Georgia occupies a legally distinctive position in the international sanctions landscape: it sits adjacent to both Russia and the EU's sphere of regulatory influence, operates under its own Association Agreement commitments, and has become a transit jurisdiction of heightened scrutiny for EU, US and UK regulators assessing potential sanctions circumvention. Companies with Georgian counterparties, subsidiaries or banking relationships face growing obligations around sanctions screening, asset freeze compliance and export-control due diligence – obligations that carry serious cross-border consequences when mismanaged. Ferraz & Whitmore advises international businesses and investors on structuring their Georgian operations to remain fully compliant while managing commercial risk.
Why Sanctions Compliance Has Become Urgent for Georgian Operations
Georgia's geographic and commercial proximity to Russia means that regulators in Brussels, London and Washington increasingly examine Georgian corporate and banking channels when investigating suspected circumvention of restrictive measures. The EU's 21st sanctions package, adopted on 23 July 2026 under Regulation (EU) 2026/1848, contains dedicated anti-circumvention provisions targeting third-country operators – including Georgian entities – that facilitate the reexport of controlled goods or provide services to sanctioned Russian persons.
The 20th package, adopted on 23 April 2026, introduced a further layer of complexity: Council Regulation (EU) 2026/506 established anti-suit protection for EU persons facing litigation brought by sanctioned Russian parties in Russian courts under Articles 248.1 and 248.2 of the Russian Arbitrazh Procedure Code (APC). Those APC provisions grant Russian courts exclusive jurisdiction over sanctions-related disputes and allow Russian courts to issue injunctions with financial penalties of up to the value of the claim. For any company with a Georgian nexus that is also party to EU-governed contracts, this creates a direct collision of legal systems that requires careful advance planning.
Switzerland has adopted a parallel protective measure under its own Art. 29d, confirming that the concern is not exclusively an EU matter. Georgian counsel and international advisers therefore need to coordinate across at least three regulatory frameworks when structuring commercial relationships touching Russia.
A further technical development requiring immediate attention is the ban on the digital rouble (RUBx), which entered into force under EU rules on 24 May 2026. Any payment architecture or treasury function that could be construed as involving RUBx instruments must be audited and, where necessary, restructured.
If your business has Georgian counterparties, transit arrangements or correspondent banking relationships that may intersect with EU sanctions, we encourage you to contact our team for a preliminary assessment. Write to info@ferrazwhitmore.com or visit our contacts page.
Core Legal Instruments and Georgian Domestic Framework
Georgia has not formally adopted the EU or UN sanctions regimes as domestic law in the same way EU Member States have; however, Georgian banks, payment systems and entities transacting with EU or US counterparts are contractually and regulatorily bound to apply their counterparts' sanctions rules. In practice, this means that Georgian companies operating in international trade must conduct sanctions screening against EU consolidated lists, the US OFAC Specially Designated Nationals list and equivalent UK designations – even in the absence of a directly applicable Georgian statutory mandate.
The Public Registry of Georgia plays a central role in due-diligence processes: beneficial ownership verification, share-transfer tracking and collateral registration all pass through or are recorded by the Public Registry, making it an essential tool for pre-transaction screening. Lawyers practising Georgian law can obtain and verify Public Registry records as part of a structured compliance review.
Key instruments and obligations to keep in view include:
- EU Regulation (EU) 2026/1848 (21st package, 23 July 2026): strengthened anti-circumvention duties for operators in third countries who are subsidiaries of EU entities or transact with EU persons.
- Council Regulation (EU) 2026/506 (20th package, 23 April 2026): anti-suit protection allowing EU persons to seek remedies in EU courts against sanctioned Russian parties that litigate in Russia in breach of jurisdiction or arbitration clauses.
- Russian APC Arts. 248.1 and 248.2: provisions used by Russian parties to claim exclusive domestic jurisdiction and to seek injunctions against foreign arbitration, with penalty exposure up to the value of the underlying claim. Russian Constitutional Court Ruling No. 999-O (29 April 2025) clarified that application of these provisions is not automatic and requires evidence of real obstacles to access to justice; the Supreme Court thematic review No. 8/2026 (June 2026) consolidated the current practice. Companies with existing Russian arbitration clauses must assess their exposure.
- Digital rouble / RUBx ban: operative under EU rules from 24 May 2026, with implications for any payment mechanism that could be re-characterised as involving this instrument.
- EU export controls: Georgia is a priority jurisdiction in EU enforcement guidance on dual-use goods; the best-efforts obligation for EU exporters to verify end-use now extends explicitly to Georgian intermediaries in certain product categories.
Typical Compliance Procedures and Timelines
A structured sanctions-compliance programme for a Georgian operation typically involves four sequential workstreams. The timelines below reflect standard transactional practice; complex group structures or ongoing enforcement inquiries will require longer engagements.
1. Initial gap analysis (weeks 1–3): Review of existing contractual documentation, payment flows, banking relationships and corporate ownership structure against applicable sanctions lists and regulatory guidance. The Public Registry search forms part of this workstream.
2. Screening infrastructure and policy drafting (weeks 3–6): Implementation or audit of automated sanctions-screening tools calibrated to EU, OFAC and UK lists; drafting or updating internal compliance policies covering customer due diligence, transaction monitoring and escalation procedures.
3. Contractual remediation (weeks 4–8): Review and, where necessary, amendment of commercial agreements to incorporate sanctions warranties, termination-for-sanctions clauses and dispute-resolution provisions that protect against exposure under Russian APC Arts. 248.1 and 248.2. This workstream intersects directly with the anti-suit protections introduced by Regulation (EU) 2026/506 and Switzerland's Art. 29d.
4. Ongoing monitoring and reporting: Sanctions lists are updated on a rolling basis; new packages (such as the 21st, adopted 23 July 2026) frequently add entities and expand the scope of restrictions. A sustainable compliance programme requires a designated review cycle – at minimum quarterly – and a clear escalation path when a potential match is identified.
Where a Georgian entity has an EU parent or EU-resident beneficial owner, the best-efforts obligation under EU sanctions law means that ignorance of a subsidiary's activity is not a defence. Group-level compliance programmes must therefore capture Georgian operations explicitly.
Cross-Border Dimension: Georgia, Armenia and Beyond
Georgia is not the only Caucasus jurisdiction under sanctions scrutiny. Regulators frequently assess Georgian and Armenian corridors together when investigating transit of controlled goods or financial flows. Our team advises clients on structuring multi-jurisdictional arrangements that address both jurisdictions in a coordinated framework.
For clients whose operations span both countries, our sanctions and trade compliance practice in Armenia offers a coherent regional approach. Similarly, clients managing broader corporate law matters in Georgia will find that sanctions obligations interact closely with corporate governance, share-transfer restrictions and director duties – areas covered under our corporate law practice in Georgia.
The risk of parallel proceedings – EU courts protecting EU persons, Russian courts issuing injunctions against them – is particularly acute for companies operating across post-Soviet corridors. Our analysis of comparable dynamics in a different but instructive context is available in our deep-dive on sanctions circumvention risk in Hong Kong, which examines how third-country legal systems interact with major sanctions regimes.
Common Pitfalls to Avoid
- Assuming Georgian incorporation provides a regulatory buffer. EU and US regulators apply economic substance and control tests; a Georgian holding company controlled by EU nationals is typically treated as an EU person for sanctions purposes.
- Overlooking the digital rouble prohibition. Payment systems that were compliant before 24 May 2026 may no longer be if they involve RUBx-denominated instruments or settlement mechanisms linked to Russian state digital infrastructure.
- Failing to analyse dispute-resolution clauses before a dispute arises. Once a Russian counterparty files under APC Art. 248.1, the costs and strategic options for the non-Russian party narrow significantly. Proactive clause review is far more cost-effective than reactive litigation management.
- Incomplete beneficial-ownership mapping. The Public Registry in Georgia provides formal ownership data, but complex nominee structures may require supplementary investigation. Errors in beneficial-ownership mapping undermine the entire screening programme.
- Static compliance policies. The pace of sanctions legislative change in 2025–2026 – two EU packages in roughly three months – means that policies drafted before April 2026 may already be materially incomplete.
- Underestimating the best-efforts obligation. The obligation to take reasonable steps to prevent circumvention applies to EU exporters dealing with Georgian intermediaries; this is increasingly tested in enforcement proceedings as well as in transactional due diligence by acquirers.
Self-Assessment Checklist for Companies Active in Georgia
The following checklist is intended as a starting point for internal review. It does not constitute legal advice and should be supplemented by a qualified assessment of your specific situation.
- Have all Georgian counterparties been screened against current EU, OFAC and UK consolidated lists within the last 90 days?
- Does the group compliance policy explicitly address Georgian subsidiaries and agents?
- Have commercial contracts with Russian counterparties been reviewed for exposure under APC Arts. 248.1 and 248.2?
- Are dispute-resolution clauses structured to benefit from the anti-suit protections in Regulation (EU) 2026/506?
- Has the payment infrastructure been audited for any link to RUBx instruments following the ban effective 24 May 2026?
- Is there a documented escalation procedure for potential sanctions matches, including a clear line to external legal counsel?
- Does the compliance programme include a scheduled review triggered by new EU or UN sanctions packages?
- Has beneficial ownership been verified through the Public Registry and, where necessary, through supplementary due diligence?
If one or more items on this checklist cannot be answered with confidence, a structured compliance review may be warranted. Our team can assist with gap analysis, policy drafting and contractual remediation tailored to Georgia's legal environment. Reach us at info@ferrazwhitmore.com or through our contacts page.
How Ferraz & Whitmore Works on Georgian Sanctions Mandates
Our approach combines international sanctions law expertise with on-the-ground knowledge of Georgian corporate and commercial law. Mandates typically begin with a scoping call to identify the regulatory frameworks applicable to the client's specific fact pattern – which may include EU sanctions, US OFAC rules, UK designations and Georgian banking regulations simultaneously.
We work on both transactional and advisory instructions: pre-deal due diligence on Georgian targets, restructuring of existing supply chains and payment arrangements, representation in regulatory correspondence, and training for compliance officers and boards operating in or through Georgia.
Where matters have a multi-jurisdictional dimension – for example, a Georgian intermediary in a chain that also touches Armenia, the EU and a post-Soviet financial centre – we coordinate across our regional desks to provide a unified assessment rather than isolated country-by-country opinions. This is particularly important given the interlocking nature of EU asset freeze provisions, export controls and the anti-circumvention framework.
To discuss a specific mandate or to request a preliminary assessment of your Georgian operations, please contact us at info@ferrazwhitmore.com or visit our contacts page to submit an enquiry form.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.