How to protect yourself from government sanctions

The war between Russia and Ukraine triggered several sanctions proceedings by the ECB against individuals and companies that had a direct connection to the Russian market.

The planned financial sanctions indirectly affected several markets, including those related to the luxury industry. Many companies and professionals suffered significant losses, going to the detriment of their economic stability. The various supervisory authorities have undermined the most steadfast certainties.

If there are direct connections, in business, with Soviet companies, certain steps should be followed to avoid losses. When interpreting and managing contracts with Russian and Belarusian companies, it is crucial to understand whether there are any clauses that relate to international sanctions. In case they are, it is necessary to perform a deep analysis on the type of content they include (assumptions covered, burdens and consequences). Another check to be performed is on the right of withdrawal. Where it is present, a verification of the timing should be carried out.

It should be emphasized that even the more general force majeure clauses are normally applicable in the case of international trade sanctions, since as events generally unforeseeable and beyond the control of the parties, they make the execution of the contract completely or partially impossible. The pandemic and the war in Ukraine have thus highlighted the importance of assessing risks that cannot be easily predicted. The relevance of regulating such circumstances and their consequences explicitly when drafting contracts has emerged.

This can be done by including force majeure clauses, whether general or more specific, in contracts and regulating the consequences of events, such as changes in costs during contract performance, so that the consideration can be adjusted or renegotiated. In addition, it may be considered to include the possibility of withdrawal in the cases in question. Clauses that specifically regulate the consequences of any international sanctions on the contract are commonly known as " sanctions clauses." The latter permit the planning of multiple aspects such as, for example, suspension of performance, dissolution of the contractual obligation or the option to rescind the contract, but also the assumption of risks and consequential costs, payments, refunds, possible restitution and/or compensation.

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