The Anti-Circumvention Tool

For over two years, one of the sharpest tools in EU sanctions law has remained virtually unused and dormant. Known as the Anti-Circumvention Tool (ACT), it was embedded in Article 8b of Regulation (EU) No. 833/2014 as part of the 11^th sanctions package in June 2023 – and the European Commission is now preparing to put it into action for the first time. But what is behind this, and what does it mean for businesses? 

What is the Anti-Circumvention Tool?

Article 8b of Regulation (EU) No 833/2014 authorises the European Commission to adopt implementing acts that require certain third countries or companies in third countries to stop supplying sanctioned goods to Russia – as a condition for EU exporters to be permitted to continue doing business with them. Put simply: any third-country partner that circumvents sanctions risks being excluded from the EU internal market. 

The instrument is technically elegant, but politically sensitive. It allows the EU to influence the behaviour of companies in third countries – such as Turkey, the United Arab Emirates and Kazakhstan – without directly imposing sanctions on them. The leverage is economic in nature: access to the European market. 

Why has the tool been ineffective so far?

Since its introduction, the ACT has never been activated. The reasons for this are well known: diplomatic pressure from third countries, unclear proportionality issues, and the enormous administrative burden placed on the Commission when identifying the target individuals and companies. Added to this is the structural problem of gathering reliable evidence of circumvention in third countries.

In practice, whilst compliance departments were aware of the ACT, it was rarely put into operation. For many EU exporters, it simply did not pose an immediate risk. This could now change. 

A paradigm shift: first-time activation is on the horizon

As part of the discussions surrounding the 20^th sanctions package, the European Commission has signalled its intention to enforce the ACT for the first time. This is in response to the ongoing, empirically proven circumvention of the oil price cap and the export bans on so-called “Common High Priority Goods” – dual-use goods and industrial products found on Russian battlefields that are clearly of Western origin. Particularly Kyrgyzstan has come under the scrutiny of the European Commission. 

For compliance officers, this means that a previously theoretical regulation is now becoming an operational reality. Companies that regularly trade with partners in high-risk third countries must now actively assess these business relationships for ACT relevance. 

What should compliance teams be doing right now?

The first activation of the ACT is expected to take the form of a positive list of third-country companies or sectors with which EU exporters will only be permitted to conduct business under stricter conditions. This will result in specific areas of action: 

• Expand partner screening: existing third-country partners must be screened for potential addition to the ACT list – similar to screening against OFAC’s SDN list or the EU Consolidated List. 
• Amend contract clauses: new supply contracts should include ACT-specific compliance clauses and termination rights in the event that the contracting party is listed. 
• Define the internal escalation processes: who decides whether a listed partner can continue to receive shipments, and what is the legal basis for this decision? 

• The issue of personal liability is also gaining significance: since the implementation of EU Directive 2024/1226 on the criminalisation of sanctions evasion, continuing to supply an ACT-listed partner is potentially a criminal offence. 

   

Practical advice: Act now, don’t wait

The experience gained from the introduction of the Common High Priority Goods list shows that companies that act reactively rather than proactively quickly find themselves having to justify their actions when new restrictions are introduced – towards authorities, business partners and lending institutions. The ACT is not just a silent extension of sanctions law; it fundamentally changes the way due diligence for transactions with third countries must be conducted.

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