Answers to some questions regarding the software prohibition in the EU's 12th package of restrictive measures

On 6 February 2024, the Directorate-General for Financial Stability, Financial Services and Capital Markets Union published answers[1] to some of the questions that have arisen in relation to the prohibition, adopted at the end of December 2023, on the sale, supply, transfer, export and provision, directly or indirectly, to the Government of Russia and any entities, organizations and bodies established in Russia of enterprise management, industrial design and production software.

According to the published clarifications, the prohibition applies to software in both material form (e.g. saved on a storage medium) and intangible form (e.g. downloaded from a cloud, transferred by technology). The provision of technical assistance, brokering services or other services related to prohibited software, and the provision of financing or financial assistance for such purposes, is also prohibited.

This prohibition also covers software updates. In addition, assistance or advice relating to software updates and upgrade, as well as bespoke software updates and upgrades, were already subject to a prohibition from 2022 with the introduction of the EU's 8th package of restrictive measures prohibiting the provision of IT Consultancy services.

Particular attention should be paid to comments on the situation where a European company provides software to any third country other than Russia.

The Software Prohibition does not affect the sale, supply, transfer, export, or provision of prohibited software to entities in third countries which are not targeted by the provision. Consequently, the new prohibition allows an EU operator to continue providing software to its multinational clients with multiple global subsidiaries and affiliates, including when some of those affiliates are Russian.

However, European companies will need to assess and consider the risks of indications of circumvention of European sanctions on a case-by-case basis. For instance, if the client may in fact seek to acquire the software for predominant use by a subsidiary established in Russia or any other legal person, entity or body established in Russia.

The B1 team is ready to provide support on various issues related to EU sanctions in the field of intellectual property, including legal advice on the impact of sanctions on the current activities of companies and the preparation of licensing and other accompanying agreements.