AUSTRIA Trends and Developments Contributed by: Anna Zeitlinger, Gabriel Lansky, Philip Goeth and Konstantin Oppolzer, Lansky Ganzger Goeth + Partner Rechtsanwälte GmbH
Best-Efforts Obligation – Cryptic Wording with Wide-Reaching Consequences? The “best-efforts” obligation remains highly relevant in practice, especially for multinational corporations with numerous subsidiaries in non-EU jurisdictions. This fairly new concept in EU sanctions requires EU entities to use their best efforts to ensure that their subsidiar - ies in third countries essentially comply with EU sanc - tions. Due to the cryptic wording of the relevant legal provisions and the lack of comprehensive guidance on the subject, the best-efforts obligation still poses plenty of questions for practitioners. This chapter pro - vides an overview of the best-efforts obligation, its practical application and existing uncertainties. Background From the outset of sanctions legislation, the combat - ing of sanctions circumvention was a key concern for the EU and its member states. It was evident that sanctions would be rendered obsolete if circumven - tion could not be effectively curbed. Instruments against circumvention are (among others) broadly-worded sanctions prohibitions (wording like “directly or indirectly”, “in whole or in part” or “busi - ness of any kind”) and a broad interpretation of sanc - tions regulations in order to achieve the object of a particular sanctions regime and to combat circumven - tion. Furthermore, in relation to the Russian sanctions regime, the European Union recently “activated” the anti-circumvention tool by adding the Kyrgyz Repub - lic into Annex XXXIII to Regulation 833/2014. As a result, certain products cannot be exported from the European Union to the Kyrgyz Republic in order to halt the re-export of such products to Russia. It can be expected that the anti-circumvention tool will be extended in the future. By introducing the “best-efforts obligation” the Euro - pean Union continues its efforts against transactions and structures that frustrate the purpose of sanctions. The black letter law and available guidance The best-efforts obligation was introduced in relation to the Russia and Belarus sanctions regimes in 2024 (Regulation 833/2014 and 765/2006) and 2025 (Regu - lation 269/2014).
The provision reads as follows: “Natural and legal per - sons, entities and bodies shall undertake their best efforts to ensure that any legal person, entity or body established outside the Union that they own or control does not participate in activities that undermine the restrictive measures provided for in this Regulation.” In November 2024, the Commission of the European Union introduced in its “Frequently Asked Questions” a chapter on the best-efforts obligation. In addition, the EU Sanctions Helpdesk published some guid - ance on the application of the best-efforts obligation. Though useful for practitioners to a certain extent, the available guidance is rather superficial and leaves plenty of open questions. Moreover, the FAQ chapter on the best-efforts obligation partially arrives at con - clusions that have no support in the black-letter law (see below for a more detailed elaboration). Practition - ers have criticised the European Commission in this regard for “gold platting”, ie, using the FAQ to achieve more extensive interpretation of the best-efforts obli - gation than the black-letter law would allow. Addressee of the obligation is the EU entity The person obliged to comply with the best-efforts obligation is the EU entity that has subsidiaries in third countries which it owns or controls. EU subsidiaries are not covered because they are anyway obliged to comply with the EU sanctions regulations by them - selves. Though, the best-efforts obligation extends to all sub - sidiaries in third countries, subsidiaries incorporated in jurisdictions with similar sanctions against Russia or Belarus require less oversight by the EU parent as such subsidiaries are anyway obliged to comply with their own sanctions regimes against Russia or Bela - rus. Thus, emphasis is placed on subsidiaries in juris - dictions without a sanctions regime against Russia or Belarus in place (eg, Serbia, Turkey, India and China). “Undermining” instead of “circumventing” EU sanctions generally do not extend to a legal entity established outside of the European Union. The mere fact that such entity is a subsidiary of an entity incor - porated in the European Union, is insufficient to estab - lish a nexus and to trigger the application of EU sanc - tions regulations. Therefore, a legal entity established
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