FAQs REGARDING THE “BEST EFFORTS” OBLIGATION
On 22 November 2024, the European Commission published a FAQs document that provides clarifications on various aspects related to Article 8a of Regulation 833/2014.
Concept of “best efforts”
First of all, the concept of “best efforts” must be understood within the context of Regulation 1745/2024, which states that this obligation comprises all necessary actions to prevent undermining the restrictive measures. This includes the implementation of appropriate policies, controls, and procedures for effective risk management.
The FAQs also explain the difference between “circumventing”, which involves activities that aim to evade the enforcement of restrictive measures, and “undermining”, which refers to actions that counteract the objectives of those measures.
EU operators’ obligations for non-EU entities
The obligation under Article 8a extends to entities located outside the EU, owned or controlled by EU operators, even those located in Russia.
In this regard, EU operators must take appropriate actions based on their size, resources, market sector, and level of control over the foreign entity. In this sense, an EU operator cannot be held responsible for a non-EU entity’s actions that violate sanctions if they are unable to exercise control due to external factors, such as third-country legislation. However, if the lack of control is due to the EU operator’s own actions, liability may arise.
Therefore, to demonstrate compliance with Article 8a, EU operators must ensure they are aware of the activities of the non-EU entities they own or control. This can be achieved through internal compliance programs, sharing business standards, distributing newsletters and alerts, implementing mandatory reporting, providing staff training on sanctions, and establishing procedures for rapid response to violations.
Additionally, the non-EU entity could publicly commit to refraining from activities that might compromise EU sanctions or the compliance policies of the EU operator.
Liability of EU Operators
Regarding liability, if an EU operator is aware that the activities of a non-EU entity it owns or controls are undermining the restrictive measures and chooses to accept these activities, this constitutes a violation of Article 8a because the EU operator cannot be deemed to have taken all necessary actions to prevent the non-EU entity from violating EU sanctions.
This may also violate Article 12 of Regulation 833/2014, which prohibits knowingly and intentionally participating in activities that circumvent its prohibitions, even if the intent is not to do so, as long as the participant is aware of the potential consequences and accepts that possibility.
In this context, it is important to note that recital 36 of Regulation 2024/1745 clarifies that the liability protection granted to Union operators – if they were unaware and had no reasonable cause to suspect that their actions would violate restrictive measures – cannot be claimed if they have not conducted appropriate due diligence. Such due diligence involves being aware of the activities of non-EU entities they own or control.
EU sanctions and export obligations
Finally, the FAQs clarify that EU sanctions do not impose obligations on entities in Russia or other third countries which are owned or control by EU operators. Instead, obligations are imposed only on EU operators owning or controlling such entities.
Therefore, if an entity owned or controlled by an EU operator produces or trades goods subject to an export ban and the EU operator fails to prevent their supply to Russian clients, then the EU operator cannot be deemed to have taken all necessary actions to prevent the entity from undermining the restrictive measures.
