Council Regulation (EU) 833/2014 (as amended) (the “Regulation”) regarding restrictive measures due to Russian actions destabilizing the situation in Ukraine, set out a broad set of prohibitions regarding trade in goods or services with or to any person, entity or body in Russia or intended for be used in Russia.

The regulation was recently amended by Council Regulation (EU) 2022/576, which, among other things, introduced a new article – Article 5m. With very limited derogations, this new section imposes restrictions on the provision of (what are generally referred to as) trust and corporate services, to trusts or similar arrangements, where the settlor or beneficiary of the trust is ( wholesale) a Russian legal or natural person, or a person controlled by or acting for such Russian persons. This wording is broad and therefore potentially has a significant impact on the business and operations of business service providers (CSP). We have defined the entire 5m article at the end of this article.

What is restricted?

Article 5(m) appears to be designed to target persons holding assets in trust for Russians. However, it is poorly written and appears to go further than necessary or appropriate. To take a few examples, it can at least be argued that the following would fall within the scope of the regulation:

  • If an employee ownership trust held shares in trust for 1,000 employees of a company, one of whom happens to be Russian, and 999 of whom are not, it appears that the trustees would be forced to cease acting to the detriment of all beneficiaries.
  • If a trustee holds security for 10 syndicated credit banks, one of which happens to be Russian, the trustee would be forced to cease acting.
  • If a common depositary holds legal title to debt securities (such as bonds or loan securities) on behalf of a clearing system (equity settlement), but the ultimate holders of the bonds/securities upstream of the custody chain include Russian persons, the common depository and the intermediary depositories would be forced to cease acting.

One example that we believe is overlooked relates to orphan trust structures.

However, if the above scenario is slightly modified and the Irish SPV is a wholly owned subsidiary of a Russian entity, rather than an orphan, the SPV would be a body corporate controlled by a Russian body corporate. Accordingly, if he placed anything, such as debt securities, in a trust, the trustee or trustees would be forced to cease acting. This makes sense because the sanctions are not designed to prevent the outflow of money from Russia/Russian entities in order to repay their debts to bondholders/note-holders on existing transactions. In addition, if legal title to debt securities issued by the SPV is held by a common depositary on behalf of a clearing system (equity settlement), assuming there are no beneficial owners ultimate Russian debt securities (which, admittedly, could be difficult to establish in practice), the common depositary could continue to act.

Separately, it is unclear what is meant by “any similar legal arrangement” We are aware that the Cyprus Ministry of Finance has issued guidance stating that this does not extend to companies, but we are not aware of any EU or Irish guidance on this point. At first glance arguably, an executor with a Russian beneficiary could be forced to cease acting.[1]


Although our intentions are good, we are of the opinion that article 5m must be clarified, if it is not to have significant unintended consequences. Article 5m requires trustees, including business service providers, who hold assets in trust for beneficiaries, some, but not all of whom, are Russians, to simply cease acting, in violation of their obligations trustees. We believe that it would be more appropriate and effective to simply prohibit the disbursement of money or assets to Russian beneficiaries and perhaps to require the disclosure of those beneficiaries.

The content of this article is provided for informational purposes only and does not constitute legal or other advice.

Annex – the full text of article 5m

1. It is prohibited to register, provide a registered office, business or administrative address and management services to a trust or any similar legal arrangement having as trustee or beneficiary:

  • Russian nationals or natural persons residing in Russia;
  • legal persons, entities or bodies established in Russia;
  • legal persons, entities or bodies whose economic rights are held directly or indirectly for more than 50% by a natural or legal person, entity or body referred to in points (a) or (b);
  • legal persons, entities or bodies controlled by a natural or legal person, entity or body referred to in points (a), (b) or (c);
  • a natural or legal person, entity or body acting on behalf of or on the instructions of a natural or legal person, entity or body referred to in points (a), (b), (c) or (d).

2. He must it is prohibited from May 10, 2022 to act as, or cause another person to act as, trustee, agent shareholder, director, secretary or similar position, for a trust or similar legal arrangement as referred to in Article paragraph 1.

3. Paragraphs 1 and 2 do not apply to operations strictly necessary for termination on or before May 10 2022 contracts not in accordance with this article concluded before April 9, 2022 or ancillary contracts necessary for the execution of these contracts.

4. Paragraphs 1 and 2 do not apply where the settlor or the beneficiary is a national of a Member State. State or natural person person holding a temporary or permanent residence permit in a Member State.

5. By way of derogation from paragraphs 1 and 2, the competent authorities may authorize the services referred to contained therein, under such terms as they deem appropriate, after determining that it is necessary to:

  • for humanitarian purposes, such as delivering or facilitating the delivery of aid, including medical supplies, food, or the transfer of humanitarian workers and related assistance or for evacuations; or
  • civil society activities that directly promote democracy, human rights or the rule of law in Russia.

AHRC New York City receives $18,000 in grants from NYSARC Trust Services


Analysis: Russia Sanctions Have Potential Unintended Consequences for Trust Services

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