Best Efforts Rule, the commission encourages EU operators to treat it as good practice globally,” they note.
“EU operators should look to review their governance, contracts, compliance programmes, and training to ensure they can demonstrate full adherence to the new ‘best efforts’ obligation,” the lawyers conclude.