Council Regulation (EU) 833/2014 concerning restrictive measures due to actions by Russia destabilizing the situation in Ukraine (Regulation 833) sets out an extensive set of prohibitions and restrictions regarding trade in goods with, or supply of certain services to (including financial services), certain categories of Russian legal or natural persons, certain named Russian persons or entities and specified elements of the Russian state/government.

Regulation 833 has been amended several times since the Russian invasion of Ukraine.

The introduction of a new 5m article, which we wrote about here. Since this note, Article 5m has been amended by Council Regulation (EU) 2022/879 of 3 June 2022. In addition, clarifications as to its scope and correct application are provided by the FAQs published by the European Commission . We have provided an overview of the updated position.

For convenience, we have reproduced Section 5m, as amended, in full at the end of this Privacy Notice.

With limited derogations, Article 5m limits the provision of (commonly referred to as) trust and corporate services to trusts or similar arrangements, where the settlor or beneficiary of the trust is (as defined broad) (a) a Russian national or natural person living in Russia, (b) a legal person, entity or body established in Russia, or (c) a legal person, entity or body owned, controlled or acting on behalf of or under the direction of such Russian persons, entities or bodies.

The wording of Article 5m is broad and potentially has a significant impact on the business and operations of business service providers (CSPs).

We advise against reading Article 5m in isolation, as it must be considered in the broader context of all other EU sanctions laws related to Ukraine. These include prohibitions on entering into IPO transactions with designated persons under Article 5aa of Regulation 833 as well as asset freezes under Regulation 269/2014 (Regulation 269).

What is restricted?

Article 5m targets the creation and provision of services to “trusts or similar arrangements” established by or for the benefit of Russians. Regulation 833 does not define “trusts or similar arrangements”. The commission has issued an FAQ which generally states that any arrangement in which the legal and beneficial ownership of assets are separated and in which the legal owner has fiduciary obligations to the beneficial owner would fall under this definition.

Prior to the amendments, Article 5m raised questions about how the restrictions would apply when the trust included a mix of Russian and non-Russian persons among its beneficiaries. The amendments have now extended the exemptions so that competent national authorities can allow the provision of fiduciary services with a mix of Russian and non-Russian beneficiaries as long as the fiduciary does not accept from or distribute assets to a Russian person.

Competent authorities may also authorize the operation of trusts whose purpose is the administration of occupational pension schemes, insurance or employee share ownership policies, charities, amateur sports clubs and funds for minors and vulnerable adults. .

However, it should be noted that these are not general exemptions and that each case must be authorized individually by a competent authority.

Orphan works

We are generally of the view that the management of existing orphan trust structures is not prohibited under Article 5m. The orphan structure is commonly used by debt issuance SPVs that issue bonds or loan notes in debt capital markets and securitization transactions. This structure is important because it allows the SPV to establish its independence, separation, and insolvency estrangement from other parties and entities in the transaction, particularly its sponsoring group. Under this structure, a professional trustee is appointed to hold the shares of the SPV as an agent, in trust for charitable purposes. The SPV then issues the bonds/notes and is able to use the funds to, for example (i) loan them to an associated company in its sponsoring group to finance commercial activities (as part of a debt transaction company) or (ii) finance the purchase of a portfolio of securitized assets (in a securitisation).

Continuation of the provision of services to an already existing structure of this nature would not, in our view, be prohibited under Article 5m if the following conditions (which are typical of this type of structure) are met: (i ) the settlor is a professional trustee who owns the shares (and is not, when discussing these agreements, a Russian entity) and (ii) the beneficiary of the orphan trust is a non-Russian charity.

Therefore, if properly implemented, the provision of trust services in an orphan trust structure should not be prohibited under Article 5m. This makes sense because the sanctions are not designed to prevent the outflow of money from Russia/Russian entities to repay their debts to bondholders/bondholders on existing transactions.

Problematic issues with orphan structures

Although a CSP may not be prohibited by Article 5m from acting as a trustee of shares in an existing orphan trust structure, it should consider other sanctions measures that might apply, in particular under Regulations 833 and 269. Specifically, the CSP should review proposed transactions. who will use the structure, especially if there might be a connection to Russia. This includes carrying out due diligence on the profile, nationality and location of those involved.

In terms of due diligence, it is important for the CSP to verify that an orphan SPV to which it provides services is not directly or indirectly controlled by a sanctioned person and that it is not acting under the orders of a person sanctioned. This due diligence can be quite technical and complex and is beyond the scope of this note.


The additional waivers are helpful to trustees and corporate service providers, who hold assets in trust for beneficiaries, some, but not all, of whom are Russians, who would otherwise have to cease acting in violation of their fiduciary duties. But these are derogations and not general exemptions, and will have to be requested from a competent authority and each situation assessed individually.

While trustees holding orphan SPV shares in trust for charitable purposes should be exempt from the Article 5m prohibition, the degree of influence wielded by a sponsoring group with a Russian connection should be carefully assessed. in light of the broader sanctions measures currently in place. Trustees would be well advised to exercise due diligence on the associated companies of the SPV sponsoring group in light of the broader sanctions in place.


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