Pursuant to the amendments to the European Union (EU) Regulation No. 833/2014, concerning restrictive measures in view of Russia’s actions destabilising the situation in Ukraine (the Regulation) adopted on 18 December 2023, as of 20 March 2024 exporters of various categories of goods are obliged to include in their purchase or supply contracts a clause which prohibits a recipient/importer from a third country from further re-exporting (transferring) these goods to Russia or for use in Russia.

The aim of these amendments is to combat the circumvention of EU sectoral sanctions, in cases where goods that are subject to sanctions are exported from the EU to third countries (in particular, to countries neighbouring Russia), but are later re-exported to Russia. In practice, many EU exporters already stipulate a re-export prohibition in their contracts; however, as a result of the above-mentioned amendments, this good practice by exporters has turned into a legal obligation.

Products and countries covered by the new rules

The restrictions apply to all exporters who, for example, export brake linings or discs, ball bearings or other bearings, antennas or reflectors, or various electrical goods such as integrated circuits, diodes, transistors, plugs and sockets, etc. The complete list of goods can be found in Annexes XI, XX, XXXV and XL of the Regulation, as well as in Annex I of the EU Regulation No. 258/2012.

The exporters of the above-mentioned goods must prohibit the recipient of the goods from further re-exporting the goods to Russia. In terms of geography, the exporter (an EU company) has this obligation if it exports the goods outside the EU, with the exception of the partner countries listed in Annex VIII of the Regulation, which are: the USA, Japan, the United Kingdom, South Korea, Australia, Canada, New Zealand, Norway and Switzerland.

The deadline for implementation of the prohibition and the transition period

All contracts concluded from 20 March 2024  (inclusive) must provide for prohibition on the re-export of the aforementioned goods to Russia. Contracts entered into before 19 December 2023 are subject to a one-year transition period until 19 December 2024 or until the date on which the specific contract expires, whichever is earlier. Contracts concluded after 19 December 2023 must include this prohibition by 20 March 2024.

The term “contract” in this context means a relationship between parties in which the parties have agreed on all the components of the transaction necessary for it to be valid, such as price, quantity, date of delivery, etc.

Other important terms

It is the exporter’s responsibility to ensure that the contract in question also contains adequate remedies for violation of this prohibition. In practice, this is likely to most often take the form of the exporter’s right to unilaterally terminate the contract and/or apply a contractual penalty, but the parties may also choose other means of legal remedies. In such a case, the contractual penalty must be appropriate to the nature of the violation. This means that it cannot be merely symbolic, as it must be effective enough to deter non-EU companies from violating this prohibition.

The exporter is obliged to report to the competent authority of the relevant member state as soon as it becomes aware of a violation of this prohibition by a third-country business partner.

The sanctions regulations do not provide exact wording for this prohibition on re-exporting goods to Russia, and exporters have discretion to choose the wording of the prohibition that is most appropriate to the contractual relationship with the relevant recipient. The main requirement is that this wording in its essence meets the requirements of Article 12g of the Regulation. In addition, the European Commission recommends stipulating in the contract that this prohibition is an essential element of the contract. If a new contract for the supply of goods is concluded, the prohibition may be included by introducing a relevant clause to it, while if the contractual relationship has already been established, the parties can elect to amend the existing contract or conclude a new contract with the relevant clause inserted.

If you would like to receive further advice on this or other sanctions-related matters, our regional Sanctions Compliance team will be ready to assist you.