Liability for defying sanctions against Russia and Belarus – fine of up to 20 million zloty or even 15 years in prison

by Rafał Szymański

8 April 2022

The Russian Federation's military aggression against Ukraine started on 24 February 2022 and led the European Union to launch a series of sanctions against individuals and entities from Russia as well as Belarus supporting it in its war. The Polish regulations included in the government bill passed by the lower chamber of Polish parliament (Sejm) on 7 April 2022, referred to as the “Sanctions Act”, refine the EU regulations and introduce very severe penalties for their violation.

Asset freeze – penalty for collaboration up to 20 million zloty

The possibility of freezing the assets of persons or entities participating directly or indirectly in the armed aggression against Ukraine, or associated with such persons or entities and supporting their activities, is the flagship solution proposed in the draft legislation. However, the Sanctions Act is nothing new as EU Council Regulations 765/2006 and 269/2014 have already allowed the freezing of funds and economic resources of entities and persons subject to sanctions imposed by the European Union.

Among other things, the draft “Sanctions Act” adopted by Sejm on 7 April 2022  envisages creating a list of persons and entities that:

• have money, financial and economic resources and, at the same time, are directly or indirectly supporting the aggression of the Russian Federation against Ukraine,
• are supporting serious human rights violations or the repression of civil society and democratic opposition,
• pose any other serious threat to democracy or the rule of law in the Russian Federation and Belarus, or that are directly associated with such persons or entities.

In other words, assets of persons and entities (e.g. companies) entered on the created list may be frozen, and the listed persons and entities will be effectively expelled from the Polish market.

Individuals and organisations may end up on the list also if they are deemed to pose a threat to the national security of the Republic of Poland. This, however, is controversial as it leaves room for far-reaching interpretation, and thus abuse.

The Polish Minister of the Interior and Administration is to be responsible for the above assessment, as well as the entry on the list, by way of an administrative decision which will be immediately enforceable and non-appealable. Moreover, those on the said list of the Minister of the Interior and Administration will not be the same persons and entities for which the European Union has issued sanctions and restrictions in Regulations 765/2006 or 269/2014. In this respect, Poland is free to sanction additional persons and entities, irrespective of those sanctioned by the European Union.

A very controversial solution in the proposed legislation is that persons or entities that, among others, by continuing deliberate and purposeful business with entities sanctioned by the Minister of Internal Affairs and Administration aim to circumvent the freezing of funds and economic resources may expect an administrative fine of up to 20 million zloty imposed by way of an administrative decision issued by the Head of the National Revenue Administration (NRA, or KAS in Polish).

The list will be published in the Public Information Bulletin, so the information on individuals and entities whose assets have been frozen will be available to everyone.

The sanctioned will be entitled to apply to the Head of the NRA for re-examination of their case.

Exclusion from tenders

Another measure proposed in the bill in respect of the persons or entities on the list of the Ministry of Internal Affairs and Administration and of the persons (entities) sanctioned under annexes to Regulations 765/2006 and 269/2014, as well as their beneficial owners and parent entities, is to exclude them from public tender procedures or competition under the Public Procurement Act of 11 September 2019.

If a person or entity takes part in a public tender or competition despite the above exclusion, they may face an administrative fine of up to 20 million zloty.

Criminal liability – imprisonment from 3 to 15 years

The draft Sanctions Act introduces criminal liability for violations of specific provisions of Regulations 765/2006 and 833/2014, as well as Council Regulation (EU) No 2022/263 of 23 February 2022 concerning restrictive measures in response to the recognition of the non-government controlled areas of the Donetsk and Luhansk oblasts of Ukraine and the ordering of Russian armed forces into those areas.

The penalty for the above offences is to be imprisonment from 3 to 15 years.

According to the bill, a person responsible for concluding a commercial transaction may also be charged with infringement of the indicated provisions if the action referred to in paragraph 1 has been committed as part of his or her business activity.

The proposed legislation also allows forfeiting goods involved in a prohibited action, even if the perpetrator does not own them.

The proposed legislation does not allow excluding criminal liability if, at the time of sentencing, the unlawfulness of the conduct in question has been repealed. The repeal of the unlawfulness of the infringement of orders and prohibitions set out in the regulations does not constitute grounds for the erasure of a conviction. In other words, if the proposed law is amended after the perpetrator has committed the offence, he or she will not get more lenient treatment.

In conclusion, the liability for breaking the sanctions against Russia and Belarus may be expected to grow.

Do you have questions about the new legislation? You are welcome to contact Rödl & Partner experts.