The ban on providing IT services and selling software to Russia: a new tool to limit Russia’s industrial capabilities

Since Russia’s invasion of Ukraine in February 2022, the European Union (hereinafter the “EU”) continues to put in place restrictive measures to sanction Russian’s actions. Regulation No. 833/2014 which restricts and prohibits the import and export of certain products originating in Russia, has thus been modified multiple times.

Among these modifications, some aim to limit Russian’s industrial capacities. For instance, since June 3rd, 2022, it is prohibited to provide, directly or indirectly, certain services to the Russian government or to legal persons, entities or organizations established in Russia. Article 5n §1 targets accounting services, business and management consulting services or public relations services.

Since October 6th, 2022, following the 8th sanctions package, this ban has been extended to other services. According to §2 of Article 5n, it is prohibited, for example, the provision of legal advisory services and IT consulting services.

On December 18th, 2023, Regulation (EU) 833/2014 was once again amended following the adoption of the 12th “package” of sanctions. Article 5n was supplemented by paragraph 2b. This paragraph provides that it is now prohibited to sell, transfer, export or make available directly or indirectly software for the management of enterprises and industrial design and manufacturing software listed in Annex XXXIX to the government Russian or to legal entities, entities of organizations established in Russia. According to the Commission’s FAQs, this ban covers their updating and upgrading and also software in material form, for example saved on a USB key and in intangible form, in the case of storage on a cloud.

Management of enterprises means the systems used “to represent and digitally control all the processes taking place in a company”, including enterprise resource planning (ERP), customer relationship management (CRM), business intelligence (BI) or supply chain management (SCM).

Design and manufacturing software includes software “used in architecture, engineering, construction, manufacturing, media, education and entertainment, including” software that enables building information modeling (BIM), computer-aided design (CAD) and computer-aided manufacturing (CAM).

It is important to underline that, all the typical components of the above-mentioned suites are also covered by this appendix. For example, concerning business management software, accounting software, fleet management, logistics and human resources.

Regarding the deadlines surrounding Article 5n 2b, prohibitions targeted by the article entered into force on December 18th, 2023. The Commission has, however, allowed an additional period: these prohibitions will be effective as of March 20th, 2024, for contracts concluded before December 19th, 2023, or ancillary contracts necessary for execution.

These prohibitions in Article 5n §1, §2 and §2b will only be effective for Russian subsidiaries of EU groups as of June 20th, 2024. From this date, an authorization will be required to provide these services. However, it is important to remember that the Commission sanctions the sanctions’ circumvention. It is therefore necessary to rigorously conduct the “due diligence” process.


Text’s link: COUNCIL REGULATION (EU) No 833/2014 of 31 July 2014 (consolidated version)

European Commission’s FAQs : Consolidated FAQs on the implementation of Council Regulation No 833/2014 and Council Regulation No 269/2014

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