Ireland tapped by consultancy firms over scope of Russian sanctions – The Irish Times

Consulting firms have lobbied the government for legal clearance of sanction rules so they can liquidate Russia-linked companies.

Consulting firms and law firms are expected to earn lucrative fees by liquidating companies linked to sanctioned Russian parties, but fear falling foul of the sanctions themselves.

They asked for clarification on the legality of doing so or on the possibility of granting exemptions to allow this work.

Teneo Restructuring, a division of the global advisory services firm founded by Irish businessman Declan Kelly, contacted the Department for Enterprise earlier this year over the matter, according to regulatory documents. It is understood that a host of other service providers and law firms are ready to take advantage if the way is cleared.

Front companies linked to larger foreign companies – known as special purpose vehicles (SPVs) – are a feature of the Irish financial services landscape, with Russian-linked firms having raised tens of billions of euros there.

In March, Central Bank Governor Gabriel Makhlouf said that about half of the 33 existing SPVs that had been used by Russian banks and companies for fundraising purposes had links to people or entities subject to European Union sanctions.

Well-placed sources said that since the introduction of the sanctions, the directors of many such companies had resigned and it was now necessary to cancel them. In the UK, specialist advisory and restructuring firms have been given special exemptions to do so.

Teneo contacted an aide to the Tánaiste Leo Varadkar, seeking “to clarify whether EU sanctions prohibit the liquidation of sanctioned entities”.

Temporary exception

Earlier this month, the Official Journal of the European Union granted a temporary exception to the rules prohibiting the provision of services to Russian companies if their services were deemed necessary for the termination of contracts that did not comply with the sanctions rules, which could pave the way for the work to be undertaken.

A Department of Enterprise spokesperson said they told the company that the sanctions “do not appear to expressly prohibit liquidators from acting.”

“However, liquidators should be aware of their own obligations arising from sanctions, as breaching them is a criminal offence.” He was told to contact the finance ministry or relevant regulators with “any specific concerns”.

A total of €1.67 billion had been frozen by Irish financial institutions under the sanctions regime until June 10, 2022. The Central Bank said it could not provide an update on the number of Irish companies linked to sanctioned entities.

Experts say that if a sanctions-linked entity were to be wound up, it would raise questions about what would happen to the assets it controlled.

Professor Jim Stewart, assistant professor of finance at TCD, who has conducted research on Russian-linked businesses in Ireland, said: “If the owner of the asset is sanctioned, the owner liquidates the business, then the Proceeds from this liquidation would also be frozen.” However, he said the assets themselves might not be readily available due to their broader involvement in complex financing structures.

“You can liquidate in Ireland, but the assets can go through a bank in London or Luxembourg.”

Teneo Restructuring Ireland declined to comment when contacted.

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