Sanctions and Your Contracts: What to Know
Sanctions do not end a contract with a Russian party by themselves. Whether you may stop performing, suspend payment or walk away depends on the governing law, the wording of the force majeure clause and the specific restriction that applies to you. Under Russian law, a party claiming force majeure has to prove that the sanctions made performance impossible, not merely more expensive.
Both sides are also bound by their own jurisdictions' rules, so a step that is lawful in one country may breach the other's.
Force Majeure Under Russian Law
The Civil Code (GK RF) relieves a business from liability when performance is prevented by extraordinary circumstances that could not be avoided. Russian courts read this narrowly.
Supreme Court guidance says that sanctions are not automatically force majeure. The party must show a direct link between the restriction and its failure to perform, and that no alternative way to perform existed. Sanctions already in force when the contract was signed usually do not qualify.
Hardship and Changed Circumstances
A separate rule of the Civil Code lets a court amend or terminate a contract after a material change of circumstances. The threshold is high: the change must be unforeseeable and so serious that the parties would not have signed on these terms.
Courts rarely grant this relief. It works best when the contract itself contains a hardship clause with a renegotiation mechanism.
Payment Channels and Currency Rules
Many disputes arise from payments that are blocked by correspondent banks rather than refused by the debtor. Check whether the contract says when payment is considered made: on debit from the payer's account or on receipt.
Russia has its own counter-measures. Some transactions with parties from states Russia treats as unfriendly require special approval, and certain payments go through dedicated accounts.
Compliance Review of Existing Agreements
| Clause to review | Why it matters now |
|---|---|
| Force majeure definition | Whether sanctions are named expressly |
| Payment and currency | Who bears the risk of blocked transfers |
| Governing law and forum | Where a dispute will actually be heard |
| Termination rights | Whether sanctions allow exit without penalty |
| Sanctions warranty | Which party must confirm its status |
Screen counterparties and their owners against current lists before each new shipment or payment.
Restructuring and Exit Options
Parties often prefer to amend a contract rather than litigate. Options include changing the currency, the delivery route, the paying bank or the schedule.
When exit is the goal, a mutual termination agreement settles outstanding sums and waives claims. Draft it so that it is valid under both parties' laws.
Where Sanctions Disputes Are Heard
Russian procedural law gives Russian arbitrazh courts exclusive jurisdiction over disputes involving sanctioned persons, even when the contract names a foreign court or arbitration. A Russian party may also ask a Russian court to bar the other side from pursuing foreign proceedings.
Foreign creditors should expect that a claim may end up in Moscow regardless of the forum clause.
Reviewing Your Position With Elena Petrova
Elena Petrova, a Moscow advocate, reviews contracts affected by sanctions and represents clients in the resulting arbitrazh disputes. She explains the Russian side of the risk in English.
The main channel of communication with the lawyer is email: lawyer@lawyer-moscow.com.