The withdrawal of European companies from the Russian market continues to raise complex questions under sanctions law. Of particular relevance here is Article 12b of Regulation (EU) No 833/2014, which, under narrow conditions, allows for authorisations exempting certain transactions connected with market exit. This provision shares the fate of all exemption provisions: it must be interpreted narrowly. The sale of listed goods in Russia remains the exception, even in the context of a withdrawal from the Russian market.
“Strictly necessary” as the central requirement
Under Article 12b(1) of Regulation (EU) No 833/2014, the sale in Russia, or to a person, entity, or body in Russia, must be strictly necessary for the withdrawal from Russia. It is therefore not sufficient that a sale appears commercially sensible or practically easier. Rather, it must be specifically demonstrated:
- why the withdrawal cannot be carried out without a sale in Russia,
- why the goods cannot be brought back into the European Union, and
- why they also cannot be brought out of Russia in any other way.
The underlying rationale of the embargo is that listed goods should, in principle, no longer be made available to Russia. Anyone who nonetheless seeks an authorisation must therefore be able to justify why, in the specific individual case, a sale in Russia is exceptionally necessary.
A politically sensitive case-by-case decision
The decision on an authorisation is apparently not merely a technical export control assessment, but also a politically sensitive matter. According to the German Federal Office for Economic Affairs and Export Control (BAFA), the ministries with subject-matter responsibility are involved in the decision on the authorisation, in particular the Federal Ministry for Economic Affairs and the Federal Foreign Office are likely to be involved. For practice, this means that applications should be not only formally complete but also substantively justified with particular care.
Economic reasons alone are not sufficient
It should be noted, in particular, that economic motives play, if anything, only a subordinate role. High transport costs, organisational burden, or economic disadvantages alone are generally not sufficient, on their own, to justify an authorisation. However, the economic burden can be taken into account as part of the overall assessment. This applies in particular to the question of the actual effort that would be involved in bringing the goods back to the Union or removing them from Russia. For example, if a listed item in the form of a machine is still located in Russia, and the machine is covered under its own CN code, while scrap metal is also covered under the relevant provisions, the applicant company will not be expected to remove the scrap metal from Russia at disproportionately high cost. An authorisation is then more likely to be granted for the sale of the scrap than for the sale of the listed machine. BAFA emphasises that every application under Article 12b constitutes a political decision on the individual case. However, the authorities would work with companies during the authorisation procedure to reach a practically workable outcome that enables withdrawal from Russia.
Military usability in focus
A key point of examination under Article 12b is whether the goods in question could be put to military use. Where a military application of the goods concerned can be ruled out, an authorisation is more readily obtainable in the individual case.
Applicants should therefore clearly set out:
- what civilian purpose the goods serve,
- why military use is unlikely, and
- why no other sensitive end use is to be expected.
The practical recommendation is accordingly to first submit an application and to clarify further questions in dialogue with the authorities.
Liquidation is not an automatic way out
Caution also remains warranted in connection with the liquidation of a Russian company. The undertaking is presumably exempt from authorisation only if the Russian company initiates the liquidation itself. If, on the other hand, the liquidation is pursued by the German parent company with the aim of selling the goods in Russia as part of the liquidation proceedings, the authorisation requirement continues to apply, since this route could otherwise be used to circumvent the purposes of the embargo (Article 12!). Liquidation is therefore not an elegant way around the authorisation requirement.
Leaving goods behind or giving them away does not solve the problem
Even though the wording of the respective prohibition provisions covers “only” sale, supply, or transfer, simply leaving the goods behind or transferring them free of charge does not offer a safe way out. Under sanctions law, what matters is not only a sale for consideration, but, more broadly, whether listed goods are made available to a Russian PEB or for use in Russia. This could be regarded as a violation of the general anti-circumvention prohibition in Article 12, under which it is prohibited to knowingly and intentionally participate in activities the object or effect of which is to circumvent the prohibitions set out in Regulation (EU) No 833/2014, even where the participant does not intentionally seek that object or effect but is aware that participating in such activities may have that object or effect and accepts that possibility.
Exit of goods into a third country
The transfer of goods from Russia to a third country, for example to Kazakhstan, is exempt from authorisation. In such a case, there is neither a sale to a person, entity, or body in Russia or for use in Russia, nor an import into the Union.
A transfer of goods from Russia to a third country does not fall within the wording of the provision and, from the EU’s perspective, is in principle possible without an authorisation under Article 12b, provided the goods are not subject to an authorisation requirement for other reasons (for example, as dual-use goods). What requires authorisation under Article 12b is the supply, sale, or transfer of listed goods to a PEB in Russia or for use of the goods in Russia.
Conclusion
Article 12b of Regulation (EU) No 833/2014 is not a general exit clause but a narrowly limited exemption provision. Anyone wishing to sell listed goods in Russia must, as a rule, apply for an authorisation and demonstrate in detail why that sale is strictly necessary for the withdrawal from Russia.
Pure commercial expediency is not sufficient here. What matters, rather, is the absence of alternatives and a convincing justification of the individual case. In assessing whether an authorisation is possible, the authorities will in every case examine whether the goods lack military relevance.
At the same time, this means that, where a transfer from Russia to a third country is possible, this can, from a European perspective, be the legally far simpler and less bureaucratic route, at least as long as no other export control authorisation requirements (such as, for example, dual-use rules) come into play.
