The UK is “inflicting devastating economic pain on Putin and Russia” as a result of its unprovoked and illegal invasion of Ukraine, according to Foreign Secretary, Liz Truss.

The UK’s Russia sanctions are detailed in the Russia (Sanctions) (EU Exit) Regulations 2019 (the Regulations) as amended, most recently on 8 March. The Regulations were established to allow the EU’s sanctions on Russia (implemented following the 2014 Crimean Peninsula annexation) to be applied after Brexit. Since their introduction, the Regulations have been significantly broadened. The Regulations include a number of restrictions and requirements, including (but not limited):

  • The Russian Federation’s state-owned and key strategic private firms are prohibited from raising capital on the UK financial market.
  • The assets (including cash and non-financial assets such as property and cars) of particular Russian nationals in the United Kingdom must be frozen.
  • The UK Border Agency has turned down numerous requests from Russian citizens to enter or remain in the country.
  • Russian ships are prohibited from entering ports in the United Kingdom and may be held for inspection.
  • Russian aircraft are not permitted to fly into or land in the United Kingdom.
  • It is also illegal to import, export, supply, make available, or deliver military goods, dual-use goods and technology, aviation and space products and technology, critical industry products and technology (cover of specific items in industries including electronics, computers, information security, telecommunications, sensors and lasers, navigation and avionics), as well as energy-related products.
  • Additionally, the supply of infrastructure-related products or services to Crimea is prohibited.

Given the strained economic situation in Ukraine, we believe that additional sanctions will be imposed as events in Ukraine develop and that the Regulations will continue to be revised on a regular basis.

Who are they aimed at?

The Regulations contain a number of restrictions and obligations that apply to all UK incorporated firms, wherever they conduct business (including branches of UK businesses operating outside the country).

What are the consequences of not following the rules?

The Regulations provide that it is a criminal offense to violate (or to enable or facilitate a contravention of, or to circumvent) any of the proscriptions in the Regulations. Breaches result in up to ten years’ imprisonment or a fine (or both) if they are intentional.

What businesses must do in order to remain competitive – the effects of your contract agreements

It is critical that firms stay in compliance with the Russian sanctions to prevent serious penalties. With continuous monitoring of the extent of the sanctions, businesses should be sure their actions are compliant. The Department for International Trade advises reading its guidance on Russia sanctions (Russia Sanctions: Guidance – GOV.UK (www.gov.uk)) to see how.

To assess the impact of the sanctions, you’ll need to audit your current business relationships. You’ll need to consider:

  • Whether you’re doing business with a legitimate individual (or any companies they control or own)
  • Whether you’re selling goods in a restricted market or to a restricted region
  • Staff at the law firm advised that it was critical to establish a good legal foundation for any issues that arise, since they may lead to complicated corporate matters.
  • If a company fails to comply with an order but believes that the sanctions do not prevent it from doing so (including payment obligations).

You may need to decide if the penalties are sufficient compensation for missed obligations and whether the contract contains a force majeure clause that is broad enough to justify performance (and, if so, on what terms) or any other relevant termination provisions.

If you’re signing new contracts that may be affected by sanctions, make sure the agreement has adequate protections in place if those sanctions are actually implemented. In particular, it would be critical that you include pertinent payment and termination provisions as well as that the law and location of jurisdiction are outside of Russia.

How we can assist you

If you have any queries relating to how the sanctions will impact your commercial contracts, please do not hesitate to contact us.

We can assess the repercussions of the sanctions on existing contracts. We can also assist with and draft suitable language for future contracts.