EU’s 18th Sanctions Package Against Russia
On July 18 2025, the EU unveiled its 18th package of sanctions against Russia, described as one of the most far-reaching yet. With measures ramping up pressure on the Russian energy, banking, and defense sectors.
But, what do these measures mean in practice?
Our interdisciplinary team of sanctions and litigation experts has taken a closer look. In this focused analysis, we explore a couple of key developments: The new transaction bans, the introduction of the novel catch-all provision, and significant changes to litigation and arbitration-related clauses.
The new transaction bans
The transaction ban was first introduced under the fourth sanctions package, establishing Article 5aa of Regulation 833/2014. This Article prohibits ‘directly or indirectly engaging in any transaction with’ (i) entities listed in the accompanying Annex XIX, (ii) entities that are more than 50% owned or controlled by those listed entities, or (iii) any party acting on behalf or at the direction of those entities. Transaction bans are a type of sectoral sanction, used uniquely by the EU. In application, the bans however share similarities with asset freezes, in part due to the broad scope of applicability, as emphasized again in the recitals of the 18th package.
The latest sanctions package introduces several amended and new types of transaction bans. One involves the amendment to the existing prohibition to provide specialized financial messaging services under Article 5h to certain designated entities in Annexes XIV including those entities owned or controlled for 50% or more by them (known as the ‘SWIFT- ban’). This prohibition was ramped up into a full transaction ban with 22 more entities added to the Annex. As a consequence, the new sanctions package significantly intensifies sanctions on the Russian banking sector.
Another new transaction ban relates to the Russian Direct Investment Fund (RDIF) as introduced under the new Article 5ag. The Article is particularly broad in scope as prohibitions go beyond the RDIF and even owned or controlled entities. The prohibition extends to entities established outside the EU that have received significant investment, directly or indirectly, from the RDIF or entities owned or controlled by it, as listed in Annex XLIX.
Currently, four such entities are designated under that Annex. In addition to the investment recipients, a separate basis for designation targets non-EU entities that provide financial or investment services to the RDIF, its subsidiaries, or the entities referred to in Annex XLIX. These service providers are listed in Annex L to the regulation. This brings in a layer of secondary sanctions: a company may be sanctioned not for being owned or controlled by a listed entity, but because of the services it offers or ties it maintains with targeted entities.
The EU also extends the restrictions related to the System for Transfer of Financial Messages (SPFS) of the Central Bank of Russia. The 14th sanctions package already introduced a prohibition for EU operators to connect to SPFS, and entities could be subjected to a transaction ban when such entities (i) aided Russia’s financial resilience and (ii) supported the circumvention of the prohibitions. With the introduction of the latest sanctions package, those cumulative listing criteria have been eliminated. Consequently, entities may now be added to Annex XLIV solely on the basis of their use of the SPFS or comparable services, irrespective of their intent or the effectiveness of these actions in aiding Russia to circumvent sanctions.
This development reflects a transition from a risk-based approach to a conduct-based approach, whereby the mere use of Russian financial infrastructure is sufficient grounds for action. To date, no entities have been sanctioned under this transaction ban. The new Article 5ad introduces another transaction ban aimed at curbing the facilitation of circumvention of sanctions through crypto providers and third-country financial channels. Two entities have already been designated under the new accompanying Annex XLV, demonstrating the EU’s commitment to take action against those who facilitate circumvention. Last but not least, the EU (finally) introduced restrictions on Nord Stream. All transactions associated with Nord Stream are broadly prohibited, with no reference to specific entities connected to Nord Stream.
As demonstrated, the EU views the transaction ban as a versatile tool that can be applied flexibly to meet specific objectives. In many cases, the measures extend beyond entities included in the accompanying annex to include entities owned or controlled by listed entities. Other types of bans do not specify the entities targeted but merely
describes the prohibited transaction, such as in the case of Nord Stream transaction ban. As these bans become increasingly common, we recommend our clients to pay close attention to the scope of applicability the transaction ban, and to ensure that the entities that are subject to a transaction ban are included in sanctions screening.
Catch-all controls
For the first time in sanctions history, the EU introduces an optional catch-all mechanism for advanced technology exports (as listed in Annex VII). These items were already subject to an (indirect) export prohibition to Russia. This new tool, included under article 2a(a)(1aa), now also grants Member States the authority to require a prior export authorization if the exporter has been informed that the goods are or may be intended for a natural or legal person in Russia, or for use in Russia.
While this new provision has often been referred to as a new sanction, we do not expect it to have significantly broader consequences than the existing prohibitions under Article 2a, as the wording of the new provision does not go beyond the existing indirect export ban. A transaction with a third country with regard to which there were possible re-export to Russia was always prohibited under the existing Article 2a. This new sanction only seems to emphasize this.
The competent authorities have not been granted the power to impose unilateral export restrictions on goods beyond those already listed, but rather the ability to strengthen enforcement of existing controls. This interpretation is supported by the recitals of the 18th sanctions package, which confirm that the scope of the existing indirect export prohibition remains unchanged, and that it aims to equip Member States with a tool to investigate and prevent possible circumvention of restrictive measures, while ensuring a harmonized interpretation and legal clarity for exporters. In this light, the measure appears to function more as a means of encouraging Member States to step up enforcement and to encourage further prudence with market parties, rather than as a new prohibition targeting exporters directly.
This is further reflected by the fact that – despite the apparent link to the longstanding catch-all controls under the EU Dual-Use Regulation – the new sanctions-related mechanism does not impose an active obligation on exporters to notify the authorities when they are aware the goods are ultimately destined for Russia.
This mechanism could, however, lead to authorities systematically stopping and investigating shipments of advanced technology items destined for countries considered high-risk for sanctions circumvention. Yet this is already possible under the current regime, and requiring prior authorization in such cases would seem redundant
if the goods are or may be intended for end-use in Russia. Again, the export is in that case already prohibited, unless specific authorization is granted. The additional powers do not enable authorities to create new grounds for such authorization.
Where a licensing requirement is imposed, the Regulation stipulates that competent authorities must follow the procedures outlined in the Dual-Use Regulation. This includes notifying other Member States and the European Commission. As a result, exporters cannot bypass the requirement by rerouting shipments via other Member States.
Taking into consideration the above, we advise exporters – particularly those dealing with Annex VII (Russia) or Annex V (Belarus) items – to maintain clear documentation demonstrating that the goods are not intended for end-use in Russia or Belarus. If a shipment is stopped, this documentation will help avoid unnecessary delays or enforcement actions.
Litigation, claims and arbitration
Finally, we highlight the strengthened EU legal protections against abusive Investor-State Dispute Settlement (ISDS) claims arising from sanctions. Under article 11, the EU chooses a rigorous no-claims policy against Russia and Belarus with respect to ISDS claims, to protect Member States from illegitimate arbitration claims brought by Russian companies or individuals under Bilateral Investment Treaties(BITs). Most countries are member states to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 10 June 1958). The New York Convention provides a framework for the international enforcement of arbitral awards, which creates certainty and efficiency in cross-border dispute resolution. The New York Convention outlines specific, limited grounds for the refusal of (recognition and) enforcement, one of them being that the recognition and enforcement of the specific arbitral award would be contrary to the public policy of the enforcing state. Generally, the member states define what public policy entails.
As illegitimate arbitration claims may lead to circumvention of sanctions, the EU now takes measures to prohibit the enforcement and execution of judgements and awards. EU Member States will not recognize or enforce any court decisions or arbitral awards from any non-EU court or panel regarding investor-State disputes following from EU sanctions and brought by certain individuals or entities. Where Member States are confronted with arbitral awards rendered against them in ISDS in connection with imposed measures, they must invoke any objection available to them in domestic or foreign proceedings for the recognition and enforcement of such awards. This includes raising the objection that the recognition or enforcement of the award would be contrary
to the public policy of the country where recognition and enforcement is sought, pursuant to the New York Convention. In order to contest illegitimate ISDS claims outside the EU, or illegitimate recognition and enforcement of awards, Member States may recover damages and costs of (arbitral) proceedings caused by such abusive legal actions. In this regard, the forum necessitatis provision which provides for jurisdiction on an exceptional basis, applies to damages claims brought under Article 11a, Article 11b or Article 11e. This provision creates jurisdiction when i) no other Member State court has jurisdiction under EU or national law and ii) the damages case has a sufficient connection to the court’s Member State.
The road ahead
With the introduction of the new package, the EU maintains a firm stance on sanctions against Russia, even as US support has become more uncertain under the Trump administration. The EU continues to expand the sanctions toolkit with new instruments, such as the catch-all control and the new varieties of transaction bans, while intensifying efforts to close loopholes used for circumvention. These developments will continue to present ongoing implementation challenges for exporters, financial institutions, and national authorities across the EU. With the May 2025 deadline now passed for implementing the directive that harmonizes criminal offences and penalties for sanctions violations, enforcement efforts are expected to intensify. We will continue to monitor how these challenges play out in practice, particularly in the implementation of the latest sanctions package and the development of enforcement across the EU.
