The EU Commission update on the notion of "Best efforts" as per Article 8a of Regulation 833/2014

On 22nd of November 2024, the EU Commission published an update to Russia Sanction FAQs and Answers providing a guidance on the notion of “best efforts” in the context of article 8a of Regulation 833/2014.

Article 8a of the Regulation since June 2024 provides that “natural and legal persons, entities and bodies shall undertake their best efforts to ensure that any legal person, entity or body established outside the Union that they own or control does not participate in activities that undermine the restrictive measures provided for in this Regulation.”

The full text of the FAQs is available here. Moving on to a brief analysis of the FAQs that could have a specific impact in the shipping sector, we would point out the following.

FAQ no. 1 contains a definition of “best efforts”. The definition is actually the same as the one already contained in the EU Regulation and that we have already discussed.

On the one hand, the EU Commission clarifies that “best efforts should be understood as comprising all actions that are suitable and necessary to achieve the result of preventing the undermining of the restrictive measures in Regulation (EU) No 833/2014. Those actions can include, for example, the implementation of appropriate policies, controls and procedures to mitigate and manage risk effectively…”. On the other hand, the EU Commission provides that the best efforts should be understood as comprising only actions that are actually feasible for the EU operator: for example, the EU operator will not be liable for the actions of an entity it controls if it is unable to exercise control over that entity due to third country law.

Under FAQ No. 4, 6 and 7 the EU Commission clarifies that:

• inadequate risk assessment and management, coupled with risk-prone decisions of the EU operator, may be evidence that the EU operator has lost control over the non-EU company through its own fault, and is therefore responsible for it;
• being aware that a non-EU controlled entity undermine EU sanctions and accepting these circumstances amounts to a breach of Article 8a.

In the FAQ no. 5, the EU Commission clarifies that the scope of actions expected from each EU operator depends on the operator’s nature (e.g. market sector, risk profile etc.) and size, but also on other factual circumstance (e.g. even if an operator is relatively small in size, the fact that it operates in a highly regulated sector with abundant compliance resources may be considered as a tool enabling it to exercise more control over its related entities).

Although the means of ensuring compliance with Article 8a are many and must be evaluated on a case-by-case basis, the EU Commission lists some possible ones: internal compliance programs, systematic sharing of corporate compliance standards, newsletters and sanctions advisories, mandatory sanctions trainings for staff, mandatory procedures to report and react to sanctions violations.

The EU Commissions suggests that “the non-EU entity may consider publicly stating its intent not to engage in any activities that risk undermining EU sanctions or the compliance and governance policies of the EU operator that has ownership or control”.

Finally, under FAQ No. 7 and FAQ No. 9, the Commission confirms that the sale in or into Russia as well as the purchase in Russia of restricted goods, technology, intellectual property or trade secrets may give rise to liability on the part of the EU parent company to the extent that it has not made every effort to take measures to prevent the movement of such goods.

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