As part of the EU’s 12th package of sanctions against Russia, adopted on 19 December 2023 (see our previous blog post here), the EU introduced a requirement under Article 12g of Regulation 833/2014 which requires EU exporters to include wording in certain goods contracts prohibiting the re-export of the goods to Russia and providing for “adequate remedies” in the event of a breach, in order to combat the circumvention of EU export bans and more specifically the situation where goods exported to third countries are re-exported to Russia.
While there may be practical challenges in successfully introducing such a clause into a contract with a third country counterparty not bound by EU sanctions, EU businesses should be mindful that this will be a legal requirement for all in-scope contracts from the relevant effective date. By way of reminder, contracts concluded from 19 December 2023 onwards must contain the ‘no re-export to Russia’ clause as of 20 March 2024.
Template clause
On 22 February 2024, the EU published guidance on the Article 12g requirement. The guidance provides the following example of a clause which meets the requirements of Article 12g. This is intended as guidance only, exemplifying a clause which satisfies all the relevant requirements; parties are nevertheless free to decide on their own appropriate wording as long as the clause meets the requirements of Article 12g. Whilst this provides a helpful template, the clause should in any event be carefully reviewed within the context of the relevant governing law of the contract, should parties decide to use the example text below:
“(1) The [Importer/Buyer] shall not sell, export or re-export, directly or indirectly, to the Russian Federation or for use in the Russian Federation any goods supplied under or in connection with this Agreement that fall under the scope of Article 12g of Council Regulation (EU) No 833/2014.
(2) The [Importer/Buyer] shall undertake its best efforts to ensure that the purpose of paragraph (1) is not frustrated by any third parties further down the commercial chain, including by possible resellers.
(3) The [Importer/Buyer] shall set up and maintain an adequate monitoring mechanism to detect conduct by any third parties further down the commercial chain, including by possible resellers, that would frustrate the purpose of paragraph (1).
(4) Any violation of paragraphs (1), (2) or (3) shall constitute a material breach of an essential element of this Agreement, and the [Exporter/Seller] shall be entitled to seek appropriate remedies, including, but not limited to:
(i) termination of this Agreement; and
(ii) a penalty of [XX]% of the total value of this Agreement or price of the goods exported, whichever is higher.
(5) The [Importer/Buyer] shall immediately inform the [Exporter/Seller] about any problems in applying paragraphs (1), (2) or (3), including any relevant activities by third parties that could frustrate the purpose of paragraph (1). The [Importer/Buyer] shall make available to the [Exporter/Seller] information concerning compliance with the obligations under paragraph (1), (2) and (3) within two weeks of the simple request of such information.”
Timeframe
Contracts concluded from 19 December 2023 onwards: The “no Russia clause” must be included in all contracts concluded after the date Council Regulation (EU) 2023/2878 came into force – 19 December 2023 – from 20 March 2024.
Contracts concluded prior to 19 December 2023: Contracts that were already concluded when Council Regulation (EU) 2023/2878 came into force benefit from a one-year transition period until 19 December 2024, inclusive (or until the contracts’ expiry, whichever is earliest). All pre-existing contracts must therefore have a “no Russia clause” in place from 20 December 2024.
