Contributors
Foreign Secretary, Liz Truss announced that the UK is "inflicting devastating economic pain on Putin and Russia following its unprovoked and illegal invasion of Ukraine".
The UK sanctions on Russia are set out in the Russia (Sanctions) (EU Exit) Regulations 2019 (the Regulations) as amended (most recently amended on 8 March). The Regulations were brought in to ensure the post-Brexit application of EU sanctions (imposed on Russia following the invasion of Crimea in 2014) but have been significantly widened since they were initially implemented. The Regulations impose a number of prohibitions and requirements, including (among other things):
- Russian state-owned and key strategic private companies are banned from raising finance on the UK financial markets
- assets (including funds and non-monetary assets such as property and vehicles) of specified Russian individuals in the UK must be frozen
- specified Russian individuals are refused leave to enter or remain in the UK
- Russian ships are banned from UK ports and may be subject to detention
- Russian aircraft are banned from UK airspace and from landing in the UK
- the import, export, supply, making available or delivery of military goods, dual-use goods and technology, aviation and space goods and technology, critical industry goods and technology (covering specified items in sectors including electronics, computers, information security, telecommunications, sensors and lasers, navigation and avionics, marine and aerospace) and energy related goods is prohibited
- the provision of infrastructure related goods or services to Crimea is prohibited.
We anticipate that further sanctions will be imposed as the situation in Ukraine develops and that the Regulations will be subject to relatively regular amendments for the foreseeable future.
Who do the sanctions apply to?
The prohibitions and requirements imposed by the Regulations apply in the UK and in relation to the conduct of all UK incorporated companies wherever they do business (including branches of UK companies operating overseas).
What are the consequences of non-compliance?
The Regulations make it a criminal offence to contravene (or to enable or facilitate a contravention of, or to circumvent) any of the prohibitions in the Regulations. Breaches carry up to 10 years’ imprisonment or a fine (or both).
What businesses need to do – implications for your contractual arrangements
It is important that businesses ensure that their activities are compliant with the sanctions against Russia, with regular consideration of the extent of the sanctions. The Department for International Trade advises checking guidance it has published (Russia sanctions: guidance - GOV.UK (www.gov.uk)) to understand the potential impact on your business and action you may need to take.
You will need to audit your existing commercial relationships to determine the impact of the sanctions. If you have any existing contracts with Russian companies or individuals, or for the supply of purchase of goods that either originate in Russia, or are destined for use in Russia, then you will need to consider:
- whether you are doing business with a sanctioned individual (or any entities that they own or control)
- whether you are doing business in a restricted sector or with a restricted region
- whether supply or distribution chains will be impacted by sanctions (particularly in light of the prohibition on Russian ships entering UK ports)
- whether the sanctions affect the ability of either party to fulfil their obligations (including obligations to make payment).
You may need to consider whether the sanctions justify non-performance of contractual obligations and whether the contract includes a force majeure clause that is drafted broadly enough to excuse performance (and if so, on what terms) or any other relevant termination provisions.
If entering into new agreements that pose a risk from a sanctions perspective, you should ensure that the contract includes adequate protections in the event that relevant sanctions are actually imposed. In particular it would be important that you include appropriate payment and termination provisions and that the governing law and jurisdiction are outside of Russia.
How we can help
Don't hesitate to get in touch if you have any queries on how the sanctions affect your contractual arrangements.
We can advise on the implications of the sanctions on existing contracts. We can also advise on and draft appropriate terms for inclusion in future contracts.
Click here to learn more about the impact of the Russia/Ukraine conflict on global business.
