European Union — Sanctions & Embargoes

European Union sanctions (officially termed "restrictive measures") rest on a two-instrument legal architecture that splits political authority from economic enforcement. The Council of the European Union imposes sanctions under the Common Foreign and Security Policy (CFSP) framework established by Article 29 of the Treaty on European Union (TEU), and economic or financial measures are implemented through regulations adopted under Article 215 of the Treaty on the Functioning of the European Union (TFEU).

Article 29 TEU — CFSP Decisions

Under Article 29 TEU, the Council may adopt a decision to impose restrictive measures against non-EU countries, non-state entities, or individuals to bring about a change in policy or activity. The Council acts by unanimity, based on proposals from the High Representative of the Union for Foreign Affairs and Security Policy. These CFSP decisions define the targets (geographic, sectoral, or designated persons and entities) and the objectives of the sanctions regime. Council decisions typically apply for twelve months and require renewal; the Council reviews the measures before extension and may amend, suspend, or lift them depending on the situation.

Article 215 TFEU — Economic and Financial Regulations

When a Council decision under Article 29 TEU includes economic or financial measures — such as asset freezes, import or export restrictions, or prohibitions on making funds available — those measures must be implemented through a regulation adopted under Article 215 TFEU. The High Representative and the European Commission jointly propose the regulation, which the Council adopts by qualified majority (not unanimity). The regulation is directly applicable across all Member States, binding on any person or entity within the EU, including EU nationals anywhere in the world, companies incorporated under Member State law (including foreign branches), and anyone conducting business in whole or in part within the EU territory. Council regulations adopted under Article 215 TFEU are open-ended instruments; they remain in force until repealed or amended, though the underlying CFSP decision must be renewed annually.

Relationship to UN Security Council and Autonomous Regimes

EU sanctions may be imposed either to implement United Nations Security Council resolutions or on the EU's own autonomous initiative. In both cases the dual-instrument structure applies: the Council decision under Article 29 TEU provides the CFSP legal basis, and the regulation under Article 215 TFEU makes the economic measures directly enforceable. EU autonomous sanctions regimes follow the same unanimity threshold in the Council and the same proposal procedure.

Enforcement and Oversight

Implementation and enforcement of EU sanctions are the responsibility of Member States, which must establish effective, proportionate, and dissuasive penalties for violations. The European Commission monitors the correct and uniform implementation across Member States and provides interpretive guidance to national competent authorities, economic operators, and humanitarian actors. Council Decision (EU) 2022/2332, adopted 28 November 2022, identified the violation of Union restrictive measures as a criminal offense meeting the criteria in Article 83(1) TFEU, establishing a foundation for harmonized criminal penalties across the EU.

Non-Punitive Character and Consistency with EU External Action

EU restrictive measures are preventive, not punitive. They are imposed to achieve a change in behavior by targeted parties — for example, those violating international law, human rights, or the rule of law — and must be consistent with the objectives of the EU's external action under Article 21 TEU. Restrictive measures must be designed to minimize adverse effects on civilian populations, and the EU typically employs targeted sanctions directed at specific individuals, entities, or sectors rather than comprehensive country-wide embargoes.

Source: Consolidated version of the Treaty on European Union — Article 29 Source: Consolidated version of the Treaty on the Functioning of the European Union — Article 215 Source: EUR-Lex Glossary — Sanctions (restrictive measures) Source: Council Decision (EU) 2022/2332 of 28 November 2022

The European Commission publishes and maintains the EU Consolidated Financial Sanctions List, a single authoritative roster of all individuals, groups, and entities subject to asset-freeze measures under EU sanctions regulations. The list is managed by the Commission's Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA) and reflects the officially adopted legal texts published in the Official Journal of the European Union. The consolidated list serves as the operational reference for compliance officers, financial institutions, and any person or entity conducting business within the EU that must screen counterparties, customers, and beneficial owners against EU restrictive measures.

Legal Basis and Designation Mechanism

Persons and entities are designated—added to the consolidated list—through Council Regulations adopted under Article 215 TFEU. Each sanctions regime defines its own listing criteria in the regulation establishing that regime. When the Council amends a sanctions regulation to add or remove names (by adopting an implementing regulation amending the annexes), DG FISMA updates the consolidated list to reflect the change. The Commission describes its role as updating the list "whenever necessary" to mirror the texts in the Official Journal. The consolidated list is published in downloadable formats (PDF, CSV, XML) and via searchable web interfaces, allowing real-time lookups by name, nationality, regime, and type of restrictive measure.

Scope: Who Is Listed and What an Asset Freeze Means

The consolidated list encompasses natural persons (individuals), legal persons (companies, partnerships, trusts, foundations), groups (including informal associations without legal personality), and entities (government bodies, state-owned enterprises, non-state armed groups). A designated person or entity is subject to an asset freeze. Under EU sanctions regulations, an asset freeze prohibits the release of funds (such as cash, cheques, bank deposits, stocks, shares) and economic resources (tangible or intangible assets, including real estate) owned, held, or controlled by that person or entity. It also prohibits making funds or economic resources available, directly or indirectly, to or for the benefit of a designated person or entity. No business transaction may be conducted with a designated party unless authorized by a Member State competent authority through a derogation or exemption provided in the relevant regulation.

EU sanctions apply extraterritorially to any person inside or outside the EU's territory (whether EU or non-EU nationals), any company or organization incorporated under the law of a Member State (including branches of EU companies in non-EU countries), and any business conducted in part or in whole within the EU. The Commission's overview page states that sanctions are "designed to have political and economic effects" and that they "apply to: any person inside or outside the EU's territory, whether they are an EU- or a non-EU-national; companies and organisations incorporated under the law of a Member State (including branches of EU companies in non-EU countries); governments, organisations and non-state entities of non-EU countries; any business done in part of or in the whole of the EU."

Ownership and Control Provisions

Several EU sanctions regimes—particularly those targeting individuals and entities connected to Russia following its invasion of Ukraine—include provisions that extend asset freezes to entities owned or controlled by designated persons, even if those entities do not appear by name on the consolidated list. The precise thresholds and definitions (for example, what constitutes "ownership" percentage-wise, and how "control" is assessed) are set out in the individual Council Regulations for each regime. Practitioners should consult the relevant regulation (for example, Council Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia's actions destabilizing the situation in Ukraine, and its subsequent amendments) for the specific ownership and control tests that apply to a given sanctions regime. The Commission's overview materials confirm that compliance requires looking beyond the consolidated list itself and investigating the ownership and control structures of counterparties.

Access to the Consolidated List

The EU Consolidated Financial Sanctions List is available through multiple official channels:

• Data portal: The Commission publishes downloadable files (PDF, CSV, XML) at the EU Open Data Portal page for consolidated financial sanctions.
• EU Sanctions Map: A searchable web interface maintained by the Commission that allows users to filter by name, regime, nationality, and type of restriction. The map displays the legal instruments (Council Decisions and Regulations) that establish each listing and the grounds for designation, and includes links to the full text of each instrument in EUR-Lex.
• Commission finance portal: The official page at finance.ec.europa.eu provides an overview of sanctions and related resources, links to the consolidated list, contact details for Member State competent authorities, guidance documents, and FAQs.

The Commission states on its finance portal that it "updates [the consolidated list] whenever necessary" and that the list "reflects the officially adopted texts published in the Official Journal of the EU." Because new designations take effect immediately upon publication of the amending regulation in the Official Journal, practitioners should monitor the Official Journal and consider subscribing to alerts or RSS feeds to track amendments in real time.

Who Must Screen

Any person or entity subject to EU sanctions law—including financial institutions, trade-finance providers, logistics companies, exporters, importers, and any entity holding, transferring, or making available funds or economic resources—must screen against the consolidated list before onboarding a customer, executing a payment, releasing goods, or providing services. The Commission notes that Member States are responsible for implementation and enforcement of EU sanctions and that they "must have effective, proportionate and dissuasive penalties in place, and enforce them when EU sanctions are breached."

Delisting and Judicial Review

Persons and entities listed on the consolidated list have procedural rights. The Commission's overview materials confirm that listed persons may request the Council to review and remove their designation, and that they have the right to challenge their designation before the General Court of the European Union under Article 263 TFEU. The General Court and the Court of Justice of the European Union have developed case law concerning the substantive and procedural standards the Council must meet when imposing and maintaining listings, including the duty to provide a statement of reasons and to permit an effective defense. Specific details of these standards—including disclosure obligations, the burden of proof, and the scope of judicial review—are set out in the case law of the EU courts.

Source: European Commission — Overview of sanctions and related resources Source: Consolidated list of persons, groups and entities subject to EU financial sanctions (EU Open Data Portal)

European Union sanctions regulations frequently impose sectoral sanctions — prohibitions or restrictions on the import, export, sale, supply, transfer, or transit of specific categories of goods, technologies, and services. These measures target defined economic sectors or product categories and apply irrespective of whether the counterparty is a designated person or entity on the consolidated financial sanctions list. Any person or entity subject to EU jurisdiction must comply with sectoral sanctions when conducting cross-border trade, arranging logistics, or providing related services, even if the transaction does not involve a listed individual or entity.

Sectoral sanctions are distinct from targeted financial sanctions (asset freezes and travel bans). While asset freezes prohibit transactions with specific designated persons and entities, sectoral sanctions prohibit entire categories of trade or services with a country, sector, or end-use, regardless of the identity of the counterparty. The economic and financial aspects of sanctions decisions — including import and export restrictions and the freezing of assets — are implemented by regulations adopted by the Council under Article 215 TFEU, following a joint proposal by the High Representative and the European Commission. A single transaction may be subject to both types of measure: for example, an export of dual-use technology to a designated Russian entity would violate both the sectoral export prohibition and the prohibition on making economic resources available to a designated party.

## Principal Categories of Sectoral Sanctions

EU sanctions regulations employ the following principal categories of sectoral trade restrictions, which may be combined in varying degrees depending on the sanctions regime:

Arms embargoes — prohibitions on the sale, supply, transfer, or export of arms, military equipment, and related materiel. The EUR-Lex glossary describes sectoral measure prohibitions to include, among other things, restrictions on importing and exporting goods with both civilian and military uses (dual-use goods), and sectoral measure prohibitions on importing or exporting certain goods or technologies. Arms embargoes typically cover firearms, ammunition, military vehicles, explosive devices, and related spare parts, components, and technical assistance. Certain regimes extend the embargo to goods and technology that "might contribute to military and technological enhancement or to the development of the defence and security sector." For example, Council Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia's actions destabilising the situation in Ukraine prohibits (in Article 2, as amended) the sale, supply, transfer, or export of goods and technology listed in Annex VII — "goods and technology which might contribute to Russia's military and technological enhancement or to the development of the defence and security sector" — to any natural or legal person, entity, or body in Russia or for use in Russia. The prohibition extends to the provision of technical assistance, brokering services, financing, and financial assistance related to those items.

Dual-use goods and technology — restrictions on goods and technology with both civilian and military applications. The EU Dual-Use Regulation (EU) 2021/821 establishes the general framework for export controls on dual-use items, and individual sanctions regulations layer additional prohibitions on exports to specific jurisdictions or end-users. For example, Article 2 of Regulation 833/2014 (as amended) prohibits the sale, supply, transfer, or export of dual-use goods and technology listed in Annex I to Regulation 2021/821 to any person, entity, or body in Russia or for use in Russia, unless authorized by the competent authority of a Member State under the conditions specified in Council Regulation (EC) No 428/2009. The prohibition in the original Article 2 specified that when deciding on requests for authorizations, competent authorities "shall not grant an authorisation for exports to any natural or legal person, entity or body in Russia or for use in Russia, if they have reasonable grounds to believe that the end-user might be a military end-user or that the goods might have a military end-use," with an exception for obligations arising from contracts concluded before 1 August 2014. Where the end-user is the Russian military, any dual-use goods and technology procured by it are deemed to be for military use. The prohibition also extends to the provision of technical assistance, brokering services, and financing or financial assistance related to such goods.

Sectoral import and export bans — prohibitions on importing or exporting goods within defined product categories or sectors. These bans target specific industries or commodities to deprive the sanctioned country of export revenue (import bans) or critical inputs for strategic sectors (export bans). Regulation 833/2014 includes comprehensive sectoral bans that have been expanded through successive amendments. The EUR-Lex summary of EU restrictive measures in view of Russia's invasion of Ukraine notes that the measures include export bans on dual-use and advanced goods and technologies, import prohibitions on gold, diamonds, helium, coal, and mineral products including crude oil, and bans on the provision of certain services. These bans are implemented through detailed annexes that list specific goods by Combined Nomenclature (CN) code, by functional description, or by reference to other EU regulations.

Energy-sector restrictions — prohibitions on the sale, supply, transfer, or export of goods and technology for use in specified energy projects or activities. Article 3 of Regulation 833/2014 (as originally adopted on 31 July 2014) requires prior authorization for the sale, supply, transfer, or export of technologies listed in Annex II. Paragraph 5 of that article provides that competent authorities "shall not grant any authorisation for any sale, supply, transfer or export of the technologies included in Annex II, if they have reasonable grounds to determine that the sale, supply, transfer or export of the technologies is for projects pertaining to deep water oil exploration and production, Arctic oil exploration and production, or shale oil projects in Russia," with an exception for obligations arising from contracts concluded before 1 August 2014. The regulation defines the "energy sector" to mean a sector covering exploration, production, distribution within Russia or mining of crude oil, natural gas or solid fossil fuels; refining of fuels, liquefaction of natural gas or regasification; manufacture or distribution within Russia of solid fossil fuel products, refined petroleum products or gas; and construction of facilities or installation of equipment for, or the provision of services, equipment or technology for, activities related to power generation or electricity production, with an exception for civil nuclear-related activities such as the Paks II project.

Services restrictions — prohibitions on providing specified categories of services. Sectoral sanctions may prohibit the provision of financial services (such as banking, insurance, and capital-market services), transport services, legal and accounting services, engineering and consulting services, and IT services. The EUR-Lex summary materials note that EU restrictive measures can include restrictions on the provision of certain services, including banking services. Regulation 833/2014 includes prohibitions on providing certain services to designated entities or the Russian government. Council press releases and summaries confirm that successive amendment packages have introduced prohibitions on providing credit-rating services, accounting and auditing services, trust services, and public-relations services. The 20th sanctions package (adopted 23 April 2026) established the legal basis for a future prohibition on the provision of maritime transport services — including insurance and financing — for vessels transporting Russian crude oil and petroleum products; the Council will decide when this prohibition enters into force, taking into account coordination with the G7 and the Price Cap Coalition.

Transit and transhipment restrictions — prohibitions on the transit of specified goods through the territory of a sanctioned country or the transhipment of goods destined for a sanctioned country. Regulation 833/2014 prohibits (in Article 1g, as amended) the transit via the territory of Russia of certain dual-use goods and advanced technology items when exported from the EU to any third country, in order to prevent Russia from obtaining such goods indirectly. Similarly, the regulation requires an authorization for the export of certain goods to any third country other than Russia if the exporter has been informed by the competent authority that the items in question are or may be intended for Russia.

## Scope of Application and Compliance Obligations

EU sanctions regulations describe the scope of application as follows: "Sanctions are designed to have political and economic effects. They apply to: any person inside or outside the EU's territory, whether they are an EU- or a non-EU-national; companies and organisations incorporated under the law of a Member State (including branches of EU companies in non-EU countries); governments, organisations and non-state entities of non-EU countries; any business done in part of or in the whole of the EU." This language appears in the EUR-Lex glossary and summary materials for EU sanctions. An exporter, freight forwarder, logistics provider, insurer, financial institution, or service provider that falls within this scope must screen all transactions against the applicable sectoral prohibitions before executing a sale, shipment, payment, or service contract.

Annexes and product lists. Most sectoral sanctions regulations define prohibited goods by reference to annexes that list specific products by Combined Nomenclature (CN) code, by functional description, or by reference to other EU regulations (such as the Annex I dual-use list in Regulation 2021/821). Compliance officers must consult the relevant annexes to determine whether a proposed transaction falls within a prohibition. The European Commission's sanctions website and the EU Sanctions Map provide consolidated annexes and search functionality.

Licensing and derogations. Certain sectoral prohibitions permit Member State competent authorities to authorize otherwise-prohibited transactions under specified conditions — for example, exports necessary for humanitarian purposes, civil safety, or the execution of contracts concluded before a specified grandfather date. The conditions for granting a licence and the procedure for applying are set out in the relevant regulation. The EUR-Lex glossary notes that "in certain cases, exceptions from the asset freeze may be granted to allow the export of products to meet basic needs (such as food or medicines)," and that "Member States may also grant exemptions to travel bans."

Anti-circumvention provisions. EU sanctions regulations include provisions that prohibit participation, directly or indirectly, in activities the object or effect of which is to circumvent the prohibitions in the regulation. These provisions extend liability to intermediaries, re-exporters, and service providers who facilitate prohibited transactions.

## Relationship to Member State Implementation and Criminal Penalties

Sectoral prohibitions in Council regulations adopted under Article 215 TFEU are directly applicable in all Member States. They create binding obligations on persons and entities without requiring transposing legislation. The Commission is responsible for ensuring, through monitoring, that the regulations imposing restrictive measures are implemented and enforced by the Member States. Member States are responsible for enforcement and must establish effective, proportionate, and dissuasive penalties for violations. On 12 April 2024, the Council adopted new rules to ensure that the violation of restrictive measures is criminalized. Certain actions are considered criminal offenses in all Member States, including helping to bypass a travel ban, trading in sanctioned goods, or performing prohibited financial activities. Member States must ensure that violating EU sanctions is punishable by effective and proportionate criminal penalties, and intentional violation of sanctions must give rise to a prison sentence as the maximum penalty.

Source: EUR-Lex Glossary — Restrictive measures (sanctions) Source: EUR-Lex Summary — General framework for EU sanctions Source: Council Regulation (EU) No 833/2014 of 31 July 2014 concerning restrictive measures in view of Russia's actions destabilising the situation in Ukraine Source: EUR-Lex Summary — EU restrictive measures in view of Russia's invasion of Ukraine Source: Council press release — Russia's war of aggression against Ukraine: 20th round of stern EU sanctions, 23 April 2026 Source: Council of the European Union — Why the EU adopts sanctions

European Union sanctions regulations distinguish between exemptions and derogations as mechanisms to permit otherwise-prohibited activities. An exemption means that a prohibition does not apply when the purpose of the activity coincides with the scope of the exemption; persons falling within the exemption may carry out the activity without prior authorization or delay. A derogation means that a prohibited action may be carried out only after a Member State national competent authority (NCA) has granted prior authorization for the specified purpose. The Council's Best Practices Guidelines for the Effective Implementation of Restrictive Measures define the distinction: "Exemptions mean that a restriction does not apply when the purpose of the action coincides with the scope of the exemption; as a result, persons falling within the purview of the exemption can carry out the action at hand without any delay. Derogations mean that a restricted (prohibited) action can be carried out only after the NCA has granted an authorisation."

Derogation and exemption procedures, as well as NCA processes, can vary across different sanctions regimes and Member States. Practitioners must confirm the specific procedures and conditions for the legal instrument and activity type involved.

## Drafting: Standard Language in Council Regulations

Council Regulations adopted under Article 215 TFEU employ standardized phrasing to signal whether a provision is an exemption or a derogation. Exemptions are generally phrased: "(The prohibitions laid down in) Article... shall not apply to...". Derogations are generally phrased: "By way of derogation from the (prohibitions in) Article..., the competent authorities may authorise, under the conditions they deem appropriate...". The European Commission's factsheet on humanitarian derogations confirms this pattern and notes that derogations "provide the Humanitarian Operators with a formal indication of the scope of the permitted activities."

## Common Derogations in EU Sanctions Regimes

EU sanctions regulations typically include derogations for the following categories of activities, though the precise scope and conditions vary by regime:

• Basic needs of designated persons and their dependents — release of frozen funds necessary to cover foodstuffs, rent or mortgage payments, medicines, medical treatment, taxes, insurance premiums, and utility charges. The Commission's overview materials note that "authorities can also permit derogations from the asset freeze under specific exemptions, for instance to cover basic needs (such as foodstuffs, rent, medicines or taxes) or reasonable legal fees."

• Reasonable professional fees and reimbursement of expenses — payment of fees for legal services and costs directly associated with the provision of legal services, or fees or service charges for the routine holding or maintenance of frozen funds or economic resources.

• Humanitarian purposes — release of frozen funds or making funds or economic resources available if necessary for humanitarian purposes, such as delivering or facilitating the delivery of assistance (including medical supplies, food, or the transfer of humanitarian workers and related assistance) or for evacuations. The Commission published a factsheet on Member State procedures to grant humanitarian derogations that summarizes the most common rules and procedures applied by NCAs when assessing requests and granting humanitarian derogations under EU sanctions regulations. The factsheet confirms that commercial companies — such as manufacturers of medicinal products and medical devices — can benefit from a derogation for humanitarian purposes, and that humanitarian derogations are one of the tools provided by EU sanctions regulations to safeguard the humanitarian space in sanctioned environments.

• Execution of pre-existing contracts — performance of obligations arising from contracts concluded before the entry into force of the prohibition, subject to notification or prior authorization. For example, Article 2 of Council Regulation (EU) No 833/2014 (as originally adopted on 31 July 2014) provided an exception for obligations arising from contracts concluded before 1 August 2014.

• Medical and pharmaceutical purposes — export of dual-use goods and technology, or goods listed in sectoral annexes, for medical or pharmaceutical purposes. Council Regulation 833/2014 includes exemptions and derogations for medicinal products, medical devices, and related assistance and services. The Commission's FAQs on Russia medical-sector sanctions note that EU sanctions do not include a definition of "medical" or "pharmaceutical purposes"; it is for the economic operator to assess, and prove, that the goods and technology are sold, supplied, transferred, or exported for those purposes, and the economic operator retains responsibility if the exported goods are not used as declared.

• Civil nuclear cooperation and safety — activities necessary for civil nuclear capability and civil nuclear safety, including enrichment, reprocessing, and heavy-water activities, and the Paks II project (construction of nuclear power plants in Hungary). Council Regulation 833/2014 defines the energy sector and provides exemptions for civil nuclear-related activities.

• Official purposes of diplomatic or consular missions — activities necessary for the official purposes of the diplomatic missions, consular posts, and international organizations enjoying immunities in accordance with international law.

• Extraordinary expenses — release of frozen funds necessary to satisfy an extraordinary expense, provided the relevant Member State has notified other Member States and the Commission of the grounds on which it considers that a specific authorization should be granted at least two weeks prior to the authorization.

The scope of each derogation and the conditions under which it may be granted are set out in the individual Council Regulation for each sanctions regime. Practitioners must consult the relevant regulation to determine which derogations are available and what conditions the NCA must or may impose.

## Applying for a Derogation: Member State National Competent Authorities

It is for the NCAs of Member States to grant authorizations for derogations. Each Member State designates one or more NCAs responsible for implementing and enforcing EU sanctions. The contact details of the relevant competent authorities of the Member States are published by the European Commission on its finance portal at finance.ec.europa.eu and in the annexes to individual Council Regulations. The NCAs establish the procedures for applying for an authorization, the form and content of the application, the duration of the authorization, and any conditions or reporting obligations attached to the authorization.

The Commission's factsheet on humanitarian derogations summarizes common elements of NCA procedures, though it emphasizes that the factsheet does not provide legal guidance on EU law and is not binding on NCAs. Commonly, an applicant submits a request to the NCA of the Member State in which the applicant is established or in which the transaction will take place. The application typically includes:

• Identification of the applicant (legal name, registration number, address, contact details, and the identity of beneficial owners or controlling persons if the applicant is designated or owned/controlled by a designated person);
• Description of the proposed activity (parties, transaction value, goods or services, destination, end-user, and end-use);
• Legal basis for the derogation (citing the specific article and paragraph of the Council Regulation that permits the NCA to grant the authorization);
• Supporting documentation (contracts, invoices, certificates, proof of humanitarian purpose, or other evidence demonstrating that the conditions for granting the derogation are met).

NCAs establish the duration of the authorization based on the applicant's request, the nature and duration of the project or activity, and the NCA's assessment of the risk of circumvention or diversion. The Commission's factsheet notes that "NCAs establish the duration of the Humanitarian Derogation (e.g. for the duration of the humanitarian project or for a specific time period)." For recurring identical restricted transactions (such as weekly or quarterly provision of similar or identical services to the same Russian counterpart for humanitarian purposes), an NCA may grant an authorization covering a number of similar or identical transactions during a specific timeframe, coupled with reporting obligations at the end of the stated period to ensure that the authorization was used according to the specified conditions. However, Council Regulation 833/2014 does not foresee general authorizations covering entire sectors or activities (as would be possible under the U.S. or UK systems); such a general authorization would amount to a de-facto exemption, which the Council would need to establish explicitly.

Humanitarian derogations granted by one NCA are not automatically recognized by other Member States, but NCAs usually give them due consideration. The Commission's factsheet states: "While Humanitarian Derogations granted by another NCA are not automatically recognised by other Member States, NCAs usually give them due consideration. After reviewing the Humanitarian Derogation granted by other NCAs, the relevant NCA may" decide to grant or deny the request. An applicant conducting activities in multiple Member States or seeking to release frozen funds held in multiple jurisdictions may need to apply to the NCA of each relevant Member State.

## Cross-Border Authorization Procedures: Dual-Use Export Controls Applied Mutatis Mutandis

Several EU sanctions regulations — most notably Council Regulation 833/2014 concerning Russia — require prior authorization for the export of certain goods and technology and provide that the authorization procedures and conditions of Regulation (EU) 2021/821 (the Dual-Use Regulation) apply mutatis mutandis. Article 2(6) of Regulation 833/2014 (as amended) states: "All authorisations required under this Article shall be granted by the competent authorities in accordance with the rules and procedures laid down in Regulation (EU) 2021/821, which shall apply mutatis mutandis. The authorisation shall be valid throughout the Union."

This means that the exporter applies to the competent export-control authority of the Member State in which the exporter is established (or, if the exporter is not established in the EU, the Member State in which the goods are located). The competent authority decides the request in accordance with the substantive criteria in the sanctions regulation (for example, whether the NCA has reasonable grounds to believe the end-user might be a military end-user or that the goods might have a military end-use) and the procedural rules in the Dual-Use Regulation (application form, supporting documentation, consultation with other Member States if required, and issuance of the authorization electronically). The authorization is valid throughout the EU customs area; no additional export licence is required from other Member States. The competent authority may annul, suspend, modify, or revoke an authorization if it deems such action necessary for the effective implementation of the regulation.

## Notification Obligations and Information Sharing

Certain derogations require that the Member State notify other Member States and the European Commission before or after granting the authorization. For example, the derogation for extraordinary expenses typically requires the Member State to notify other Member States and the Commission of the grounds on which it considers that a specific authorization should be granted at least two weeks prior to the authorization. Article 5n(11) of Council Regulation 833/2014 provides that "Member States have the obligation to inform other Member States and the Commission of any authorisation granted pursuant to Article 5n." The Commission monitors the uniform implementation of EU sanctions by Member States, including the granting of authorizations, and uses the notification and reporting mechanisms to identify divergences in national practices and to provide interpretive guidance.

## Judicial Review and Appeal

Persons and entities that are denied an authorization or that contest the conditions imposed by an NCA may seek review under the applicable national law of the Member State whose NCA issued the decision. In certain cases, the review can also be lodged with the national Ombudsperson. The Commission's factsheet notes: "Humanitarian Operators can seek further information on the grounds for appeal to the issuing NCA." Applicants may also challenge the underlying Council Regulation or Council Decision before the General Court of the European Union under Article 263 TFEU if they are directly and individually concerned by the measure. The General Court and the Court of Justice of the European Union have developed case law concerning the substantive and procedural standards the Council and Member State authorities must meet when imposing and implementing restrictive measures, including the duty to provide a statement of reasons and to permit an effective defense.

## Where to Find NCA Contact Details and Guidance

The European Commission publishes the contact details of Member State NCAs on its finance portal at finance.ec.europa.eu/eu-and-world/sanctions-restrictive-measures/overview-sanctions-and-related-resources_en and in annexes to individual Council Regulations (for example, Annex II of Council Regulation (EU) 1998/2020 concerning the EU Global Human Rights Sanctions Regime). The Commission also publishes guidance notes, FAQs, and factsheets addressing specific derogations and sectors (humanitarian aid, medical and pharmaceutical purposes, legal advisory services, and others) on the same portal. Applicants are invited to consult the Commission's website for updates and to contact the relevant NCAs directly to obtain information on requirements in place.

Source: Council Best Practices Guidelines for the Effective Implementation of Restrictive Measures (Council document ST 10572/22, 27 June 2022) Source: European Commission factsheet on Member State procedures to grant humanitarian derogations from EU sanctions regulations Source: Council Regulation (EU) No 833/2014 of 31 July 2014 concerning restrictive measures in view of Russia's actions destabilising the situation in Ukraine (consolidated version 25 June 2024) Source: European Commission — Overview of sanctions and related resources Source: European Commission FAQs on Article 5n of Council Regulation 833/2014 (services provision) Source: European Commission FAQs on medical and pharmaceutical exceptions under Council Regulation 833/2014

European Union sanctions regulations impose direct obligations on any person inside or outside the EU's territory (whether an EU or non-EU national), any company or organization incorporated under the law of a Member State (including branches of EU companies in non-EU countries), and any business conducted in part or in whole within the EU. Compliance is not limited to financial institutions; exporters, logistics providers, brokers, insurers, professional-service firms, and any entity holding, transferring, or making available funds or economic resources must implement sanctions-compliance programs and perform due diligence to ensure that their activities do not violate or circumvent EU restrictive measures.

## Screening Against the Consolidated List

Any person or entity subject to EU sanctions must screen counterparties, customers, and beneficial owners against the EU Consolidated Financial Sanctions List before onboarding a customer, executing a payment, releasing goods, or providing services. The consolidated list, published and updated by the European Commission's Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA), reflects all individuals, groups, and entities subject to asset-freeze measures under EU sanctions regulations. The Commission updates the list whenever the Council amends a sanctions regulation to add or remove names. New designations take effect immediately upon publication of the amending regulation in the Official Journal of the European Union; practitioners should monitor the Official Journal and consider subscribing to alerts or RSS feeds to track amendments in real time.

Screening extends beyond the names on the consolidated list. Several EU sanctions regimes include ownership and control provisions that extend asset freezes to entities owned or controlled by designated persons, even if those entities do not appear by name on the list. The precise thresholds and definitions are set out in the individual Council Regulations for each regime. Compliance officers must investigate the ownership and control structures of counterparties and apply the ownership-and-control tests specified in the relevant regulation.

## Due-Diligence Obligations — General Framework and Russia-Specific Requirements

EU regulations require economic operators to perform appropriate due diligence calibrated according to the specificities of their business and the related risk exposure. The European Commission has stated repeatedly in guidance documents and FAQs that "there is no one-size-fits-all model of due diligence" and that "it is for each operator to develop, implement, and routinely update an EU sanctions compliance programme that reflects their individual business models, geographic and sectoral areas of operations and related risk assessment." These statements appear in non-binding Commission guidance; the legal obligation to comply with EU sanctions arises from the directly-applicable Council Regulations adopted under Article 215 TFEU.

The Commission published comprehensive guidance in September 2023 (updated December 2023) to help EU operators identify, assess, and understand the possible risks of sanctions circumvention and to avoid it. The guidance is addressed to all EU operators and focuses on tackling circumvention of Russia sanctions, particularly re-exportation to Russia of Common High Priority (CHP) items and goods listed in Annex XLVIII to Council Regulation (EU) No 833/2014. The guidance sets out successive steps for conducting strategic risk assessments, implementing enhanced due diligence when exposure to circumvention risk is high, and applying best practices with regard to the assessment of business partners, transactions, and goods. The guidance provides a list of circumvention "red flags" relating to business partners and customers — indicators designed to alert EU operators to possible risks when entering into a commercial relationship with a new trading partner. The Commission's guidance is advisory and intended to support compliance efforts; it does not itself create binding legal obligations.

As part of the 14th sanctions package on Russia (June 2024), recital 3 of Council Regulation (EU) 2024/1739 and recital 36 of Council Regulation (EU) 2024/1745 clarified that protection against liability for inadvertent violations cannot be invoked where the EU operator has failed to carry out appropriate due diligence. The recitals add that publicly or readily available information should be duly taken into account when carrying out such due diligence. Therefore, an EU operator should not be able to successfully invoke protection when accused of breaching the relevant sanctions if it has failed to carry out simple checks or inspections.

Article 12gb of Regulation 833/2014 (inserted by amendment) sets out a binding legal obligation for operators dealing with CHP items or goods listed in Annex XLVIII to have in place adequate due-diligence procedures. This provision applies to natural and legal persons, entities, and bodies established in the EU that sell, supply, transfer, or export those items to any country other than Russia or the partner countries listed in Annex VIII. It also applies to EU operators that own or control any legal person, entity, or body established outside the Union that sells, supplies, transfers, or exports CHP items or goods listed in Annex XLVIII, unless otherwise excluded from the scope. Under this provision, EU operators must use their best efforts to ensure that entities they own or control do not participate in activities that undermine the sanctions. "Best efforts" is understood (as clarified in recital 30 of Regulation 2024/1745) to comprise only actions that are feasible for the Union operator in view of its nature, its size, and the relevant factual circumstances, in particular the degree of effective control over the legal person, entity, or body established outside the Union.

National competent authorities may enforce the due-diligence obligation under Article 12gb by treating a failure to conduct adequate due diligence as a violation of EU sanctions law.

## Penalties for Violations — Directive (EU) 2024/1226

Member States are responsible for implementation and enforcement of EU sanctions and must establish effective, proportionate, and dissuasive penalties for violations. On 28 November 2022, the Council adopted Decision (EU) 2022/2332, which identified the violation of Union restrictive measures as a criminal offense meeting the criteria in Article 83(1) of the Treaty on the Functioning of the European Union (TFEU), establishing a foundation for harmonized criminal penalties across the EU. Following that decision, the European Parliament and the Council adopted Directive (EU) 2024/1226 on 24 April 2024, which establishes minimum EU-wide rules for defining criminal offences and penalties for the violation and circumvention of EU restrictive measures. The directive entered into force on 19 May 2024, and Member States were required to transpose it into national law by 20 May 2025.

Directive 2024/1226 defines a comprehensive list of criminal offences, including (per Article 3):

• Helping persons subject to EU travel bans to bypass those bans;
• Trading sanctioned goods or running transactions with states or entities subject to EU restrictive measures;
• Providing financial services or performing financial activities that are prohibited or restricted;
• Transferring funds to a third party or providing false information to conceal funds or economic resources that should be frozen;
• Covering up the ownership of funds or economic resources by a person, entity, or body that is sanctioned by the EU.

Inciting, aiding, and abetting the commission of a criminal offence, and attempting to commit certain offences, are also criminalized (Articles 4 and 5).

Penalties for natural persons (Article 6): An intentional violation of sanctions must give rise to imprisonment as the maximum penalty. Member States must ensure that intentional offences are punishable by a maximum penalty of at least one year of imprisonment for certain offences and at least five years of imprisonment for more serious offences (including trade-related violations involving military equipment or dual-use items, as specified in Article 6(1)(b)). Serious negligence applies to trade-related sanction violations, at least when involving military equipment or dual-use items (Article 3(2)). Fines may be issued in addition to any sentence of imprisonment.

Penalties for legal persons (Article 8): Companies and other legal persons can be held criminally or non-criminally liable for offences committed to their benefit by persons with a leading position in the organization. Maximum fines must be at least 5% of the worldwide turnover or €40 million, whichever is higher. Accessory penalties may include disqualification from business activities, withdrawal of permits and authorizations to pursue economic activities, judicial supervision, and temporary or permanent closure of establishments used to commit the offence.

The directive defines aggravating and mitigating factors (Article 7), sets minimum limitation periods for investigation, prosecution, and enforcement (Article 10), and enhances rules on the freezing and confiscation of proceeds and assets subject to EU sanctions (Article 11, in conjunction with Directive (EU) 2024/1260). Member States must establish jurisdiction over the offences (Article 12) and ensure cooperation among and between national authorities, the European Commission, the European Public Prosecutor's Office, Eurojust, and Europol (Article 14).

## Record-Keeping, Reporting, and Whistleblower Protection

EU sanctions regulations and related guidance emphasize the importance of record-keeping to demonstrate compliance and to facilitate investigation by national competent authorities. Economic operators should maintain records of risk assessments, due-diligence procedures, screening results, authorization applications and decisions, and transactions involving sanctioned or high-risk counterparties. The Anti-Money Laundering Directive (Directive (EU) 2015/849, as amended, and the successor Regulation (EU) 2024/1624 applicable from 10 July 2027) imposes customer-due-diligence and record-keeping requirements on obliged entities, including financial institutions and certain non-financial businesses, and requires effective transparency of beneficial owners of legal persons and legal arrangements to ensure effective application of sanctions.

Directive (EU) 2024/1226 requires Member States to ensure that Directive (EU) 2019/1937 (the Whistleblower Protection Directive) is applicable to the reporting of violations of Union restrictive measures and to the protection of persons reporting such violations (Article 13). Persons who report breaches in good faith are entitled to protection from retaliation.

The European Commission has established an EU Sanctions Helpdesk to support European operators, particularly small and medium-sized enterprises (SMEs), in complying with EU restrictive measures. The helpdesk offers resources, information, and cost-free personalized help to companies performing sanctions due-diligence checks. Operators may also report suspected sanctions violations to Member State national competent authorities; sharing information about violations can contribute to the success of ongoing investigations and increase the effectiveness of EU sanctions.

Source: European Commission — Overview of sanctions and related resources Source: European Commission Guidance for EU operators — enhanced due diligence to shield against Russia sanctions circumvention (December 2023) Source: European Commission FAQs — Circumvention and due diligence Source: Directive (EU) 2024/1226 of the European Parliament and of the Council of 24 April 2024 on the definition of criminal offences and penalties for the violation of Union restrictive measures Source: EUR-Lex Summary — Criminal offences and penalties for the violation of EU restrictive measures Source: Council of the European Union — Council gives final approval to introduce criminal offences and penalties for EU sanctions' violation (12 April 2024)

Council Regulation (EC) No 2271/96 — commonly called the EU Blocking Statute or Blocking Regulation — prohibits EU operators from complying with certain extraterritorial laws adopted by third countries and protects EU persons and entities engaged in lawful international trade from the effects of those laws. The Blocking Statute creates a direct conflict-of-laws problem for EU businesses that are simultaneously subject to EU jurisdiction and to the extraterritorial reach of foreign sanctions regimes, most prominently U.S. sanctions administered by the Office of Foreign Assets Control (OFAC). The EU introduced the Blocking Statute in 1996 in response to U.S. extraterritorial sanctions legislation concerning Cuba, Iran, and Libya, and the European Commission updated the Annex in 2018 to cover re-imposed U.S. extraterritorial sanctions against Iran following the U.S. withdrawal from the Joint Comprehensive Plan of Action (JCPOA). The purpose of the Blocking Statute is to protect EU operators from the extraterritorial application of third-country laws, and the European Union does not recognize the extraterritorial application of laws adopted by third countries, considering such effects to be contrary to international law.

## Scope of Application — Article 11 "EU Operators"

The Blocking Statute applies to the following categories of persons and entities (referred to in Article 11 and in Commission guidance as "EU operators"):

• Any natural person being a national of a Member State;
• Any legal person incorporated within the EU;
• Any natural person residing or being in the EU, including in its territorial waters and air space and in any aircraft or on any vessel under the jurisdiction or control of a Member State, when acting in a professional capacity;
• Any other natural person being a resident in the EU, unless that person is in the country of which he is a national.

The Blocking Statute thus applies extraterritorially to EU nationals and EU-incorporated companies wherever they operate. An EU company's non-EU branch or subsidiary is not automatically within the scope of Article 11; whether the Blocking Statute applies to a non-EU subsidiary depends on whether that subsidiary is controlled by the EU parent to such a degree that it is acting as an agent or intermediary of the EU operator. The Commission's 7 August 2018 guidance note addresses the treatment of branches and subsidiaries in detail, noting that the application of the Blocking Statute to a specific branch or subsidiary depends on the degree of control and the specific facts.

## Listed Extraterritorial Legislation — The Annex

The Blocking Statute applies only to the laws, regulations, and other legislative instruments of third countries that are listed in the Annex to Council Regulation (EC) No 2271/96. The Commission is empowered to adopt delegated acts to add to or delete from the Annex laws, regulations, or other legislative instruments of third countries having extraterritorial application and causing adverse effects on the interests of the Union and the interests of natural and legal persons exercising rights under the Treaty on the Functioning of the European Union. As of 7 August 2018, when Commission Delegated Regulation (EU) 2018/1100 entered into force, the Annex lists the following categories of U.S. legislation with extraterritorial effect:

U.S. extraterritorial sanctions concerning Cuba:

• Title XVII of the National Defense Authorization Act for Fiscal Year 1993 ("Cuban Democracy Act 1992")
• The Cuban Liberty and Democratic Solidarity Act of 1996 (the "Helms-Burton Act")
• Sections 1704 and 1706 (prohibition to load or unload freight from a vessel in any place in the USA or to enter a USA port; refusal to import goods or services originating in Cuba; blocking of financial dealings involving Cuba)
• Title III of the Helms-Burton Act concerning liability and the right to bring action in U.S. courts against persons "trafficking" in property formerly owned by U.S. persons and expropriated by the Cuban regime
• Cuban Assets Control Regulations (31 CFR Part 515)

U.S. extraterritorial sanctions concerning Iran:

• The Iran Sanctions Act of 1996, as amended
• The Iran Threat Reduction and Syria Human Rights Act of 2012
• Executive Orders and implementing regulations re-imposing sanctions following U.S. withdrawal from the JCPOA, including:
• Executive Order 13846 of 6 August 2018
• Sections of 31 CFR Chapter V re-imposing prohibitions on trade in certain goods and services (autos, gold, metals, software, carpets, foodstuffs, Iranian rial)
• Sections of 31 CFR Chapter V re-imposing prohibitions on petroleum-related transactions, transactions with the Central Bank of Iran and Iranian financial institutions, provision of specialized financial messaging services, underwriting services, insurance and reinsurance, the energy, shipping, and shipbuilding sectors

U.S. extraterritorial sanctions concerning Libya (historical):

• The Libya Sanctions Regulations (31 CFR Part 550), concerning the embargo established by United Nations Security Council Resolutions 748 (1992) and 883 (1993). (Note: U.S. Libya sanctions have evolved substantially since 1996; the Annex text reflects the position at the time of original adoption.)

The Commission's guidance note states: "The Blocking Statute applies with regard to the extra-territorial legislation mentioned in its Annex ('listed extra-territorial legislation'), which currently consists of U.S. legislation and actions." The Council may add or delete laws to or from the Annex acting in accordance with the relevant provisions of the Treaty.

## Core Prohibitions — Article 5

Article 5, first paragraph, of the Blocking Statute provides:

> "No person referred to in Article 11 shall comply, whether directly or through a subsidiary or other intermediary person, actively or by deliberate omission, with any requirement or prohibition, including requests of foreign courts, based on or resulting, directly or indirectly, from the laws specified in the Annex or from actions based thereon or resulting therefrom."

This prohibition is absolute and directly applicable. An EU operator that complies with a requirement or prohibition based on listed extraterritorial legislation — for example, by refusing to engage in a transaction with an Iranian counterparty because of U.S. secondary sanctions — violates Article 5, first paragraph. The prohibition extends to compliance through a subsidiary or other intermediary, and to compliance by deliberate omission (for example, by failing to perform a contract or release frozen funds when the only reason for non-performance is compliance with the listed extraterritorial law).

The prohibition applies to "requests of foreign courts." An EU operator served with a subpoena or discovery request by a U.S. court in a Helms-Burton Title III action or an OFAC enforcement proceeding is prohibited by Article 5 from complying with that request if it is "based on or resulting, directly or indirectly, from the laws specified in the Annex."

## Waiver Mechanism — Article 5, Second Paragraph (Commission Authorization to Comply)

Article 5, second paragraph, provides a limited waiver mechanism:

> "Persons may be authorized, in accordance with the procedures provided in Articles 7 and 8, to comply fully or partially to the extent that non-compliance would seriously damage their interests or those of the Community."

If an EU operator determines that non-compliance with a listed extraterritorial law would seriously damage its interests or the interests of the Union, the operator may apply to the European Commission for an authorization to comply with that law. The Commission may grant the authorization "in specific and duly motivated circumstances, and as a derogation from the rule." The Commission's finance portal states: "Such an authorisation may be granted by the Commission in specific and duly motivated circumstances, and as a derogation from the rule." A template application is available on the Commission's website.

The criteria for the application of Article 5, second paragraph, are laid down in Commission Implementing Regulation (EU) 2018/1101 of 3 August 2018. When there is sufficient evidence that non-compliance would cause serious damage to a natural or legal person, the Commission must expeditiously submit to the Committee on Extra-territorial Legislation a draft of the appropriate measures to be taken. The authorization procedure is administered by the Commission; national authorities of Member States do not grant authorizations under Article 5.

The waiver mechanism places EU operators in a difficult position. Compliance with listed extraterritorial legislation without Commission authorization violates EU law and may expose the operator to penalties imposed by the relevant Member State. Non-compliance may expose the operator to enforcement by the U.S. government (including designation, penalties, and loss of access to U.S. financial systems) and to civil liability in U.S. courts. Commentators have described this as a "Catch-22 situation" or a situation in which EU operators are "caught between a rock and a hard place." In practice, the Commission has granted a limited number of authorizations; the Commission's 2021 report to the European Parliament and Council relating to Article 7(a) of the Blocking Statute noted that the Commission was made aware of ten legal proceedings that made reference to the Blocking Statute before courts of EU Member States, and several cases concerning Commission authorization decisions were pending before the General Court and the Court of Justice of the European Union.

## Information Obligations — Article 2

EU operators whose economic or financial interests are affected, directly or indirectly, by the laws specified in the Annex or by actions based thereon or resulting therefrom must inform the European Commission within 30 days from the date on which they obtained that information. Where the interests of a legal person are affected, this obligation applies to the directors, managers, and other persons with management responsibilities. At the request of the Commission, such persons must provide all information relevant for the purposes of the Regulation within 30 days from the date of the Commission's request. Information may be submitted to the Commission either directly or through the competent authorities of the Member States. Information that is by nature confidential or that is provided on a confidential basis is covered by the obligation of professional secrecy and may not be disclosed by the Commission without the express permission of the person providing it.

The reporting obligation is mandatory, not voluntary. Failure to report may expose the operator to penalties imposed by the relevant Member State under Article 9.

## Non-Recognition of Foreign Judgments and Administrative Decisions — Article 4

Article 4 of the Blocking Statute provides:

> "Any foreign judgment or administrative decision which gives effect, directly or indirectly, to the laws specified in the Annex or to actions based thereon or resulting therefrom, shall not be recognised or be enforceable in any manner."

This provision nullifies the effect in the EU of any foreign court ruling or administrative decision based on listed extraterritorial laws. For example, a judgment issued by a U.S. district court under Title III of the Helms-Burton Act awarding damages against an EU operator for "trafficking" in expropriated property in Cuba is not recognized in the EU and cannot be enforced against assets located in the EU. Similarly, an OFAC designation or penalty notice based on Iran-related secondary sanctions listed in the Annex is not recognized in the EU for the purposes of freezing assets or enforcing penalties within EU jurisdiction.

## Right to Recover Damages — Article 6

Article 6 of the Blocking Statute provides:

> "Any person referred to in Article 11, who is engaging in an activity referred to in Article 1 shall be entitled to recover any damages, including legal costs, caused to that person by the application of the laws specified in the Annex or by actions based thereon or resulting therefrom."

EU operators can recover damages from "the natural or legal person or any other entity causing the damages or from any person acting on its behalf or intermediary." The scope of recoverable damages is broad and includes direct and indirect damages, lost profits, reputational harm, and legal costs. The Commission's 7 August 2018 guidance note confirms: "The scope of damages that can be claimed is thus very broad, in line with the protective aim of the Blocking Statute." Who exactly will be the defendant in each case depends on the specifics of the case, the kind of damage caused, the person or entity actually causing it, and possible shared responsibility in causing such damage. Article 6 does not create extraterritorial jurisdiction to sue U.S. authorities or U.S. persons in U.S. courts; the damages action must be brought in a court of a Member State that has jurisdiction over the defendant.

## Penalties for Breach — Article 9

Each Member State determines the sanctions to be imposed in the event of breach of any relevant provisions of the Regulation. The sanctions must be effective, proportional, and dissuasive. Member States have adopted varying penalties, including administrative fines and, in some Member States, criminal liability for directors and managers who intentionally violate the prohibition in Article 5. EU operators should consult the national implementing legislation and contact the relevant national competent authority for the Member State in which they are established or operate.

## Relationship to EU Sanctions and Conflict-of-Laws Strategy

The Blocking Statute does not prohibit or restrict compliance with EU sanctions regulations adopted under Article 215 TFEU. EU operators remain bound by all EU restrictive measures. The Blocking Statute addresses only the extraterritorial application of third-country laws listed in the Annex. When an EU operator is subject to both an EU sanction and a U.S. extraterritorial sanction covering overlapping conduct (for example, transactions with an Iranian state-owned entity designated under both EU and U.S. regimes), the operator must comply with the EU sanction and may not invoke the Blocking Statute to excuse non-compliance with EU law.

In practice, EU operators that face simultaneous exposure to listed U.S. extraterritorial sanctions and the Article 5 prohibition typically pursue one or more of the following strategies: (1) apply to the Commission for an authorization to comply under Article 5, second paragraph; (2) restructure transactions to avoid the extraterritorial reach of the U.S. sanction (for example, by ensuring that no U.S.-origin goods, U.S. persons, U.S. financial institutions, or U.S. dollar clearing are involved); (3) exit the relevant market or counterparty relationship; or (4) accept the legal and commercial risk of non-compliance with the U.S. measure, relying on the Blocking Statute as a defense in EU courts and in dealings with EU regulators, and manage the exposure to U.S. enforcement through risk-mitigation measures (such as limiting U.S. assets, U.S. transactions, and the travel of executives to the United States). The choice among these strategies depends on the operator's business model, the importance of the affected transaction or market, the operator's U.S. exposure, and the operator's risk tolerance.

## Commission Review and Proposed Amendment

In its Communication of 19 January 2021 ("The European economic and financial system: fostering openness, strength and resilience"), the Commission announced that it would consider amending the Blocking Statute to further deter and counteract the unlawful extraterritorial application of sanctions to EU operators by countries outside the EU and to streamline the application of the current EU rules, including by reducing compliance costs for EU citizens and businesses. On 2 August 2021 the Commission published an inception impact assessment, and on 9 September 2021 the Commission launched a public consultation. The consultation period closed on 4 November 2021. As of June 2026, the Commission has not published a formal proposal to amend the Regulation.

Source: Council Regulation (EC) No 2271/96 of 22 November 1996 protecting against the effects of the extra-territorial application of legislation adopted by a third country, and actions based thereon or resulting therefrom Source: Council Regulation (EC) No 2271/96 — consolidated version as of 7 August 2018 Source: Commission Delegated Regulation (EU) 2018/1100 of 6 June 2018 amending the Annex to Council Regulation (EC) No 2271/96 Source: Guidance note — Questions and Answers: adoption of update of the Blocking Statute (7 August 2018)) Source: European Commission — Extraterritoriality (Blocking statute) Source: Report from the Commission to the European Parliament and the Council relating to Article 7(a) of Council Regulation (EC) No 2271/96 ('Blocking Statute'), COM(2021) 535 final, 3 September 2021