On 26 January 2024, the European Union updated its Frequently Asked Questions on Russian sanctions regarding public procurement issues. The FAQ are released  to help the public accurately interpret and implement EU legislation regarding Russian sanctions.

The following are clarifications found in the EU’s most recent FAQ update:

in accordance with the Article 5k of Council Regulation 833/2014, any public procurement contract involving Russian participation comprising 10% or more of the contract value must be terminated. All public buyers are required to verify if they have entered into any public contract surpassing the EU public procurement thresholds. Public buyer should also assess the potential for Russian involvement in any public or concession contract falling within the purview of public procurement, and ascertain if these contracts are subject to restrictive measures.  As regulated by the Article 5k of Regulation 833/2014, it is prohibited to award or execute any public or concession contract falling within the scope of EU public procurement directives with:

(a) a Russian national, an individual with Russian residence, or a legal person established in Russia;

(b) a legal entity in which more than 50% of proprietary rights are directly or indirectly owned by a Russian entity; or

(c) a natural or legal person, acting on behalf of or under the direction of the aforementioned entity, including subcontractors, suppliers or entities whose capabilities are relied upon in the public procurement, and whose work contributions represent more than 10% of the contract value.

Exceptions may be authorized by authorities solely for essential goods or services, the operation of diplomatic and consular missions, among other circumstances.

The updated FAQ additionally recommend that subcontractors be required, in writing, to verify that they have not engaged Russian parties for the contract. Specifically, it proposes that that all public buyers ask their (sub-) contractors to sign the following statement verifying the absence of Russian involvement:

I declare under honour that there is no Russian involvement in the contract of the company I represent exceeding the limits set in Article 5k of Council Regulation (EU) No 833/2014 of 31 July 2014 concerning restrictive measures in view of Russia’s actions destabilising the situation in Ukraine.

In particular I declare that: (a) the contractor I represent (and none of the companies which are members of our consortium) is not a Russian national, or a natural or legal person, entity or body established in Russia; (b) the contractor I represent (and none of the companies which are members of our consortium) is not a legal person, entity or body whose proprietary rights are directly or indirectly owned for more than 50 % by an entity referred to in point (a) of this paragraph; (c) neither I nor the company represent is a natural or legal person, entity or body act on behalf or at the direction of an entity referred to in point (a) or (b) above, (d) there is no participation of over 10 % of the contract value of subcontractors, suppliers or entities whose capacities the contractor I represent relies on by entities listed in points (a) to (c).

With the aim to comply with personal financial sanctions against Russian individuals it is also suggested to request from (sub-)contractors the following statements in writing:

“(e) the contractor I represent (and the companies which are members of our consortium or any of their subcontractors) is not a target of EU sanctions, such as those against the persons listed in Annex I to Council Regulation (EU) No 269/2014, nor is owned or controlled by listed persons. The criterion to be taken into account when assessing whether a legal person or entity is owned by another person or entity is the possession of more than 50% of the proprietary rights of an entity or having majority interest in it.“

All public buyers are strongly encouraged to conduct thorough due diligence and request additional information if any doubts arise regarding Russian involvement in the contract. Additional verifications and investigations into corporate structures, media information, etc. are key to ensure the accuracy of statements provided by the contractor.

EU sanctions prohibit the involvement of any company established in Russia, regardless of  ownership, as well as any company that is directly or indirectly owned by a Russian national or has half or more of its operations or ownership tied to Russia. The FAQ clarify that even if Russian participation is partial, its proportion must be calculated and summarized, irrespective of the ownership levels involved. Additionally, the 10% threshold for Russian subcontracting, supplying, or capacity provision applies to each subcontractor, supplier, or capacity provider. This rule covers the entire supply chain, not just direct suppliers. Consequently, contracts fall under scrutiny even if the 10% of Russian subcontracting or supplying is facilitated through intermediary entities.

An additional FAQ update highlights the interconnection between Article 5k of Council Regulation (EU) 833/2014 and Article 2 of Council Regulation 269/2014. These articles pertain to the prohibition on awarding or continuing public procurement contracts and freezing funds and economic resources owned, held, or controlled by designated individuals or entities. The European Commission clarifies that both provisions must be complied with and therefore their applicability must be checked in parallel. It is important to note that if either provision applies, the action is deemed prohibited.

Though FAQs are not legally binding, they aim to ensure the uniform application of sanctions throughout the European Union. As such, they are important for individuals and businesses operating within the EU, guiding them on compliance and applicable regulations.

Our series of articles on EU restrictive measures are provided for information purposes only and do not constitute legal advice. For professional advice tailored to your particular case please contact us at: .