Austria’s implementation of EU sanctions against Russia: Leal consequences and compliance

Introduction

Austria, as a member of the European Union, has enforced a comprehensive series of sanctions against Russia in response to its annexation of Crimea and military involvement in Ukraine. These measures are part of a coordinated international effort to apply economic pressure on Russia and promote adherence to international laws. This article provides an in-depth look at the current state of these sanctions, their impact on Austrian businesses, and the legal ramifications of non-compliance under Austrian law.

Key Elements of the Sanctions

The EU sanctions against Russia include various restrictive measures designed to limit Russia's economic and military capabilities. These measures encompass travel bans, asset freezes, export restrictions, and financial sanctions. Travel bans prohibit entry into the EU for individuals listed by the EU Council. Asset freezes involve the freezing of assets belonging to individuals and entities specified by the EU.

Export restrictions ban the export of specific goods and technologies, particularly those related to energy production and military use. This includes a prohibition on the sale, supply, transfer, or export of dual-use goods and technology to Russia.

Financial sanctions impose restrictions on transactions with Russian financial institutions, limiting their access to EU capital markets. This includes prohibiting loans and credit to Russian state-owned banks and imposing restrictions on investment in Russian infrastructure projects. These measures aim to restrict Russia's ability to finance and sustain its military operations and to exert pressure for a resolution to the conflict in Ukraine.

Economic Impact on Austria

The sanctions have had a notable impact on the Austrian economy, particularly affecting businesses engaged in trade with Russia. Trade with Russia is significant in certain commodity groups. In 2021, mineral fuels and oils made up 87% of imports from Russia, amounting to 4.1 billion euros out of a total of 4.7 billion euros in imports from Russia. Austrian agricultural exports to Russia have also been significantly affected by the sanctions and subsequent Russian counter-sanctions, leading to revenue losses for Austrian farmers.

Manufacturers of machinery and industrial equipment in Austria have faced restrictions on exporting their products to Russia, which has traditionally been a significant market. Companies involved in energy projects have experienced disruptions due to the ban on exporting energy-related equipment and technologies to Russia. These economic impacts have prompted Austrian businesses to seek alternative markets and adapt their strategies to mitigate the losses incurred from reduced trade with Russia.

According to the Austrian Federal Economic Chamber (“WKO”), Austrian exports to Russia decreased by approximately 10% in 2022 compared to previous years, amounting to significant financial losses for various sectors. The agricultural sector alone reported losses exceeding €50 million due to the inability to access the Russian market.

Legal Consequences of Violations

Under Austrian law, violations of EU sanctions are treated with utmost seriousness, involving both criminal and administrative penalties. The legal framework includes the Foreign Trade Act (“AußWG”), which transposes EU sanctions into Austrian law, outlining specific prohibitions and requirements for compliance. The Criminal Code (“StGB”) provides for the prosecution of individuals and entities that violate sanctions, detailing the potential criminal liabilities and penalties.

Companies and individuals found guilty of violating sanctions can face substantial fines. For instance, the Foreign Trade Act allows for fines up to €1 million for serious breaches. These fines can be levied on both the entities involved and their executives. Serious breaches of sanctions can result in imprisonment for responsible individuals, reflecting the gravity of such offenses under Austrian law. Authorities have the power to seize assets that are involved in or connected to the violation of sanctions. This includes freezing bank accounts and other financial assets.

Key Provisions of the Foreign Trade Act (“AußWG”)

The AußWG establishes comprehensive controls and penalties for breaches of EU sanctions. Key sections include:

• § 2 AußWG: This section defines the scope of the Act, covering all forms of cross-border trade, including goods, services, and technology transfers. It mandates compliance with EU regulations and specifies the responsibilities of Austrian businesses in adhering to these rules.

• §§ 3-12 AußWG: These sections detail the criteria for obtaining necessary authorizations for export, transit, and other controlled activities. Authorizations are required when specific security concerns are identified. The criteria include considerations of national security, foreign policy, and international obligations

• § 13 AußWG: This section mandates end-use controls, ensuring that exported goods are used for their declared purposes. The "End Use Certificate" is a crucial part of this control. It requires exporters to obtain guarantees from importers about the intended use of the goods and to provide documentation verifying compliance.

• § 14 AußWG: Specifies the prohibition of exports and services related to military and dual-use goods to sanctioned countries and entities. This section outlines the specific goods and technologies that are restricted and details the conditions under which exceptions may be granted.

• § 20 AußWG: This provision allows the Austrian Ministry of Economy to impose licensing requirements on non-licensed exports or transits when reasonable suspicion exists. It grants the authority to initiate investigations and enforce compliance measures to prevent unauthorized transfers.

• §§ 22-27 AußWG: Mentions the responsibilities of businesses in implementing internal compliance programs, which mandate that companies involved in the export of controlled goods and services establish procedures to ensure adherence to legal requirements, including employee training and internal audits. 

• §§ 49-51 AußWG: These sections require entities dealing with controlled goods or services to implement internal compliance measures and designate a responsible officer to ensure adherence to legal requirements. This includes the establishment of internal reporting mechanisms and regular compliance reviews.

Key Provisions of the Criminal Code (“StGB”)

The StGB includes specific penalties for breaches of the Foreign Trade Act and EU sanctions, including:

• § 320 StGB: This section criminalizes the violation of international sanctions, with penalties ranging from fines to imprisonment for up to five years, depending on the severity and nature of the violation. It specifies that knowingly engaging in prohibited transactions or providing false information to authorities constitutes a criminal offense.

• § 321 StGB: Outlines the penalties for financing terrorism and related activities, including the provision of financial services to sanctioned entities.

Penalties for Non-Compliance

1. Fines: Companies and individuals found guilty of violating sanctions can face substantial fines. The AußWG allows for fines up to €1 million for severe breaches.

2. Imprisonment: Serious breaches of sanctions can result in imprisonment for responsible individuals, with sentences ranging from one to five years, depending on the severity of the violation.

3. Asset Seizures: Authorities have the power to seize assets that are involved in or connected to the violation of sanctions. This includes freezing bank accounts, properties, and other financial assets.

Enforcement

Austrian authorities actively enforce compliance with EU sanctions through rigorous monitoring and investigation. Notable cases of enforcement include companies that attempted to circumvent export restrictions by rerouting goods through third countries. These firms have been fined heavily.

For example, an Austrian machinery company was fined €500,000 in 2022 for illegally exporting restricted technology to Russia via a third country. Individuals found engaging in transactions with sanctioned entities or facilitating prohibited exports have faced prosecution, leading to both fines and imprisonment.

Compliance and Legal Assistance

To navigate the complexities of EU sanctions and avoid legal repercussions, Austrian businesses are advised to conduct comprehensive due diligence.

Regularly reviewing and assessing business relationships and transactions is essential to ensure compliance with sanctions. Pursuant to Article 12gb of EU Council Regulation 833/2014 as amended, natural and legal persons, organizations and bodies that sell, supply, transfer or export common priority goods listed in Annex XL to Regulation 833/2014 as amended must introduce a due diligence mechanism from 26 December 2024 .

Seeking legal advice from experts is crucial for obtaining guidance on compliance and OBLIN Attorneys at Law will be happy to support you in these aspects.

Conclusion

Austria's implementation of EU sanctions against Russia is an important component of the international effort to address the conflict in Ukraine. Austrian businesses must stay informed about the evolving sanction regulations and ensure strict compliance to avoid severe legal and financial consequences. Through diligent compliance efforts and collaboration with legal experts, Austrian entities can navigate this challenging regulatory environment while contributing to global peace and security efforts.