Criminal Liability for Embargo and Export Violations in Germany

Embargoes are imposed by states, communities of states or associations of states. According to the Federal Office of Economics and Export Control, they are usually based on resolutions of the United Nations (UN).

An embargo is a ban on economic trade with one or more countries. A distinction can be made between different types:

• Partial embargoes,
• country-specific embargoes,
• total embargoes,
• goods-related embargoes,
• person-related embargoes,
• organisation-related embargoes.

Partial embargoes are usually the most common. They restrict only certain areas of the economy. Country-specific embargoes are imposed either on specific countries or on specific groups of people within a country. An overview of country-specific embargoes can be found on the Federal Office of Economics and Export Control website.

Foreign trade can be restricted within the framework of these country-specific embargoes. In some cases, it can even be entirely prohibited through a ban. In such a case, there is a “total embargo”. Goods-related embargoes, on the other hand, are independent of countries. These result primarily from EU regulations.

If a company violates an embargo in Germany, the provisions of the Foreign Trade and Payments Act (AWG) apply. The penalty amount depends, among other things, on whether the violation was committed intentionally or negligently.

If it cannot be proven that the offence was intentional, Section 19 AWG applies. If a company has acted negligently, i.e., has disregarded the due diligence required in trade and violated export restrictions, this is at least an administrative offence. However, fines of up to €500,000 can also be imposed in this case.

If an existing embargo has been violated intentionally, this constitutes a crime under criminal law. The minimum penalty for intentional violations in Germany is one-year imprisonment. In the case of a violation of an arms embargo, the Foreign Trade and Payments Act (AWG) even orders prison sentences of up to 10 years, according to Section 18 AWG. The legislator thus imposes a very high penalty for such violations. If necessary, further penalties may be imposed, e.g., in the case of international transactions for tax evasion or tax fraud.

In the case of a violation, there are not only criminal consequences, but also considerable economic losses.

Embargo violations are usually financially motivated offences. Here, the legislator has enacted a regulation to prevent the effects of such an offence from having no economic consequences. Therefore, the “gross principle” applies to certain offences. This means that not only the profit made from the offence is skimmed off (profit skimming), but also that the entire turnover of the respective company is confiscated for prevention purposes. This usually results in the insolvency of the enterprise. The company can also be deprived of certain privileges and seals of approval, which result in a worsened market position and considerable additional expenses.

Especially in the current situation, the focus of media coverage is particularly on possible violations of the Foreign Trade and Payments Act. The press is reporting intensively and in detail on political and economic developments. If a company is accused of such a criminal offence, it can expect considerable damage to its image.

Embargo and export violations are currently highly relevant to companies in Germany. The background to this is the current global political events: The events in Russia have a high impact on the international movement of goods.

The European Union (EU) has been imposing sanctions against Russia since 2014 – especially after Russia’s annexation of the Crimean Peninsula. An arms embargo and trade restrictions on so-called dual-use goods had already been imposed at that time. These sanctions have been drastically tightened since Russia attacked Ukraine in February 2022 and have exceeded all sanctions imposed. Numerous sanctions packages have been issued, as well as various individual measures. These include, among others, the imposition of import bans on particular regions and personal, goods and services-related sanctions. These imposed economic sanctions are valid until 31.01.2023.

The EU Sanctions Regulations apply within the following scope:

• within the territory of the European Union,
• on board of ships or aircraft, if they are under the jurisdiction of the Member States
• to persons who are nationals of a Member State, inside and outside the territory of the Union,
• to any legal person, entity or body which is incorporated or constituted under the law of a Member State, inside or outside the territory of the Union,
• to legal persons, entities and bodies in respect of business done in whole or in part within the Union.

In principle, the EU sanctions regulations do not apply extraterritorially, i.e., they do not apply outside the EU. This can be particularly relevant for Russian investment companies with European parent companies. In this context, the Russian holding company, which is exclusively active in Russia, is not subject to the EU sanctions regulations.

However, it should be noted that according to Art. 13 lit d) of Regulation (EU) No 833/2014, persons who are nationals of a Member State are also bound by the sanctions regulations outside the territory of the European Union.