Recent Japanese Government Sanctions on Russia

November 3, 2014

Following the response of the United States and European Union to the Russian Federation’s annexation of Crimea in March 2014, as well as its continued support of separatists in eastern Ukraine, Japan recently imposed economic sanctions on Russia.  In August 2014, the Ministry of Foreign Affairs, the Ministry of Finance, and the Ministry of Economy, Trade and Industry implemented economic sanctions pursuant to the 外国為替及び外国貿易法 [Foreign Exchange and Trade Act], Law No. 228 of 1949 (as amended) ("FERA").  FERA permits, subject to certain requirements, the competent ministers of the Japanese government to implement economic sanctions in order to fulfill obligations under international agreements and to contribute to international efforts for achieving international peace. 

The first Japanese sanctions under FERA were announced on August 5, about three weeks after the downing of Malaysia Airlines flight MH17.[1]  Since that date, Japan has frozen assets of 40 Russian individuals and 2 entities and has restricted the importation of goods originating in the Autonomous Republic of Crimea or the City of Sevastopol.  Further, on September 24, 2014, the Japanese government announced the additional economic sanctions under FERA (the "September Sanctions"), which tighten export restrictions on arms, dual-use goods for military use to the Russian federation, and prohibit the issuance of securities to certain designated Russian banks and their subsidiaries.[2]

These sanctions follow on additional measures Japan has taken in recent months to pressure Russia over its actions.  On March 18, 2014, after the referendum in the Autonomous Republic of Crimea, the Japanese government announced that it decided (i) to suspend consultation for easing visa regulations, and (ii) to freeze the launching of negotiations on a new investment agreement, an outer space cooperation agreement, and an agreement for prevention of dangerous military activities.[3]

Subsequently, on April 29, 2014, Japan implemented sanctions on 23 individuals who were considered to have contributed to the violation of Ukraine’s sovereignty and territorial integrity.[4]  The scope of this action was limited however, only stopping the issuance of entry visas to those 23 individuals, whose names have not been disclosed to the public.[5]

FERA August Sanctions

Japan’s first round of FERA sanctions designated 40 individuals and two entities (collectively, the "Asset Freeze Targets") as persons considered to be directly involved in the annexation of the Autonomous Republic of Crimea and the City of Sevastopol or the destabilization of eastern Ukraine.[6]  The Japanese government consequently froze their assets.[7]  As a result, authorization from the Japanese government must be obtained to conduct any of the following transactions: (i) payment to any of the Asset Freeze Targets; (ii) payment by any of the Asset Freeze Targets from Japan to a foreign state; and (iii) transactions with any of the Asset Freeze Targets pertaining to the occurrence, alteration or extinction of claims based on a deposit contract, trust contract, money loan contract, or obligation guarantee contract.[8]  The Asset Freeze Targets include Viktor Yanukovych, the former president of Ukraine, Sergey Aksyonov, acting head of the Republic of Crimea, Vladimir Konstantinov, Speaker of the State Council of the Republic of Crimea, Rustam Temirgaliev, the former Deputy Chairman of the Council of Ministers of the Republic of Crimea, and two Crimean entities, Pjsc Chernomorneftegaz and Feodosiia.[9]

In addition, the Japanese government restricted the imports of goods from Ukraine.  The Japanese government’s approval is now required for the importation of any goods originating in the Autonomous Republic of Crimea or the City of Sevastopol.[10]

FERA September Sanctions

On September 24, 2014, the Japanese government "tighten[ed]" the export restrictions on exports to the Russian Federation of arms and dual-use goods for military use as well as on provisions to the Russian Federation of military technologies or technologies pertaining to such dual-use goods.[11]  Originally, an approval from the Minister of Economy, Trade and Industry was required for conducting any of those activities.[12]  As a result of the "tighten[ing]", the Ministry of Economy, Trade and Industry decided that it would no longer grant such permissions.[13]

In addition, the Japanese government announced sanctions on the issuance or offering of securities (such as stocks and bonds) in Japan by certain designated Russian Federation banks and their subsidiaries.  Those banks are: Sberbank, VTB Bank, Bank for Development and Foreign Economic Affairs (Vnesheconombank), Gazprombank, and Russian Agricultural Bank.[14]  The sanctions define subsidiary as an organization that is "directly owned by [any of those banks] for more than 50% of the total number of shares or the total amount of investment (excluding an organization having its principal office in Japan)."[15]  Securities with a fixed maturity of equal to or less than 90 days are excluded from the scope of the sanctions.[16]  While the sanctions do not outright prohibit the issuance or offering, they do require the government’s permission to engage in any such transaction,[17] and the government has publicly declared in its announcement of these sanctions that it prohibits those activities.[18]  Finally, providing services and benefits for the purpose of such issuances or offers also requires the government’s permission.[19] 

Recommendations

Depending on how the current situation in Ukraine develops, the Japanese government may take additional actions to sanction Russia.  Japanese companies—as well as foreign companies considering conducting transactions in Japan—should ensure that they are in compliance with those sanctions, as well as closely monitor any additional sanctions imposed by Japanese regulators.  In addition, U.S. regulators are increasingly noting that designated Russian persons are moving funds to East Asian countries.  U.S. and Japanese companies should be vigilant in ensuring that they are not transacting in any of this property.  


   [1]   Press Release, Ministry of Foreign Affairs, クリミア自治共和国及びセヴァストーポリ特別市のロシア連邦への「併合」又はウクライナ東部の不安定化に直接関与していると判断される者に対する資産凍結等の措置 [Measures to Freeze Assets of Those Who Are Considered to Be Directly Involved in "Annexation" of the Autonomous Republic of Crimea and the City Sevastopol or Destabilization of Eastern Part of Ukraine] (Aug. 5, 2014), http://www.mofa.go.jp/mofaj/press/release/press4_001139.html (English translation at http://www.mofa.go.jp/press/release/press4e_000387.html).

   [2]   Press Release, Ministry of Foreign Affairs, ロシア連邦に対する武器等の輸出制限の厳格化及びロシア連邦の特定銀行等による証券の発行等の禁止措置 [Tightening of Export Restrictions on Arms and Dual-use Goods for Military Use to Russian Federation and Prohibitive Measures of Issue of Securities by Designated Russian Federation Banks and their Subsidiaries] (Sept. 24, 2014), http://www.mofa.go.jp/mofaj/press/release/press4_001262.html (English translation is available at http://www.mofa.go.jp/press/release/press4e_000446.html).

   [3]   Press Release, Ministry of Foreign Affairs, クリミアにおける住民投票の結果を受けたロシアに対する措置について(外務大臣談話) [Statement by the Minister for Foreign Affairs of Japan on the Measures against Russia over the Crimea referendum] (Mar. 18, 2014), http://www.mofa.go.jp/mofaj/press/danwa/‌page4_000409.html (English translation at http://www.mofa.go.jp/press/release/press4e_000239.html).

   [4]   Press Release, Ministry of Foreign Affairs, ウクライナ情勢を受けたロシアに対する制裁について(外務大臣談話) [Statement by the Minister for Foreign Affairs of Japan on the Sanctions against Russia over the situation in Ukraine] (Apr. 29, 2014), http://www.mofa.go.jp/mofaj/press/‌danwa/page18_000277.html (English translation at http://www.mofa.go.jp/press/release/press4e_000281.html).

   [5]   Id.

   [6]   国際平和のための国際的な努力に我が国として寄与するために講ずる資産凍結等の措置の対象となるクリミア自治共和国及びゼヴァストーポリ特別市のロシア連邦への「併合」又はウクライナ東部の不安定化に直接関与していると判断される者を指定する件 [Notice Designating Certain Persons as Those Considered to Be Directly Involved in the "Annexation" of the Autonomous Republic of Crimea and the City of Sevastopol or the Destabilization of Eastern Part of Ukraine Who are the Targets of the Measures to Freeze Assets Implemented for the Purpose of Contributing to the International Efforts for Achieving International Peace], Ministry of Foreign Affairs Notice No. 267 of 2014 (Aug. 5, 2014). 

   [7]   Press Release, supra note 1.

   [8]   外国為替及び外国貿易法第16条第1項又は第3項の規定に基づく財務大臣の許可を受けなければならない支払等を指定する件の一部を改正する件 [Notice Amending the Notice Designating Certain Payment, etc. as Those for Which Permission from the Minister of Finance under the Provision of Paragraph 1 or 3 of Article 16 of Foreign Exchange and Trade Act is Required], Ministry of Finance Notice No. 238 of 2014 (Aug. 5, 2014); 外国為替及び外国貿易法第21条第1項の規定に基づく財務大臣の許可を受けなければならない資本取引を指定する件の一部を改正する件 [Notice Amending the Notice Designating Certain Capital Transactions as Those for Which Permission from the Minister of Finance under the Provision of Paragraph 1 of Article 21 of Foreign Exchange and Trade Act is Required], Ministry of Finance Notice No. 239 of 2014 (Aug. 5, 2014); 外国為替及び外国貿易法第16条第1項の規定に基づく経済産業大臣の許可を受けなければならない支払等を指定する件の一部を改正する件 [Notice Amending the Notice Designating Certain Payment, etc. as Those for Which Permission from the Minister of Economy, Trade and Industry under the Provision of Paragraph 1 of Article 16 of Foreign Exchange and Trade Act is Required], Ministry of Economy, Trade and Industry Notice No. 167 of 2014 (Aug. 5, 2014); and 外国為替令第15条第1項の規定により経済産業大臣が指定する外国為替及び外国貿易法第24条第1項の許可を要する特定資本取引の一部を改正する件 [Notice Amending the Specified Capital Transactions Designated by the Minister of  Economy, Trade and Industry Pursuant to the Provision of Paragraph 1 of Article 15 of Foreign Exchange Order for Which Permission under the Paragraph 1 of Article 24 of Foreign Exchange and Trade Act is Required], Ministry of Economy, Trade and Industry Notice No. 168 of 2014 (Aug. 5, 2014). Note that several exceptions apply. 

   [9]   Ministry of Foreign Affairs Notice No. 267 of 2014, supra note 6. The complete list of the Asset Freeze Targets is available at http://www.mofa.go.jp/files/000048604.pdf.

  [10]   Press Release, supra note 1. 

  [11]   Press Release, supra note 2. 

  [12]   輸出貿易管理令 [Export Trade Control Order], Cabinet Order No. 378 of 1949 (as amended), art. 1; 外国為替令 [Foreign Exchange Order], Cabinet Order No. 260 of 1980 (as amended), art. 17.

  [13]   Circular, Trade and Economic Cooperation Bureau, Ministry of Economy, Trade and Industry, 「ロシア連邦に対する武器等の輸出制限の厳格化について」を制定する通達 [Circular Enacting "Tightening of Export Restrictions on Arms and Dual-use Goods for Military Use to the Russian Federation"] (Sept. 24, 2014), available at http://cistec.or.jp/export/express/140925/1-roshiarenpou.pdf (no English translation available).

  [14]   国際平和のための国際的な努力に我が国して寄与するために講ずる証券の発行等の禁止措置の対象となるロシア連邦の団体を指定する件 [Notice Designating Certain Russian Organizations as Targets of the Prohibitive Measure of Issue of Securities Implemented for the Purpose of Contributing to the International Efforts for Achieving International Peace], Ministry of Foreign Affairs Notice No. 314 of 2014 (Sept. 24, 2014).

  [15]   Press Release, supra note 2, at ¶2.

  [16]   Id., at ¶1 note.

  [17]   Id., at ¶1(ii).

  [18]   Press Release, supra note 2 ("prohibit issue of securities by designated Russian Federation banks and their subsidiaries").

  [19]   Id., at ¶1(iii).

Gibson, Dunn & Crutcher LLP   

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the above developments.  Please contact the Gibson Dunn lawyer with whom you usually work or any of the following lawyers in the firm’s International Trade Group:

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Mark Handley – London (+44 (0)207 071 4277,
mhandley@gibsondunn.com)

  *  Mr. Lorber previously served at the U.S. Department of Treasury on the Iran sanctions desk in the Office of Terrorist Financing and Financial Crime, as well as in the Chief Counsel’s Office at OFAC.  He is not yet admitted to practice in the District of Columbia, and currently practices under the supervision of the Principals of the Firm.

**  Mr. Ben is a visiting attorney from Mori Hamada & Matsumoto, a law firm in Tokyo.  He is admitted to practice in Japan, and has significant experience advising on Japanese law matters.  

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