AUSTRIA Trends and Developments Contributed by: Anna Zeitlinger, Gabriel Lansky, Philip Goeth and Konstantin Oppolzer, Lansky Ganzger Goeth + Partner Rechtsanwälte GmbH
Outlook As long as the EU maintains its sanctions regime against Russia, the best-efforts obligation will remain. Thus, EU entities with third-country subsidiaries must consider this obligation and adjust their compliance programs accordingly. It is expected that member states will eventually intro - duce penalties for the non-compliance with the best- efforts obligation (in Austria, the breach of the best- efforts obligation is currently not subject to a penalty). In order to establish a breach of the best-efforts obli - gation, it is likely that authorities will take the way of least resistance and evaluate the EU entity’s compli - ance program and its documentation regarding the activities of its third-country subsidiaries (list of con - tractual partners, products traded by the subsidiary, sanction training and the like). In terms of guidance, it remains to be seen when the EU Commission will provide more detailed guidance on the application of the best-efforts obligation. For now, no request for a preliminary ruling regarding the interpretation of the best-efforts obligation has been addressed to the Court of Justice of the European Union.
and as long the Court of the European Union does not provide a different interpretation, EU entities are generally advised to follow the EU Commission’s guid - ance in this regard. Whether or not this interpretation of the law is excessive in light of the rather cryptic black-letter law is at least debatable. Extraterritorial application of EU sanctions? The best-efforts obligation prima facie does not estab - lish extraterritorial application of EU sanctions. This is because the addressees of the obligation are the EU entities and not the third-country subsidiaries. Only an EU entity could be theoretically charged with the violation of the best-efforts obligation. However, the EU entity is obliged to stop or mitigate actions that are technically not prohibited by EU sanc - tions for lack of territorial or personal scope of appli - cation. The EU Commission has repeatedly stated that subsidiaries are separate legal entities and – for the purposes of sanctions – are not obliged to follow EU sanctions if they are established outside of the Euro - pean Union. Through the best-efforts obligations, EU sanctions apply indirectly to these third-country subsidiaries. Even if the subsidiary itself cannot be charged with a violation of a sanctions restriction, its EU parent entity may be charged for failing to stop or mitigate it. Thus, one can argue that through the best-efforts obliga - tion, EU sanctions become indirectly extraterritorially applicable.
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