Sanctions risk and compliance

What is happening

A counterparty from a third country offers a supply deal, but its ownership chain includes someone recently designated. The bank is asking questions, and the sales team is pushing to sign.

A company with a foreign shareholder wants to pay dividends or sell a stake, only to discover it needs a permit from the Government Commission, with no clear timetable or conditions.

A foreign supplier has unilaterally stopped performing, citing sanctions, is holding on to the prepayment and insists that any dispute be heard by arbitration abroad.

What the law says

• Russian countermeasures are introduced by presidential decrees, including on the basis of Federal Law No. 281-FZ of 30 December 2006 "On Special Economic Measures and Coercive Measures"; they restrict certain transactions with parties from unfriendly states.
• Transactions in shares, payments and a number of other operations involving parties from unfriendly states require a permit from the Government Commission for Control over Foreign Investment, unless a general exemption applies.
• Foreign sanctions regimes (the US, EU, UK and others) follow their own rules: blocking lists, sectoral and goods-based restrictions, ownership and control rules that extend restrictions to subsidiaries, and the risk of secondary sanctions.
• Disputes involving sanctioned persons may be heard by a Russian commercial court under Article 248.1 of the Commercial Procedure Code (APK), including where there is a foreign court or arbitration clause, if sanctions prevent it from being performed.
• Russian banks and foreign correspondent banks carry out their own sanctions screening: a payment may be held or returned even where Russian law does not prohibit the transaction.

What we do

• We screen counterparties and their ownership chains against the main sanctions lists and Russian registers.
• We assess the specific transaction: the regimes that apply, the risk of secondary sanctions, and restrictions on goods, routes and payments.
• We draft sanctions clauses for contracts: representations, rights to suspend and terminate, and allocation of risk.
• We develop an internal sanctions compliance policy and counterparty screening procedure.
• We prepare applications for a Government Commission permit and see the process through.
• We represent the company in sanctions-related disputes, including where the case is moved to a Russian commercial court.
• We train sales and finance teams to spot signs of sanctions risk.

What we will need from you

• A description of the transaction or business model: goods, countries, routes and payment currency.
• Whatever the company knows about its counterparties and their ultimate beneficial owners.
• The draft or existing contract.
• Details of the company's own ownership structure and any foreign shareholders.
• Any correspondence with banks about refused or delayed payments.