On February 20, 2024, the German Federal Office of Economics and Export Control ("BAFA") announced General License No. 42 („GL“). It clarifies that the provision of certain services and the provision of certain business software, such as ERP software, for the benefit of inter alia Russian subsidiaries of EU companies is still permitted. From June 21, 2024 - initially limited until March 31, 2025 - no individual approval will be required for certain software and services provided to Russian subsidiaries, but only a (timely) notification as a registered user. Nevertheless, there is a need for action in order to avoid compliance risks, such as revocations of approval.

Background

In principle, the following services may not be provided to legal persons, entities or bodies established in Russia (Art. 5n (1), (2), (2a) and (2b) of Regulation (EU) No. 833/2014 (Regulation 833/2014):

• Audit services including including statutory audit, bookkeeping or tax consulting services as well as business and management consulting or public relations services (Art. 5n para. 1 Regulation 833/2014).
• Services in the fields of architectural and engineering services, legal advisory services and IT consultancy services (Art. 5n para. 2 of Regulation 833/2014).
• Services in the fields of market research and public opinion polling services, technical testing and analysis services and advertising services (Art. 5n para. 2a Regulation 833/2014).
• Provision of software for the management of enterprises (including ERP systems, such as SAP) and software for industrial design and manufacture in accordance with Annex XXXIX (Art. 5n para. 2b and para. 3a Regulation 833/2014).

Until June 20, 2024, however, the automatic exemption of Art. 5n para. 7 of Regulation 833/2014 still applies to services pursuant to Art. 5n para. 1, 2, 2a and 2b of Regulation 833/2014 in favour of Russian companies owned by EU companies, EEA companies or Annex VIII partner country companies. From June 21, 2024, an approval is now required for these services (Art. 5n para. 10 lit. h) Regulation 833/2014).

The BAFA's announcement of GL No. 42 means that no individual authorizations need to be applied for, but registration as an GL user and notification of use to the BAFA is sufficient to provide the services in question for the benefit of a Russian subsidiary.

Use of GL No. 42 for the benefit of Russian subsidiaries

Two things are required for the use of GL No. 42: Timely registration as a user and timely notification of the actions or legal transactions carried out on the basis of GL No. 42.

The use of GL No. 42 requires mandatory registration with BAFA as a user of the GL. The registration can be created electronically using the ELAN-K2 export system or sent by e-mail to: allgemeine.genehmigungen.211@bafa.bund.de. Registration must take place before the first use or within 30 days thereafter (ancillary provision no. 4.1 of the GL).

The actions and legal transactions carried out on the basis of GL No. 42 in favour of subsidiaries must be reported by the user before or at the latest 30 days after the start of the provision of services. The notification must contain the following information:

• Indication of the service provider,
• details of the recipient of the service and
• details of the company that owns or controls the recipient of the service.

It is sufficient to report the first provision of services and business software for Russian companies owned by the EU. Subsequent provision of services to the same recipient do not have to be reported, even if these services are different.

According to the wording of the supplementary provision no. 4.2, the notification has to be made exclusively by e-mail to: allgemeine.genehmigungen.211@bafa.bund.de. Reporting via the ELAN-K2 export system is not provided for in the GL.

GL No. 42 can be used by nationals within the meaning of Section 2 (15) of the Foreign Trade and Payments Act and by German nationals who are resident outside the customs territory of the European Union and fall within the scope of this Regulation in accordance with Article 13 (c) of Regulation 833/2014. German nationals who make use of GL No. 42 may use foreign companies for this purpose.

Time limit and documentation obligation

GL No. 42 is limited in time until March 31, 2025. GL No. 42 users must securely store all documents that arise when using the GL for at least three years, see ancillary provision 4.3 (other retention obligations remain unaffected).

Further procedure

At present and until June 20, 2024, the transitional period is still running (Art. 5n para. 7 Regulation 833/2014), according to which an automatic exemption applies, inter alia, for services and the provision of software for the management of enterprises for Russian subsidiaries of EU parents. Only from 21 June 2024 it is mandatory to submit notifications as a registered user if services requiring approval are continuously to be provided to the Russian subsidiary. This does not apply to services in accordance with Art. 5n para. 3a of Regulation 833/2014, for which the notification obligation applies immediately (applies in particular to technical assistance, brokering services or other services relating to the provision of software, unless covered by IT consultancy services in accordance with Art. 5n para. 2 of Regulation 833/2014). If the first service provision takes place directly on June 21, 2024, the corresponding notification can be made before or at the latest 30 days afterwards. However, it is currently already possible to register and submit the notification by email.

GL No. 42 requires all service providers to identify relevant services, register as GL No. 42 users on time and notify the BAFA of their use. In the event of non-compliance, there is a risk of individual revocation of GL No. 42.