EU Sanctions: Commercial and Contract Risks

December 15, 2015

Sanctions programmes are established and developed as a political response to international relations developments; yet they impose significant obligations on commercial entities in terms of compliance. They may interfere with the performance of pre-existing contracts; and the broadly-framed and ambiguous nature of some sanctions restrictions is such that firms often struggle to place workable limits on their sanctions risks when entering into contracts. This article looks at the steps that firms can take from a contractual perspective to better manage their exposure to EU sanctions developments, and the protections that exist at law.

Some sanctions restrictions are imprecise in scope. The consequent ambiguity may be unavoidable (in the EU, this is commonly due to different linguistic traditions across Member States, or a compromise wording chosen to reach EU-level agreement) but it can have benefits for policy-makers: open-ended wording makes it harder for sanctions targets to side-step a measure, and ambiguity may persuade risk-averse firms to take a cautious approach to potentially-prohibited activities. All of this helps policy-makers to achieve the political objectives of the sanctions, but passes considerable risk onto firms. Firms need to plan ahead to mitigate that risk.

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