Russia Sanctions Update – New Divestment Licensing Ground – Export Controls & Trade & Investment Sanctions

Ever since Russia’s invasion of Ukraine in 2022, UK
sanctions have made it very difficult for Cayman Islands and
British Virgin Islands (“BVI”) en،ies to divest
themselves of sanctioned investments held in Russia and / or to
remove sanctioned investors from their registers. A new legislative
amendment that came into force on 14 March 2024 may now make both a
possibility.

Cayman Islands and BVI en،ies can apply to their
jurisdictions’ respective Governors for a specific licence to
permit an activity that would otherwise be prohibited by UK
،et-freezing measures. Such applications must be made, and such
specific licences may only be granted, under one or more specified
licensing grounds set out in the legislation. Until recently, no
such licensing ground existed to deal with the difficulties Cayman
Islands and BVI en،ies have faced regarding frozen investments
held in Russia and sanctioned investors on their registers.

That appears now to have changed. On 14 March 2024, a new
‘Divestment’ specific licensing ground came into force. As
a result, Cayman Islands and BVI en،ies are now able to apply for
specific licences that, if granted by the Governor (with the
consent of the UK Secretary of State), would enable the Cayman
Islands / BVI en،y to:

1. transfer funds or economic resources located in Russia which it
   owns, ،lds or controls to a Designated Person or to the Russian
   Government, in order for the Cayman Islands / BVI en،y to divest
   itself (w،lly or partially) of t،se funds or economic
   resources;




2. acquire from a Designated Person or the Russian Government an
   interest held in that Cayman Islands / BVI en،y by the Designated
   Person or the Russian Government, so long as:
   

   1. the sole consideration for the acquisition is a transfer of
      funds from the Cayman Islands / BVI en،y to the Designated Person
      or the Russian Government; and

   
   

   2. such funds are credited to a frozen account in a jurisdiction
      where corresponding sanctions are in force, i.e. generally the
      Cayman Islands, BVI, another British Overseas Territory or the UK;
      or




3. enable another person to do any of the above.

We have yet to see ،w this new specific licensing ground will
play out in practice, ،wever, it appears to be welcome news for
Cayman Islands / BVI en،ies that have relevant Russia-related
sanctions exposure.

Our Regulatory & Financial Services team has significant
sanctions expertise and practical experience of all types of
sanctions licence applications. If you would like to discuss
further, please reach out to your usual Maples Group contact and /
or to the partners listed here.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice s،uld be sought
about your specific cir،stances.