"No Russia Clause" - Tighter requirements for effective sanctions compliance organisation as of March 2024

As part of the EU's 12^th sanctions package against Russia from 18 December 2023, the focus was once again placed on measures to combat the evasion of sanctions. Companies are now subject to additional compliance obligations when doing business with customers in third countries. We provide you with a brief overview below:

The "No Russia Clause"

In particular, the new measures include an obligation for companies to include a contractual clause in export transactions with customers in third countries that prohibits the buyers of certain goods from re-exporting them to Russia ("No Russia Clause"). According to Article 12g (1) of Regulation (EU) 833/2014, EU companies must contractually prohibit the onward delivery of certain critical goods to Russia or for use in Russia as part of exports to third countries as of 20 March 2024. This affects goods listed in Annexes XI (goods and technology for use in aircraft and spacecraft), XX (jet fuel and fuel additives), XXXV (firearms), XL (processors and control circuits) and the list in Annex I of Regulation (EU) 258/2012 (firearms and ammunition).

Compliance with the clause must also be ensured, i.e. in the event of a breach of the contractual obligation, appropriate contractual penalties or special cancellation rights must be implemented, for example. In addition, any breach by a contractual partner must be reported to the competent authority (BAFA in Germany).

Deliveries to partner countries listed in Annex VIII, including the USA, Japan, UK, South Korea, Australia, Canada, New Zealand, Norway and Switzerland, are exempt from the above obligations in accordance with Article 12g (1) of Regulation (EU) 833/2014. In addition, Article 12g (1) of Regulation (EU) 833/2014 provides for a legacy contract rule: contracts concluded before 19 December 2023 may be fulfilled until 20 December 2024.

What does my company need to do now?

• Review of the relevant annexes of goods: Do the products fall within the scope of the new measures?
• Inclusion of a No Russia Clause in supply contracts: For all exports of the affected goods to third countries, the No Russia Clause and provisions for the event of a violation must be included or already-existing sanctions clauses must be supplemented.
• Compliance check within the group structure: If necessary, the No Russia Clause should be implemented in the supply contracts of all (including foreign) group companies if there is a risk of accountability.
• Further compliance measures/training: The inclusion of the clause alone does not exempt the company from maintaining and implementing further compliance measures. The EU Commission's recommended benchmark is a risk-based approach. In particular, we recommend regular training for sales staff.

We are experts in sanctions law and can advise you on all relevant issues. We are also happy to organise training courses and audits on sanctions compliance for you at your company. Get in touch with us!