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Syria Sanctions Update: EU imposes new restrictions

Following bomb attacks in December 2011 and January 2012, the situation in Syria continues to deteriorate, with escalating violence, and a crackdown by the Syrian government which may exacerbate the position even further.

There have also been significant political developments, with the EU calling on President Assad on 23 January to step aside immediately to allow for a peaceful and democratic transition.

This followed the League of Arab States calling on President Assad on 22 January to form a national unity government (a measure the League intends to put to the UN Security Council for support).

Against this background, the EU has significantly increased the sanctions in place against Syria by publication of two new Regulations. The first is Council Regulation (EU) No 36/2012, which was published on 19 January 2012 and which repeals and replaces the earlier EU Regulation (Regulation 442/2011, as amended). The second is Council Regulation (EU) No 55/2012, which was published on 24 January 2012 and which adds a number of entities and individuals to the list of those who are subject to asset freeze.

All EU companies which trade with Syria, as well as all financial institutions (including insurers and reinsurers) which have Syrian business, should carefully review their existing contracts and commitments, to ensure that they comply with these increased restrictions.

Overview

The latest amendments will be of interest to those who supply or ship (i) telecoms equipment, (ii) equipment for the oil and gas industry, and (iii) equipment for power plants for electricity production, as well as those who provide related services (including technical assistance, brokering services, financing or financial assistance, or investment).

There are also restrictions which apply to banks and other credit institutions, restricting relationships between EU banks and Syrian banks, prohibiting the sale or purchase of Syrian public bonds and prohibiting the provision of insurance or reinsurance to "the State of Syria, its Government, its public bodies, corporations or agencies".

There are limited exemptions for the performance of obligations in contracts concluded before 19 January 2012 in the case of the prohibitions which relate to (i) key equipment and technology for the Syrian oil and gas industry, and (ii) equipment and technology for the construction or installation of new Syrian power plants for electricity production.

There are limited carve outs from the prohibition on insurance for some types of insurance, as well as a general carve out for compliance with agreements concluded before 19 January 2012 (these may even be renewed where there is a prior contractual obligation on the part of the insurer to accept an extension or renewal of the policy).

The various prohibitions and restrictions set out in the earlier EU Regulation (Council Regulation (EU) No 442/2011, as amended) remain in force, including the asset freeze, which currently applies in respect of 108 designated persons and 38 designated entities, and the ban on imports of Syrian crude and petroleum products, with a very limited exemption for contracts concluded before 2 September 2011.

New embargo on certain products

Council Regulation (EU) No 36/2012 creates the following new import and export restrictions.

  • A ban on the sale, supply, transfer or export (directly or indirectly) of equipment, technology and software which may be used for the monitoring or interception of internet or telephone communication (as identified in Annex V to the Regulation), as well as technical assistance, brokering services, financing or financial assistance related to that equipment, technology and software.
  • A ban on the provision of telecommunication or internet monitoring or interception services of any kind to the Syrian government or its agencies.
  • A ban on the sale, supply, transfer or export (directly or indirectly) of key equipment and technology (as identified in Annex VI to the Regulation) for the Syrian oil and gas industry, as well as related technical assistance, brokering services, financing or financial assistance (with a limited exemption in each case for performance of obligations in contracts concluded before 19 January 2012).
  • A ban on the sale, supply, transfer or export (directly or indirectly) of equipment and technology (as identified in Annex VII to the Regulation) for the construction or installation of new Syrian power plants for electricity production, as well as related financing or financial assistance (with a limited exemption in each case for performance of obligations in contracts concluded before 19 January 2012).

New restrictions on financial services

Council Regulation (EU) No 36/2012 creates the following new restrictions on financial services:

  • A ban on the provision of financial loans and credits to, as well as some other investment in, Syrian entities engaged in the construction or installation of new Syrian power plants for electricity production (with a limited exemption for performance of obligations in contracts concluded before 19 January 2012).
  • A ban on the sale or purchase of Syrian public bonds.
  • Restrictions on the relationships between EU banks and Syrian banks.

New prohibitions on insurance and reinsurance

Council Regulation (EU) No 36/2012 includes a prohibition on the provision of insurance or reinsurance to "the State of Syria, its Government, its public bodies, corporations or agencies", as well as a prohibition on participating in activities to circumvent the prohibition.

The prohibition on insurance and reinsurance does not prohibit the provision of the following:

  • Insurance or reinsurance to private (ie non-State) persons, entities or bodies, save where they are acting on behalf of or at the direction of the State of Syria, its Government, its public bodies, corporations or agencies.
  • Compulsory or third party insurance provided to Syrian persons, entities or bodies based in the EU.
  • Insurance provided to Syrian diplomatic or consular missions in the EU. Insurance, including health and travel insurance, provided to individuals acting in their private capacity (and related reinsurance).
  • Insurance or reinsurance provided to the owner of a vessel, aircraft or vehicle where that vessel, aircraft or vehicle is chartered by the State of Syria, its Government, its public bodies, corporations or agencies, provided that the charterer is not subject to the asset freeze.

There is also a carve out for compliance with agreements concluded before 19 January 2012 (which may be extended or renewed where there is a prior contractual obligation on the part of the insurer to accept an extension or renewal of the policy).

Old restrictions

The following restrictions, which were imposed by Regulation 442/2011 (as amended), remain in force:

  • A ban on equipment for internal repression, as well as technical assistance, brokering services, financing or financial assistance related to that equipment.
  • An asset freeze (at present 108 persons and 38 entities are designated).
  • A ban on imports of Syrian crude and petroleum products (with a very limited exemption for performance of obligations in contracts concluded before 2 September 2011). This is covered in our briefing dated September 2011.
  • A ban on the supply to Syria of Syrian banknotes and coinage printed or minted in the EU.

A ban on the provision of financial loans and credits, as well as some other investment in, Syrian oil companies (with a limited exemption for performance of obligations in contracts concluded before 23 September 2011). Restrictions on the activities of the European Investment Bank.

For further information, please contact Anthony Woolich, Partner, on +44 (0)20 7264 8033 or anthony.woolich@hfw.com, or Daniel Martin, Associate, on +44 (0)20 7264 8189 or daniel.martin@hfw.com, or your usual contact at HFW.

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