European Union

• New Russia Sanctions
  • Cracking down on Russia’s ‘shadow fleet’: the EU’s 17th Package introduced in May 2025 focused on dismantling Russia’s ‘shadow fleet’ by sanctioning 189 oil tankers and restricting key services, such as insurance and port access. A number of Russian and third-country entities in the energy sector were also sanctioned, including major energy companies in India, and the UAE as well as other companies based in China, Türkiye, Uzbekistan, Israel, and Vietnam. Export bans were also extended to critical industrial inputs.
  • Latest sanctions package launched: The EU’s 18th Package was introduced in July. It included:
    • A reduction in the oil price cap to US$ 47.60 per barrel, banned imports of refined oil products of Russian origin processed in third countries
    • Software bans: Additional prohibitions on providing financial and banking software to Russia. Existing export prohibitions were also significantly extended to include a number of ores, metals, and metal-related chemical compounds. As of now, it is prohibited to sell the following to Russian entities or for use in Russia: molybdenum ores and concentrates; certain articles of iron and steel, copper, aluminum, tungsten, and cobalt; certain base-metal fittings; zinc, iron, cobalt, commercial cobalt and titanium oxides and hydroxides; and commercial cobalt and titanium oxides.
    • Crypto focus: The package also introduced a new legal basis for including crypto firms facilitating prohibited transactions within the scope of the transactions ban. Businesses with digital asset exposure are advised to reassess counterparty risk and update screening tools.
    • The wind-down derogation allowing competent authorities to grant licences for divestment from Russia was extended until December 31, 2025, in line with previous practice.
  • 19th Sanctions Package in the Making: European Commission’s President Ursula von der Leyen announced that EU Member States are currently working on a new sanctions package and are advancing proposals on how to use frozen Russian assets for the reconstruction of Ukraine. Proposals were also put forward to phase out Russian gas imports by 2027 to 2028.
  • Tariffs on China and India? The US Administration has urged the European Commission to impose additional tariffs of up to 100% on goods from China and India due to their continued purchases of Russian oil, a move which is argued undermines the sanctions regime. While the issue is drawing significant media attention, EU officials and Member States have to date remained silent on the prospect of such measures.
• New Guidance from the European Commission:
  • International commercial terms: On May 27, 2025, the European Commission issued a factsheet clarifying that contractual trade terms, such as Ex Works (EXW), do not exempt EU exporters from sanctions compliance obligations. The Commission emphasized that EU exporters cannot evade liability by claiming that the agreement was an EXW sale where the buyer handles shipping. If the goods end up in Russia or another sanctioned destination, the exporter is still responsible for the breach. Read the guidance here
  • Best efforts: The Commission’s Sanctions Helpdesk website was updated on July 15, 2025 with guidance on the ‘best efforts’ obligation. According to the document, ‘undermining’ EU sanctions includes “actions that weaken the effect of the sanctions, even if they do not directly violate the rules.” For example, this would apply where an EU exporter’s subsidiary based outside the EU sells prohibited machine tools to Russia. However, the guidance also confirms that an EU company will not be liable for actions undermining EU sanctions by its non-EU subsidiary if that subsidiary is prevented by local law from complying with such sanctions. While these statements provide some reassurance to EU companies still operating in Russia, they come with important nuances that should be taken into consideration when assessing compliance with the ‘best efforts’ obligation at the group level.
  • Firewalls: On August 22, 2025, the Commission published guidance on ownership and control tests on the Sanctions Helpdesk website. While largely reiterating previously published clarifications, the guidance includes an important note on firewalls (which are safeguards implemented in companies owned by sanctioned individuals preventing them from exercising their control rights). Specifically, the Commission advised EU companies dealing with parties protected by firewalls to seek a copy of the official firewall authentication/confirmation issued by competent authorities and subsequently verify it directly with the issuing authority.
  • Acting on behalf: On September 8, 2025, the Commission provided clarification on the concept of “acting on behalf / at the direction of” under EU sanctions. The guidance confirmed that actions which demonstrate that a subsidiary is acting on behalf, or at the direction, of another entity include (i) appointing or dismissing of any authorised representatives, as well as receiving instructions or obtaining approvals from any such entities. This guidance is of particular importance for entities that continue their operations in Russia.
  • Proceedings against member states: A major focus for the EU has been ensuring that sanctions are enforced consistently across all 27 Member States. To that end, the EU adopted Directive 2024/1226 (the Sanctions Criminalization Directive), requiring countries to criminalize the violation of EU sanctions with minimum penalties. By the transposition deadline of May 20, 2025, however, 18 Member States (including France, Germany, and Italy) had not yet updated their laws. In response, on July 24, 2025, the European Commission launched infringement proceedings against these Member States for failing to meet this deadline.
  • Other regimes: Sanctions relating to Belarus were extended and aligned with the Russia packages on June 30, 2025, and July 18, 2025. EU foreign ministers also discussed new human rights sanctions, with proposals to add officials from Iran and Myanmar to existing global rights regimes (though formal adoption came later). Additionally, the EU continued its annual renewal of country-specific sanctions: e.g. the arms embargo and personal sanctions on Libya were renewed in July, and some Syria sanctions were rolled over until June 2026.

United Kingdom

• • Russia sanctions expanded: On July 18, 2025, the UK announced a major Russia sanctions package alongside US and EU partners. This included:
    • Reduced price for Russian crude oil from US$ 60 to US$ 47.60 per barrel, effective September 2, 2025, to further constrain Russia’s oil revenues. The United Kingdom issued guidance urging firms to exercise due diligence and reassess existing commercial shipping and insurance contracts as well as compliance screening protocols to prevent indirect breaches.
    • More assets frozen: New designations targeted 18 officers of Russia’s military intelligence and three associated units for cyberattacks on UK and European infrastructure. These were supplemented by the blacklisting of 35 ships and two entities within Russia’s ‘shadow fleet’, including Dubai-based companies involved in illicit oil shipments. Businesses in the maritime, logistics, and energy sectors are advised to update sanctions screening methodologies to capture new vessel and entity identifiers.
    • Software restrictions: Providing oil and gas software to Russian entities, or for use in Russia, is now prohibited. At the same time, the UK Government issued a General Trade Licence that limited continuation of software services to foreign-owned Russian subsidiaries until October 20, 2025. Unless the licence is extended, UK entities would be required to apply to the Department for Business and Trade for a specific licence to provide the software to Russian entities after that date.

New guidance for non-UK companies: On June 27, 2025, the UK Government issued guidance clarifying when the activities of non-UK entities may fall within the scope of UK sanctions

• • The Government warned that even though UK sanctions laws formally bind only UK persons, non-UK companies facilitating evasion (for example, by supplying restricted goods to Russia via third countries) can themselves be sanctioned by the United Kingdom.
  • The guidance also offers practical steps for conducting due diligence on customers and suppliers, and highlights additional screening tools available to detect hidden Russian connections.
  • Importantly, the United Kingdom named five high-risk jurisdictions: Kazakhstan, Uzbekistan, Kyrgyzstan, Georgia, and Armenia, as hubs of concern for Russia sanctions circumvention. Companies operating in or via these regions are urged to exercise enhanced vigilance.
  • On September 8, 2025, the UK Government updated this guidance reiterating that persons who need to comply with UK sanctions are expected to have in place strong and effective measures to ensure that no goods or services that they supply to a third country are diverted to Russia or to sanctioned persons.
• Crypto threat assessment: In a first-of-its-kind report, on July 21, 2025, OFSI published a Cryptoassets Threat Assessment analyzing how cryptocurrencies are used to evade sanctions. The report revealed that over 7% of UK suspected sanctions breach reports since 2022 involved crypto firms, 90% of which were linked to Russia. OFSI considered it “likely” that crypto-related sanctions breaches are not reported. Flagged risks include indirect exposure to sanctioned exchanges (e.g. Russia-based Garantex) and advanced evasion by North Korean/Iranian hackers. OFSI urged crypto businesses to strengthen due diligence, use blockchain analytics, and promptly report any sanctions hits. This threat assessment is part of a broader UK effort to address new sanctions challenges in the fintech and digital assets sectors.
• Consultation on strengthening OFSI’s powers: On July 22, 2025, OFSI opened a consultation in July on reforming its civil enforcement processes. The consultation proposes:
  • capping voluntary disclosure penalty discounts at 30% uniformly as compared to up to 50% currently).
  • introducing a US-style settlement scheme with a standard 20% fine reduction for early settlement (but no appeal rights).
  • creating an ‘Early Account Scheme’ to encourage subjects under investigation to self-report facts early for greater discounts.
  • implementing a ‘fast-track’ fixed-penalty process for minor reporting or licensing offences.

  In addition, the Government is consulting on doubling OFSI’s maximum civil penalties from the greater of £1 million or 50% of the breach value to £2 million or 100% of the breach value.

  If adopted, these changes would markedly stiffen the deterrent effect of UK sanctions. The consultation runs until October 13, 2025, with OFSI hosting a webinar on September 17, 2025 to engage with stakeholders. Access the consultation here.

• Other regimes: The Home Office proscribed Palestine Action (a UK-based activist group) as a terrorist organization on July 5, 2025, an action now under legal challenge. Generally, the United Kingdom continued aligning with measures imposed by the United States and the European Union on Belarus and Iran. No entirely new sanctions regimes were launched, but officials signaled readiness to impose autonomous sanctions swiftly if situations deteriorate (for instance, in Sudan or other conflict zones).
• New UK corporate criminal offence took effect: From September 1, 2025, ‘large organisations’ in the United Kingdom and overseas are subject to a new strict liability offence under the UK Economic Crime and Corporate Transparency Act 2023 (ECCTA): the failure to prevent fraud. This landmark change means that organisations risk criminal liability if their employees, agents, subsidiaries, and other ‘associated persons’ commit fraud anywhere in the world, unless they can demonstrate that ‘reasonable’ prevention procedures were in place. ‘Fraud’ includes a number of offences, and will capture, for instance, making false representations about products to customers. Read more in our update here.

Further Insights

Please join our D.I.E roundtable discussion on October 15, 2025 which will address the strategic, financial, and regulatory issues facing the defense and critical infrastructure sectors.

In the current geopolitical climate, where these sectors face pressure from both the public and private sectors, our discussion will address key points for your operations:

• new financing opportunities
• tax aspects and structuring of deals
• securing financing and collateral
• specific regulatory constraints
• NIS 2, sovereignty issues, and cybersecurity
• Pre- and post-deal considerations: What needs to be addressed before finalizing the deal?

This event will provide an opportunity to analyze current dynamics, share feedback, and establish practical benchmarks to support your projects and secure your operations in an increasingly complex regulatory environment.

Pleased note, this event will be held in French.

Webinar on Sanctions in the Crypto Sector. On September 17, 2025, partners Raminta Dereskeviciute and Renate Prinz, as well associate Annabelle Rau, provided an update on the recent developments in the crypto regulatory sphere, including on sanctions.

McDermott Publishes a Chapter on UK Export Controls at the Guide to Sanctions – Sixth Edition of the Global Investigations Review where Raminta Dereskeviciute, Ludovica Rabitti and Michal Chajdukowski explore the legal framework governing the export of military and dual-use items, software and technology from both Great Britain and Northern Ireland. Read the full article here.

McDermott Represents Tecnimont in the Successful Defence of EuroChem Sanctions Claim. Our litigation team successfully defended Tecnimont in a high-profile dispute commenced by EuroChem before the High Court. Read more here.

McDermott Expands Regulatory Capabilities. We welcomed Omar Shah as a partner in our competition law practice. Omar brings extensive experience handling complex global merger control transactions, cartel investigations, and antitrust litigation, particularly those involving the intersection of competition law with intellectual property, media/communications, pharmaceutical, transport, financial services, and data privacy regulations in the United Kingdom and European Union.

Other Activity. On June 5, 2025, partner Raminta Dereskeviciute participated in the 2025 Sanctions Conference organized by UK Finance. Associate Michal Chajdukowski participated in the Conference organized by the London Chapter of the Association of Certified Sanctions Specialists (ACSS) on Regulatory Perspectives on the Sanctions Landscape on July 10, 2025.

Regulatory and International Trade Blog

• UK Reforms National Security and Investment Regime: Streamlining or Expansion?
• Proposals For Relaxation of EU Securitization Framework
• Quarterly Sanctions Update | Q2 2025