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Volume XII, Number 229

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Corporate Aviation: Impact of Sanctions in Response to Russia's Invasion of Ukraine

In the wake of Russia's military invasion of Ukraine, several countries, starting with the 27 member states of the European Union and followed by the United States, Canada, Switzerland and Norway, have implemented restrictions prohibiting commercial and private Russian aircraft from operating in their airspace.

On February 28, the European Council adopted Council Regulation (EU) 2022/334 (the "Regulation"), closing off the EU airspace to any aircraft operated by Russian air carriers, including as a marketing carrier, and to any Russian registered aircraft or non-Russian registered aircraft which are owned, chartered or otherwise controlled by a Russian legal or natural person. The Regulation provides an exemption for emergency overflights and landings, and licensing for humanitarian purposes.

Additionally, the EU has imposed prohibitions on the sale, supply, transfer or export of aircraft and aircraft parts and technology to Russia or to Russian persons and entities, including certain related services and financing under Council Regulation (EU) 2022/328. An exception exists for contracts concluded before February 26, 2022.

On March 1, 2022, President Biden followed suit by announcing during the State of the Union address that the U.S. would join its allies and close off its airspace to all Russian flights. According to the FAA's Notice to Air Missions (NOTAM), any plane owned, certified, operated, registered, chartered, leased or controlled by, for, or for the benefit of a person who is a citizen of Russia will be prohibited from operating in U.S. airspace, effective March 2, 2022. Other countries, including the UK, Norway, Switzerland and Canada, have implemented similar restrictions.

In a retaliatory move, on February 28, 2022, Russia announced its own prohibitions on the use of Russian airspace, affecting aircraft from 36 countries, including the EU states, the UK, and the United States. No indications were made as to when the bans would be lifted by either the Western countries or Russia.

Corporate aircraft operators and managers, pilots, charter operators and other stakeholders in the corporate aviation world will need to undertake a thorough review of their client base to ensure compliance with restrictions. The concepts of "control" are not defined in the sanctions but it is fair to expect that the broadest definitions will be applied.  

In addition to these sanctions, aircraft operators will likely need to be prepared to respond to subpoenas from a number of U.S. and international task force initiatives searching for assets of Russian individuals and corporate bodies subject to other global sanctions that may be subject to seizure.

Violation of the restrictions and sanctions may result in a variety of civil and potentially criminal penalties.

These developments reinforce the need to adopt and maintain solid due diligence and know your customer processes in order to identify the customers of aircraft operators and charter companies.

Fractional membership and on-demand programs which flourished in the last decade will have to quickly develop mechanisms to identify their customers, who often are dual nationals. Charter brokers, as the first point of contact with the customer, will likely be required to undertake additional due diligence on behalf of charter providers. These enhanced due diligence requirements may require review to ensure compliance with various privacy regulations, including the EU General Data Protection Regulation (GDPR), which regulate transfer of identifying data, including copies of passports, between different entities.

Operators of U.S.-registered aircraft cannot assume that the FAA would conduct an independent investigation of aircraft ownership as the FAA effectively outsourced that process to the few U.S. trust entities which organize owner trusts for foreign owners. These arrangements came under significant scrutiny following 9/11. In a damning report, the Department of Transportation Office of Inspector General concluded that 5,600 aircraft registered in the U.S. through trusts for the benefit of non-U.S. citizens "lacked key information such as the identity of trustors and beneficiaries." Although U.S. trust providers have significantly improved their processes since the audit, or even exited this business, we expect a significant level of scrutiny and added AML/KYC requirements.

© 2022 Miller, Canfield, Paddock and Stone PLC National Law Review, Volume XII, Number 63
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About this Author

Pawel Chudzicki International business and corporate attorney Miller Canfield Law Firm, Qatar
Principal

Pawel Chudzicki assists clients in their complex cross-border business activities and transactions. He serves both U.S. and foreign companies in industries including aerospace, biotechnology, cybersecurity, higher education, defense, manufacturing, media and telecommunications. Pawel assists U.S. companies in their global operations, with a particular focus on U.S. defense and aerospace companies engaged in business in Poland and Qatar. He also works extensively with foreign companies establishing operations in the U.S. and counsels them in all aspects of their business activities in the U...

202.572.6161
Vera Hansen Corporate Transactions Lawyer Miller Canfield
Associate

Vera Hansen is an associate in Miller Canfield's Corporate and Transactions Group. Her experience includes drafting, negotiating, and reviewing contracts, and reviewing and assessing international and domestic compliance violations. She is a native German speaker and has worked internationally with leading Fortune 500 automotive companies.

Vera is a graduate of Wayne State University Law School and earned her Bachelor of Arts in political science and law at the University of Tübingen in Germany. During her undergraduate studies, Vera was selected as a Baden-Württemberg Scholar and...

+1.313.496.785
Tomasz Mielko Infrastructure Lawyer Miller Canfield
Associate

Tomasz Mielko is a lawyer based in Miller Canfield's Warsaw office. He specializes in defense and security matters, public procurement law, infrastructure projects and export compliance.

He graduated from the Faculty of Law and Administration of the Jagiellonian University in 2020 and is currently a trainee attorney at the Warsaw Bar Association. Tomasz also gained professional experience working for a renowned Polish law firm and as part of a research project on the use of artificial intelligence in law.

+48.22.447.4300
Lana Yaghi Corporate business Attorney Miller Canfield Law Firm
Senior Attorney

Lana Yaghi is a senior attorney at Miller Canfield's Washington D.C. and New York offices. She focuses her practice on corporate and commercial matters in a broad range of industries, including aviation, cybersecurity and defense. She regularly advises U.S. and foreign clients on their cross-border business activities, particularly in connection with the establishment of operations and negotiation of commercial arrangements in the State of Qatar and the United States. A significant portion of her cross-border work relates to the representation of clients in connection...

202.572.6162
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