Companies warned over Russia sanctions
22nd August, 2014
COMPANIES need to tread carefully to avoid falling foul of EU sanctions against Russia, a law firm has warned.
Commercial law experts at Ward Hadaway say that the full extent of EU sanctions against Russia in response to the situation in eastern Ukraine could catch some companies unaware.
And with Russia one of the so-called BRIC countries (Brazil, Russia, India and China) earmarked by observers for economic expansion, many businesses may have long-standing relationships, long-term projects or schemes in the pipeline which could be affected by the crackdown.
Russia warning – Colin Hewitt, Partner and Head of Commercial at Ward Hadaway.
Colin Hewitt, Partner and Head of Commercial at Ward Hadaway, said: “Most people will be aware of sanctions against the export or import of military and defence equipment and expertise to and from Russia following the escalation of the political situation in eastern Ukraine.
“However, the fact that these EU-wide sanctions also cover activities in a wide range of additional fields has been less well publicised and, as such, may have gone unnoticed by some businesses.
“For example, the latest Government guidance is that export licences are required for sending certain energy-related technology and equipment to Russia with licences unlikely to be granted for any projects involving deep water oil exploration and production, Arctic oil exploration and production, or shale oil projects in Russia.
“With licences also a prerequisite for providing technical assistance, brokering services, financing and financial assistance related to the sale, supply, transfer or export of these technologies to Russia or for use in Russia, it is clear that these restrictions have the potential to impact on a wide range of businesses which may not have previously been affected by export control issues.
“The North’s acknowledged strengths in the energy sector mean that the region is likely to be affected by the restrictions and businesses need to tread very carefully when it comes to balancing their need to fulfill contracts and make a living with the requirement to comply with the agreed sanctions.”
Recent Government guidance has reiterated the importance of UK companies keeping in line with the sanctions regime, which is enforced by HM Revenue & Customs and the Border Agency.
The unlicensed export of controlled goods is a criminal offence and the Government has warned that “serious and deliberate evasion” of those controls may lead to companies and their directors being prosecuted.
However, whilst the Government has issued new guidelines on how companies can balance contractual obligations with sanctions compliance, it has said that it cannot give specific advice on the precise scope of the sanctions and how they apply in individual cases, suggesting businesses needing legal advice should “make their own arrangements”.
Colin Hewitt, who is also a director of energy industry association NOF Energy, said: “Since the sanctions were introduced at the start of August, we have been providing legal advice to a number of clients on issues surrounding these restrictions and how they apply to their activities.
“It is not a straightforward situation and it is one which requires very careful consideration, not just in terms of ongoing projects and work but also when it comes to companies planning future expansion in what remains a sizeable overseas market.
“We will keep a close eye on the situation and on how changes on the ground in the Ukraine will affect the sanctions policy.”
As well as advising clients, Ward Hadaway is also playing an active role in providing information and guidance to exporting companies.
The firm is hosting a series of seminars organised by defence sector trade industry body NDI in the autumn addressing the issue of export controls.
The events, which take place on October 14, November 4 and December 2, will look at the export control regime for the UK, the US and key emerging markets respectively and will feature input from Richard Tauwhare, who formerly headed up the Arms Export Policy Department of the Foreign Office, promoting and controlling trade in defence, security and dual use goods, and has over 30 years’ experience of export control issues and promoting UK exports overseas.
Further details on the events are available from the NDI website.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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