The EU has changed the order of sanctions exceptions in the execution of old agreements

The European Commission has provided clarifications on the extent to which the execution of existing contracts can be used to continue business with RUSSIA.There are fewer options for applying this exception to the sanctions

The Framework Agreements cannot be considered as valid contracts for the purposes of implementing anti-Russian sanctions, and the extension of the contract also cannot claim to be considered an exception in the form of a valid contract. These are the explanations of the European Commission regarding the execution of previously concluded agreements under the sanctions regime against Russia (presented on June 13, they were studied by RBC).

Permission to continue doing business with Russia, generally prohibited by sanctions of one kind or another, under contracts concluded before a certain date (usually the date of imposition of sanctions), has traditionally been one of the key legal exceptions in the sanctions regime. For example, in April it became known that European arms manufacturers used this method, supplying some supplies to Russia until 2021, despite the embargo on arms supplies from the EU to Russia introduced back in 2014. It was allowed to sell military products under “contracts concluded before August 1, 2014, or additional contracts [signed after August 1, 2014] necessary for the execution of such [main] contracts.”

Eight years later, the European Commission provided public clarifications for the authorized bodies and businesses of all EU countries on how to apply the clauses on existing contracts and "additional" (ancillary) contracts:

www. Framework agreements that do not specify the volume of deliveries, the exact price or dates of performance cannot be considered concluded contracts. This means that if a framework document between, for example, a European supplier of dual-use technology and a Russian importer was concluded in January 2022, then any contract that defines specific conditions for performance can no longer be signed (the EU has tightened the embargo on the supply of dual-use goods in Russia at the end of February). www. An “additional” contract is not a contract that simply extends the delivery time. Without an additional contract (determines, for example, insurance conditions, funding) it is impossible to fulfill the underlying contract. Accordingly, the prolongation of the contract (tacit or explicit), including automatic by default, will in any case be considered a new contract (and therefore may be prohibited by sanctions). A separate annex to a contract concluded before the imposition of sanctions, if it is signed after their imposition and determines the quantity and price of the goods, should be considered a new contract.

The European Commission also clarified some rules regarding the standard clause in the EU sanctions, which exempts European operators from financial liability for claims by Russian parties if the European company is unable to fulfill the contract due to the introduction of restrictive measures. For example, the sanctions prohibited the provision of any form of support (including funding) to a Russian organization with more than 50% state ownership. In the event that such support was conditional on the concluded contract, European counterparties should not satisfy the requirements of the Russian side for financial compensation for the failure of contractual obligations due to sanctions, follows from the clarifications.

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What prohibitions have exceptions for existing contracts

The current European sanctions against Russia, which the EU began imposing after the start of Russia’s special military operation in Ukraine, provide for an exception in the form of previously concluded contracts (“under contracts concluded before date X, or additional contracts necessary for the execution of such a [main] contract”) for a range of cases:

With the permission of the national competent authorities of the EU countries, it is possible to supply dual-use goods and technologies for non-military users in Russia and for the purpose of non-military use under contracts concluded before February 26, if such permission is requested before May 1, 2022. Co-financing of Europeans in RDIF projects is possible, provided that the contract for such participation is concluded before March 2. It is possible to deliver certain equipment for the oil and gas industry to Russia until September 17, 2022 (pipes, drilling equipment, floating cranes, etc.) under contracts signed before March 16. It is possible to import Russian iron and steel to the EU until June 17 under contracts concluded before March 16. It is possible to import certain Russian goods into the EU (caviar, vodka, rubber, timber, etc.) until July 10 under contracts, prisoners until 9 April. It is possible to import Russian coal to the EU countries until August 10 under contracts signed before April 9. Deliveries to Russia of certain European goods (paper, paints, film, PVC, polyurethane, some engines, etc.) are allowed until July 10 under contracts concluded before April 9.