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Ban on trust services to Russians On April 8, 2022, the EU published the EU Council Regulation No. 2022/576 and the EU Council Decision 2022/578 prohibiting European lawyers from providing trust services to Russian legal entities and individuals.
On April 8, 2022, the EU imposed the fifth package of sanctions against Russia. According to the new restrictions, citizens and legal entities of the EU member states are prohibited from acting as trusts or in other similar positions for Russian individuals and legal entities, and it is also prohibited to provide a number of services to their trusts.
In particular, it is prohibited to register, provide a registration address or an administrative address, as well as provide management services to trusts or other similar legal structures, if the founder or beneficiary of the trust are:
a) Citizens of the Russian Federation or persons permanently residing in the Russian Federation;
b) Legal entities established in the Russian Federation;
c) Legal entities owned by 50% directly or indirectly by persons listed in paragraph a) or b);
d) Legal entities controlled by persons listed in paragraph a), b) or c);
e) Natural or legal persons, acting on behalf of individuals or legal entities listed in paragraph a), b), c) or d).
From May 10, 2022, citizens and legal entities of EU Member States are prohibited from acting as a trustee, nominee shareholder, director, secretary or holding a similar position for a trust and other similar structures if the founder of the trust or the beneficiary belong to the above–mentioned list.
However, this restriction does not apply if the founder of the trust or the beneficiary is also a citizen of one of the EU Member States or has a temporary residence permit or a residence permit in one of the EU Member States.
On April 13, 2022 on the official website of the Swiss Federal Council a press release was published, according to which Switzerland joins the fifth package of EU sanctions, including restrictions on trust services. The text of the relevant law is still in development.
How will this affect Russian clients?
Due to the new restrictions, European and Swiss companies that previously provided trust services to Russian clients will no longer be able to fulfill their contractual obligations starting from May 10, 2022. In particular, the functioning of such structures as trusts in Cyprus and Malta, private foundations in Austria, the Netherlands and other EU countries will be stopped.
The work of trusts and private foundations is also at risk of being stopped if the trustee is located in one of the EU countries or Switzerland.
What actions should be taken?
If you are the founder or beneficiary of one of these structures, we recommend you to urgently contact your trust manager to check whether your structure will remain operational after May 10, 2022.
Each situation is unique, however, one of the universal options for solving the problem of the ban approved by the fifth package of EU sanctions is to change the trust and, if necessary, change the applicable law of the trust agreement to the law of a jurisdiction friendly to the Russian Federation.
ARAVANA Multifamily Office has a wide network of partners – trust managers in various jurisdictions and extensive experience in the creation and management of trusts and private foundations abroad.
We are ready to start negotiations with your current trustee and, if necessary, transfer your trust under the management of a new trustee as quickly as possible or develop other mechanisms for preserving your assets.