Derogations

Background

All natural and legal persons must comply with EU sanctions regulations as soon as they are adopted.

Sanctions or restrictive measures can take a number of forms and include, inter alia, financial sanctions (i.e. the freezing of funds and economic resources and the prohibition on making funds and economic resources available to a designated person), arms embargoes, export and import restrictions, flight and travel bans. Sanctions can also take the form of a ban on the provision of financial services and investment. Further information on the EU sanctions regulations can be found on the European Commission's website.

Once a person, entity or body has been listed under EU financial sanctions as a “designated person”, there is a legal obligation not to transfer funds or make funds or economic resources available, directly or indirectly, to that designated person. The assets of the designated person must be frozen. This obligation also applies in respect of the assets of any entity or body that is owned and/or controlled by a designated person. Further guidance on ownership or control can be found in EU Sanctions Guidelines, dated 4 May 2018.

The Central Bank’s role in assessing derogation applications and issuing authorisations

The Central Bank of Ireland (the Central Bank) is the National Competent Authority in Ireland responsible for the enforcement and administration of financial sanctions.

EU financial sanctions, such as, Council Regulation (EU) No 269/2014, usually contain derogation provisions which permit competent authorities to authorise activities that would otherwise be prohibited. The Central Bank is responsible for assessing applications for any such derogations.

The assessment of derogation applications is a key part of the Central Bank’s role in administering financial sanctions. In assessing derogation applications, the Central Bank is required to have regard to the legal grounds under which derogations can be authorised as set out in the relevant EU sanctions regulations. Where the application for a derogation does not comply with the legal grounds provided for in the relevant EU sanctions regulations, the Central Bank must refuse to grant the requested authorisation. Authorisations may be granted subject to conditions where appropriate.

Timeline for assessment of a derogation application

Given the volume of derogation requests received by the Central Bank, applicants should be aware that it may take several weeks, if not longer, to assess derogation applications.

Derogation applications should be submitted to the Central Bank well in advance of the date from which the authorisation is required. Applicants should ensure the Central Bank has received all the information required to enable us to make a decision about whether there is a legal basis to grant an authorisation. Applications that do not clearly set out the legal basis on which the derogation is being requested will be deemed incomplete and returned to the applicant.

During the course of our assessment of a derogation application, it may be necessary to request additional information from the applicant. Where a derogation application is particularly complex, and in the case of certain specific authorisation grounds, it may require information from, or dialogue with, amongst others, other National Competent Authorities and / or the EU Commission.

Please note that failure to submit all the necessary information requested by the Central Bank will result in delays in applications being assessed and may result in your application being rejected.

Urgent derogation applications

Given the high volume of derogations requests that the Central Bank is required to assess, we will prioritise cases where the EU sanctions regulations require a derogation to be provided by a certain date or in circumstances where a derogation is urgent for other reasons.

Where the EU sanctions regulations require a derogation to be granted by a certain date, applicants must submit completed applications (applications which clearly set out the legal basis on which the derogation can be granted together with relevant supporting documentation) to the Central Bank at least three months prior to the relevant legislative deadline. Should a complete application not be submitted within this timeframe, it may not be possible for the Central Bank to complete the assessment of the derogation request in advance of the legislative deadline.  

In all cases where an applicant requires a derogation by a specific date, for whatever reason, applicants must ensure that completed applications are submitted well in advance, bearing in mind that the assessment of derogation applications can take several weeks and depending on the complexity, sometimes longer. Where an applicant requires a derogation on an urgent basis, applicants must clearly set out the basis for this urgency and provide any supporting evidence that is available.

It should not be assumed that an authorisation will be granted and you should not engage in any activities prohibited by financial sanctions until an appropriate authorisation from the Central Bank has been granted or you have been informed by the Central Bank that no authorisation is required.

How to make a derogation application to the Central Bank

Derogation applications should be made to the Central Bank by using the below Sanctions Derogation Application Form. Completed application forms, together with relevant information and documentation, should be submitted by email to: [email protected].

On submitting an application, you will receive an automated acknowledgement email to confirm receipt of your email.  If you do not receive an automated acknowledgement email please contact the Central Bank by telephone on +353 (0)1 224 6000 in order to confirm that your application has been received.

Given the high volume of applications, it is not possible for the Central Bank to provide regular updates or respond to requests for further information during the assessment process.

Once you have submitted your application, please do not contact us to seek updates or discuss the status of the application unless you are directly asked by the Central Bank to provide further information. Any material changes to the derogation application that impacts the Central Bank’s assessment of the derogation application should be sent to the Central Bank as soon as possible for consideration. 

Tips for making a derogation application under Council Regulation (EU) No 269/2014 (the “Regulation”)

• Applications under Article 6(1) of the Regulation must evidence a pre-existing contractual obligation and must confirm that the recipient of any such payment is not a designated person. In this regard, the following should be submitted, where applicable:
  • Evidence that the payment by the designated person listed in Annex I to the Regulation is due under a contract or agreement that was concluded by, or under an obligation that arose for the designated person concerned, before the date on which that designated person was included in Annex I;
  • Evidence that the funds or economic resources shall be used for a payment by a designated person; and
  • Evidence that by granting the authorisation, no funds or economic resources shall be made available, directly or indirectly, to or for the benefit of a designated person, or natural or legal persons, entities or bodies associated with them, as listed in Annex I.

• Applications under Article 4(1)(a) of the Regulation for the release of frozen funds that are necessary to satisfy the basic needs of a corporate entity must evidence compliance with the relevant EU Commission Guidance. In particular, see European Commission Opinion of 29 August 2019 on the application of derogations from the freezing of funds and from the prohibition of making funds and economic resources available to designated persons and entities. In this regard, it must be fully explained how the application relates to a basic need of the applicant.

• Applications under Article 4(1)(b) of the Regulation must explain how the professional fees or reimbursement of incurred expenses associated with the provision of legal services are reasonable.
• Applications under Article 4(1)(d) of the Regulation must explain why the relevant expenses should be considered “extraordinary” i.e. that the expenses are unexpected, unavoidable and not recurring.

Amending or varying an authorisation

Any requests for an amendment to, or variation of, an authorisation should be submitted to the Central Bank by email as soon as it is apparent that a change is required. Such an application should be accompanied by supporting documentation where appropriate. 

Applicants should be aware that any amendments or variations to an authorisation may take several weeks to process. Therefore, the Central Bank cannot guarantee that last-minute amendments or variations will be authorised within the requested timeframe.