UK businesses directly trading or in supply chains with companies in Russia and Belarus need to understand how the fast-changing situation on sanctions will affect their businesses.
In recent days we have seen that working with Russia and Belarus isn’t all about the law or even sanctions. It is also about how companies balance the strength of public opinion about contracting with Russian companies and operating in Russia with the impact of withdrawal decisions on their UK and global employees, contracting partners and consumers.
For many businesses details of sanction updates have been tricky to find. Here we’ve compiled a list of considerations and where to find guidance to help you stay updated with the latest developments.
The latest sanction information
The start point for information on sanctions is the UK government produced guidance found at UK sanctions relating to Russia.
Further information can be found at:
- Russia sanctions: guidance
- Trade restrictions on exports
- Import controls
- Office of Financial Sanctions Implementation
The current key legislation and regulations are:
- Sanctions and Anti-Money Laundering Act 2018
- The Russia (Sanctions) (EU Exit) Regulations 2019 as amended
UK government sanctions helpline
As the situation is developing by the day, or hour, the UK government is advising UK companies with questions about the operation of sanctions against Russia and the impact of the sanctions on UK businesses operating in any sector, or with business operations in Ukraine or Russia, to contact the Export Support Service. The export support team telephone number is 0300 303 8955.
To keep up to date you can subscribe to the Office of Financial Sanctions Implementation’s e-alerts.
Have you done your due diligence?
Do you know who you are in business with? It is a sensible question as when you entered a contract, or started negotiations, the current sanctions against Russia and Belarus were not in place. Care must be taken to ensure you know your commercial partner/client so you are not inadvertently in breach of the sanctions.
Due diligence isn’t straight forward as the sanctions are wide enough to apply to entities that are owned or controlled by sanctions targets. In addition, if you operate from more than one country you need to ensure that due diligence checks take into account any differences in UK, EU or US sanctions and targets and are kept up to date given the fast-moving pace of sanction changes.
What do your commercial contracts say?
Whether or not the goods or services you are importing or exporting to Russia or Belarus fall within the latest UK sanctions, it is vital that UK businesses with contracts with individuals and organisations in the sanctioned countries review their commercial contracts. That is because whilst the contracted goods or services may not currently fall within the sanctions, the likelihood is that the contract will be affected by developments and, as a matter of principle, you may not want your company associated with individuals or countries that are subject to UK and international sanctions.
There is also the ripple effect and the need to review contracts that are not with sanctioned individuals or countries but may need adjustment because of supply chain or other factors.
A contract review may result in:
- Termination of contract through force majeure provisions
- Termination on notice
- The variation or suspension of the contract
- Breach of contract considerations
- The requirement for a licence to continue to trade in accordance with the sanctions
- Payment concerns given the financial sanctions and the difficulties of transferring funds into and out of the sanctioned countries.
These contracts should not be looked at in isolation because if the operation of one contract with a Russian business is to be suspended the question to be asked is how will this impact on the supply chain contracts, sale and distribution agreements and the deployment of your workforce, whether they are UK based or located in Russia or the EU.
If your company conducted a Brexit related contract review programme then you will have been through a similar exercise before but this is more urgent and potentially more far reaching.
Sanctions and the risk of not getting it right
Failure to comply with sanctions will have significant legal, financial, practical, and reputational implications for UK companies. Non-compliance could result in convictions and fines but, in most cases, failure to comply with sanctions will be through lack of exercise of due diligence or failing to keep up with the latest sanction developments.
In this age of social media, the reality is that if a company is seen to have flouted or circumvented the sanctions the financial and brand consequences could have a devastating impact on a business for years to come as many won't forgive or forget a perceived failure to stand together. That’s why commercial solicitors emphasise that sanctions are not just about the letter of the law but their spirit.