CZECH REPUBLIC Trends and Developments Contributed by: Jan Kohout and Illia Antonov, PRK Partners
holdings. This shift has brought the Customs Admin - istration into closer cooperation with the FAU, particu - larly in the enforcement of export and import restric - tions. The nature of trade sanctions demands different investigative techniques and institutional capabilities from those required for asset freezing, and the transi - tion remains a work in progress. The broadening reach: new sectors, new compliance obligations One of the most significant structural changes in the sanctions landscape has been the broadening of the circle of businesses directly affected by restrictive measures. While sanctions were traditionally the con - cern of financial institutions, defence contractors and exporters of dual-use goods, the EU sanctions pack - ages adopted since 2022 have extended far beyond these traditional constituencies. Today, a broad range of service providers, including media organizations, accountants, architects, legal advisers and management consultants, find them - selves within the ambit of trade and services restric - tions that would have been unimaginable before 2022. Non-dual-use manufacturers and exporters, too, must now navigate a complex web of sectoral sanctions, end-use controls and anti-circumvention provisions. Financial institutions, advisory firms, trade intermedi - aries and even online businesses and start-ups face an unprecedented level of compliance requirements. The driver of this expansion has been the steadily intensifying EU focus on anti-circumvention. Succes - sive sanctions packages have introduced increasingly detailed provisions aimed at preventing the routing of restricted goods, services and funds through third countries, and for Czech businesses, this has meant that even transactions with no obvious Russian or Belarusian nexus may trigger sanctions compliance obligations if there is a risk that the goods or ser - vices may ultimately reach a sanctioned destination or person. The practical consequence is that sanctions com - pliance has become a board-level concern for busi - nesses that would not previously have considered themselves within the sanctions compliance reach. Internal compliance procedures, KYC protocols, end-
use declarations and contractual safeguards have proliferated across the Czech corporate landscape, driven as much by commercial necessity to avoid sup - ply chain disruption and reputational damage, as by legal obligation. The real estate market: compliance challenges in practice The Czech real estate market, in which Russian nation - als had been active participants since the 1990s, was among the sectors most immediately and profoundly affected by the post-2022 sanctions regimes. In the months following the invasion, a wave of Russian per - sons, predominantly those who were not themselves designated but who feared impending restrictions, sought to dispose of their Czech properties. How - ever, they simultaneously faced significant obstacles in receiving sale proceeds into their bank accounts. These difficulties arose from an EU restrictive meas - ures on limiting the amounts of money that Russian citizens with no permanent residence in the EU may hold in EU bank accounts. This dynamic created acute challenges for transac - tion advisers, including lawyers. The use of lawyer- administered escrow accounts, a common feature of Czech real estate transactions, became a focal point of uncertainty. The question of whether funds held in escrow for a Russian seller could be lawfully released, and under what conditions, required intensive atten - tion and methodological assessment by regulators and supervisory bodies. While the initial panic in the real estate market has since subsided, the sector remains heavily impacted and is only now catching up with broader compliance trends and KYC awareness. The episode served as an early illustration of a theme that has since recurred across multiple sectors: the sanctions regime does not only affect designated persons but also casts a long shadow over anyone transacting with, or provid - ing services to, Russian and Belarusian counterpar - ties. Energy: the long road from Russian dependence The Czech energy sector has traditionally been deeply dependent on Russian sources. While the diversifi - cation of oil and gas supplies has been successfully
95 CHAMBERS.COM
Powered by FlippingBook