Sanctions against Russia pose many questions

It is not as easy as just stopping supply.

Igor VrankaIgor Vranka (Source: Courtesy by Soukeník & Štrpka)

The state, either using its own resources or European Union finances, should establish a contact point to help businesses navigate sanctions against Russia, says Igor Vranka of the Soukeník – Štrpka law firm in eastern Slovakia.

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A war has been raging on the borders of Slovakia for many months. Have you felt its effects in your work?

The current tragedy in Ukraine has brought with it situations we have not faced before. Initially, it brought an influx of "new" people and, of course, we all helped as best we could. Even within our law firm, we tried to respond to all inquiries from people who had to leave their homes overnight and needed legal help. As part of our pro bono projects, we provided help to people who turned to us. At the same time, we also provided our personnel capacities to non-governmental organisations. Today, however, there is little demand for such activities.

What problems did the war bring for companies and entrepreneurs you work with?

The war in Ukraine has also affected the business environment, and I don’t mean just the energy crisis but also sanctions that were imposed against Russia. .

If it were up to me, I would ban all trade with Russia. However, entrepreneurs are currently facing two basic problems – depending on whether their activities with Russian companies are on the sanctions list or not.

If they are not on the sanctions list, they face a moral dilemma - whether to supply anything to Russian subjects at all. If they decide to deliver, they have to look for possible transport. If they decide not to deliver, then questions arise regarding possible liability.

The decision to supply or not to supply to Russia is not about me simply stopping supplying and the matter is then settled. The goods are produced, you have made input investments, you have unfinished production that could be in the hundreds of thousands to millions of euros, so it’s a difficult decision. The availability of various components is another current problem. There are many questions, but few answers.

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What usually happens if a contract cannot be fulfilled due to sanctions? In such a situation, issues of contractual penalties probably come into play.

There is what is officially known as the institution of impossibility of performance, which is used when a person cannot fulfill their obligations for some reason. In such an event, they should inform the contractual partner that they cannot fulfill the contract and try to terminate the contract - ideally by agreement. However, they have to return any advance payments. They cannot hand over unfinished production and tell the client they are keeping the deposit.

Another question arises here: how to return the advance payment to the Russian client if the Russian’s bank is on the sanction list? In that case, they have to ask the contractual partner to designate another bank that will process the payment.

Banks operating in Slovakia are now giving warnings to their clients if a recipient is a bank on the sanctions list. However, they approach such payments individually. For example, clients can be asked for additional information - say why they want to send such a payment.

What happens if an agreement has not been reached with a Russian partner during the early termination of the contract and an entrepreneur does not want or cannot continue to fulfill the contract due to sanctions?

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