On 14 December 2021, the Odense District Court convicted the world’s largest bunkering firm in the world. Bunker Holding, its subsidiary Dan-Bunkering and its CEO were convicted for breaching EU sanctions by supplying jet fuel to Russian customers for which the end-use was military operations in Syria.
What preceded this verdict?
Between 2015 and 2017, the Danish fuel suppliers Bunker Holding and Dan-Bunkering sold around 172,000 tons of jet fuel (worth approximately USD 101 million) by entering into transactions with two Russian companies. These latter companies acted as agents on behalf of the Russian navy. The jet fuel was first delivered in the eastern Mediterranean and was unloaded later to the Port of Banias in Syria. Court documents show that the jet fuel was used to power Russian fighters used in military operations in Syria. According to prosecutor Anders Rechendorff, the seriousness of this unlawful end-use of cargo was clear from the fact that “the fuel filled the tanks of Russian fighters, which bombed the opposition against al-Assad in his name”.
Sanctions against al-Assad
The current EU Syria sanctions regime is in place (at least) until June 1, 2022. The sanctions under this regime were first imposed in 2011, following the violent repression of the civilian population in the country by the al-Assad regime. The restrictive measures do not only target the Syrian president, but also companies and prominent individuals that profit from their close ties with him, his regime or the war economy in Syria more generally. The restrictive measures under the said regime, include both financial and trade sanctions. The financial sanctions include, amongst others, a freeze of Central Bank of Syria assets held in the EU and restrictions on certain investments. Additionally, the trade sanctions restrict, amongst others, the import and export with respect to certain regions or certain goods and include the ban on oil imports and export restrictions on equipment and technology that could be used for internal repression or the monitoring or interception of Internet or telephone communications. Lastly the restrictive measures taken under the said regime are not designed to affect the delivery of food, medicines and medical equipment.
Implications of non-compliance
The verdict of the Danish court confirms that companies and individuals can and will be held liable for violating international sanctions. This verdict also shows that when conducting their due diligence, companies should not only screen the entities and individuals directly involved, but also pay close attention to the end-use of the goods and risk of diversion of these goods. After all, the consequences of non-compliance with sanctions can be severe. The fine for Dan-Bunkering is USD4.6 million, the seized profits are nearly USD2.3 million, and Bunker-Holding has been fined approximately USD600,000. The CEO of Bunker Holding, Keld Demant, was also sentenced to a suspended prison term of four months. Because it was held that he should have known that it was highly likely that the jet fuel would be used by the Russian army in Syria. Additionally to this financial damage, the mediatisation of this case and its outcome may lead to (permanent) reputational damage, high litigation costs and supply chain delays for Dan-Bunkering and its subsidiary.
- This case goes to show that it is important to look at i) all legal entities involved; ii) all natural persons who are – ultimately – behind the legal entity (so-called UBO’s); and iii) the end-use of goods when conducting a sanctions screening. The fact that the clients of Bunker Holding, Dan-Bunkering and Keld Demant (two Russian companies) did not appear on a sanction list, could not prevent them from being convicted for breach of sanctions. When screening parties involved in a transaction, it is advisable to use an automated screening tool (such as, but not limited to LexisNexis, Dow Jones and Intelligo) or other practical tools (e.g. EU Sanctions Map) to check for the most current developments in sanctions.
- If ‘red flag’ indicators are identified during a screening or if doubts arise about entering into or continuing a business relationship, it is advisable to perform/order a heightened due diligence review. Red flags may include involvement of i) a high-risk jurisdiction; ii) forged, fraudulent or false documents; and iii) a high-risk business profile. The military business profile of Bunker Holding’s customers should have been a clear indicator of the military end-use of the jet fuel.
- Lastly, remember that sanctions compliance is the responsibility of your company. This case shows that not only legal entities, but also individuals in charge of factual control can be regarded as suspects in a criminal investigation because of non-compliance with sanctions. Hence always verify that the company has: i) implemented a sound internal compliance policy with tailormade protocols and procedures; ii) designated a compliance officer responsible for implementation of the policy; and iii) provided periodic sanctions training to personnel.
Get in touch
If you have any questions about this or run into anything, for example, sanction screenings, please feel free to contact BenninkAmar Lawyers. Get in touch via e-mail at firstname.lastname@example.org or telephone at +31203085918.