_article 8a of regulation (eu) 833/2014: the “best efforts” obligation and its practical consequences for businesses
As part of the EU’s 14th sanctions package against Russia, Article 8a of Regulation (EU) 833/2014 entered into force on 25 June 2024. Under this provision, natural and legal persons, organizations, and entities (for the purposes of this article: “EU companies”) are required to use their “best efforts” to ensure that legal persons, organizations, or entities established outside the Union, but owned or controlled by them, do not engage in activities that undermine the restrictive measures set out in the Regulation.
In doing so, Article 8a of Regulation (EU) 833/2014 introduces a so-called “best efforts obligation” – clear compliance requirements for EU companies with respect to their foreign subsidiaries.
European Commission FAQs of November 2024: Clarification of Obligations
On 22 November 2024 – several months after Article 8a of Regulation (EU) 833/2014 entered into force – the European Commission published FAQs to explain the scope of the new obligation. The key points are:
1. Scope
The obligation applies to all EU companies that own or control a non-EU subsidiary – regardless of whether that entity is located in Russia or another third country.
2. The Best Efforts Obligation
“Best efforts” requires companies to take all suitable and necessary measures that are realistic and feasible to prevent the circumvention or undermining of sanctions. Examples include internal compliance policies, monitoring and control mechanisms, employee training, reporting obligations, and procedures for rapid response to sanctions breaches.
The scope of measures depends on the nature, size, and risk profile of the EU company and the degree of control over its non-EU subsidiary. These actions must also be documented within internal compliance programs (ICPs) or equivalent reports.
3. Conflicts with Third-Country Law
If third-country laws (e.g., in Russia) make compliance factually impossible, this is taken into account. However, where an EU company itself causes a loss of control – for example, through inadequate risk assessment or corporate decisions – the exemption does not apply.
The Commission explicitly warns that Russia has enacted legislation targeting companies from “unfriendly countries,” including EU Member States, and that such risks must be properly factored into compliance assessments.
4. Knowingly Tolerating Violations
If EU companies knowingly accept violations by their non-EU subsidiaries, this constitutes a breach of Article 8a of Regulation (EU) 833/2014. It may also amount to a breach of Article 12 of Regulation (EU) 833/2014, particularly where due diligence obligations are not met.
Developments in August 2025: Further Guidance
In August 2025, the Commission published further guidance, providing additional clarification:
- Breach: A direct violation of sanctions (e.g., exporting prohibited goods to Russia).
- Circumvention: Structuring a transaction in a formally legal way that nevertheless seeks to evade sanctions.
- Undermining: Conduct that does not directly breach sanctions but weakens their effectiveness (e.g., sales to Russia through a foreign subsidiary).
Previously, “undermining” had only been referred to in abstract terms – the new guidance now provide a clear practical distinction.
The Commission also emphasized that “best efforts” entails a higher standard of care than the “reasonable efforts” often seen in commercial contracts. Companies must implement all necessary and feasible measures, taking into account their size, sector, risk exposure, and compliance resources.
The updated guidance sets out concrete compliance steps, including:
- Risk assessment covering all non-EU subsidiaries,
- Establishing a sanctions compliance program,
- Forward-looking planning in case similar obligations are extended to other sanctions regimes.
Relevance and Implications for companies
The updated FAQs make one thing clear: inaction is not an option. EU companies must actively review and, where necessary, enhance their compliance programs. They must also be able to document and demonstrate that they have taken all feasible and proportionate steps to prevent the undermining of sanctions.
For practice, this means:
- Establishing or strengthening sanctions compliance programs for foreign subsidiaries,
- Conducting systematic risk assessments and documenting “best efforts,”
- Engaging in proactive communication and compliance alignment with group companies worldwide.
Conclusion
With these FAQs, the Commission has significantly raised the bar for sanctions compliance. EU companies now face increased pressure to review their global structures for sanctions risks and to implement robust compliance measures.
Those who act early and establish resilient processes will be better positioned to minimize liability risks and ensure legal certainty.
Our team will be pleased to assist you in developing and implementing the necessary compliance structures.
Contact:
Johanna Dobert, Lawyer, Associate