The EU sanctions against Russia also cause challenges for the domestic economy. Austrian companies with business relations to Russia must ensure that they do not violate sanctions lists or an embargo. Not only can violations be administrative offences, they can also be punishable by the courts and thus result in prison sentences.

Due to the ongoing Russian invasion of Ukraine, the European Union has adopted extensive sanctions packages - most recently on March 15, 2022. These include in particular

1. goods- and service-related restrictions;
2. restrictions on EU capital and financial markets and payment transactions;
3.  visa restrictions;
4. the closure of airspace to aircrafts of Russian air carriers and natural or legal persons from Russia; 
5. the revocation of broadcasting licenses and a ban on broadcasting certain Russian media in the European Union;
6. regional sanctions (in particular import and export bans on goods); and
7. lists of sanctioned natural or legal persons, entities, and bodies.

In coordination with the European Union, the United States has also adopted extensive sanctions packages against Russia. Austrian companies are affected by these sanctions, for example, if they knowingly facilitate or enable significant transactions with SDN-listed entities.

Restrictions on goods and services

The direct as well as indirect sale, transfer, export and supply of technology and goods listed in Annex VII of Regulation (EU) 833/2014 (as amended by Annex VI of Regulation (EU) 2022/328) is prohibited. The list is very broad and includes technology and goods from the following categories: electronics, computers, telecommunications and information security, sensors and lasers, navigation and avionics, marine and maritime technology and aerospace and propulsion.

Also direct as well as indirect sale, export and supply of dual use goods as defined in Annex I of the Dual Use Regulation (EU) 821/2021 is prohibited, regardless of whether the goods are used for a military or civilian purpose.

Among others, the direct as well as indirect sale, transfer, export and supply of oil refining goods as defined in Annex X of Regulation 833/2014 (as amended by Annex IX of Regulation (EU) 2022/328), of aircraft and spacecraft and parts thereof as defined in Annex XI of Regulation 833/2014 (as amended by Annex X of Regulation (EU) 2022/328), of maritime goods and technology as defined in Annex XVI of Regulation 833/2014 (as amended by Annex IV Regulation 2022/394), of military goods and other defense material, of certain goods and technology used for exploration and extraction projects, of iron and steel products, and of luxury goods with a value exceeding EUR 300,  are prohibited.

Regional sanctions and list of sanctioned persons, entities and bodies

Regional restrictions have been adopted for business relations with Crimea, Donetsk and Luhansk. These include, in particular, bans on the import of goods, the export of certain goods and technologies in the fields of transport, telecommunications, energy and the prospecting, exploration and extraction of oil, gas, and mineral resources and the provision of services directly related to tourism-related activities.

As a result of the various legal acts adopted, the lists of sanctioned natural and legal persons, entities and bodies have been continuously expanded. The European Union Consolidated Financial Sanctions List contains all persons, entities and bodies subject to sanctions by the European Union. This list includes not only those persons, entities and bodies sanctioned on the basis of the invasion of Russia, but rather all persons sanctioned by the European Union.

Effects of violations of EU sanctions and EU embargoes

Violations of the above-mentioned restrictions and sanctions of the European Union may, in addition to administrative offences with fines of up to EUR 40.000,  , also constitute infringements of criminal law, which means that such an infringement may also be punishable by imprisonment. The sentence is generally up to three years’ imprisonment, and in the case of a commitment of a criminal act on a commercial basis - which tends to be the case in entrepreneurial business relationships - the sentences is from six months to five years. In addition, negligence is punishable by up to one year's imprisonment.

Violations of directly applicable European Union law that serves to control trade in firearms, goods and certain services that are provided not only for civilian purposes but also, in particular, for military purposes are sanctioned under the Austrian Foreign Trade and Payments Act. Therefore, the notion of goods is of primary importance for acts punishable by law within the meaning of the Austrian Foreign Trade and Payments Act. The notion covers goods (physically tangible objects as well as electricity, with the exception of securities and means of payment), software and technology. It is not entirely clear whether the criminal sanctions of the Austrian Foreign Trade and Payments Act also cover EU-sanctioned persons, entities and bodies.

In view of possible administrative and criminal penalties, it is therefore recommended to stop business relations with sanctioned persons, regions (Crimea, Donetsk and Luhansk) and in the area of sanctioned industries (including military, energy and aviation).

Impact of EU sanctions on business relations or transactions

Transactions subject to the goods- and service-related restrictions and regional sanctions described above are generally prohibited and thus may thus affect domestic business relationships or transactions. Exceptions to the prohibitions apply primarily to contracts entered into prior to February 26, 2022 (with respect to certain goods and technologies), prior to February 23, 2022 (with respect to regional sanctions), and prior to March 16, 2022 (with respect to iron and steel products). In these cases, despite applicable restrictions or sanctions, an authorization can be obtained from the competent authority.

Sanctioned natural and legal persons, entities and bodies are particularly affected by the freezing of their funds (these are financial assets and benefits of every kind). In general, no funds may be made available to these persons. Therefore, if claims have already arisen on the basis of a valid - because it is not already covered by the restrictions or sanctions or has been authorized by the competent authority – transaction, a domestic company may generally not pay this claim, unless an exception applies. An important exception is that third parties are permitted to transfer funds to frozen accounts of sanctioned persons, entities and bodies, provided that the credited amounts are also frozen.