On 20 March 2024, the European Union implemented a pivotal component of its 12th sanctions package against Russia. The EU's stringent sanctions strategy aims to obstruct Russia's access to certain sensitive goods and technologies by leveraging contractual obligations. Specifically, exporters of these goods to third countries will now be mandated to include a "no re-export to Russia" clause in their contracts. This regulatory change, embedded in Article 12g of Regulation (EU) No 833/2014, seeks to close loopholes in existing sanctions and prevent the indirect flow of strategic goods to Russia.
Legal framework and contractual obligations
Article 12g marks a significant shift in the EU's approach to sanction enforcement. This measure directly targets the phenomenon where goods, although initially exported to third countries, are subsequently redirected to Russia. The article stipulates that starting from contracts concluded on or after 19 December 2023, a clear prohibition on re-exporting to Russia must be explicitly included. This applies not only to new contracts but also to existing ones wherever practicable, thus broadening the scope of compliance required from EU exporters.
The "no re-export to Russia" clause must be drafted in such a way that it is legally enforceable, with defined penalties for breaches. This includes provisions for terminating the contract and possibly imposing financial penalties, which acts as a deterrent against non-compliance. The clause, by preventing the redirection of goods through third countries, is designed to ensure that sensitive technologies and materials do not enhance Russian capabilities, especially in areas critical to national security and defense.
Scope of affected goods and technologies
The types of goods and technologies covered by this new contractual requirement are specified in various annexes to the regulation. These include, but are not limited to:
Aerospace technologies (Annex XI): Items that could potentially be used in the manufacture or operation of aircraft and spacecraft.
Jet fuels and fuel additives (Annex XX): Key components in aviation operations, their availability and usage are critical in military and civil aviation contexts.
Firearms (Annex XXXV): Includes firearms and other weapons that could be used in conflict scenarios or for internal repression.
High priority products (Annex XL): This includes a diverse list of goods deemed sensitive due to their potential applications in various strategic sectors.
This detailed listing ensures that all relevant stakeholders are aware of the types of goods that require careful handling and strict compliance to avoid inadvertent support of sanctioned activities.
Enforcement and compliance challenges
Implementing article 12g poses significant legal and logistical challenges for EU exporters. They must navigate the complexities of international trade law, adjust their contract management processes, and ensure that all third-country buyers adhere to the new requirements. The EU has also set up mechanisms for monitoring compliance, requiring exporters to report any breaches of these provisions to national authorities. These authorities are then responsible for informing the European Commission, creating a network of information that supports the enforcement of the sanctions.
Guidance from the European Commission
In response to potential queries and to facilitate a smooth transition, the European Commission released an updated FAQ document on 22 February 2024. This document provides further clarification on the implementation of the "no re-export to Russia" clause and offers a template to ensure uniformity and ease of adoption. While the use of this template is recommended, it is not obligatory; exporters may adapt the wording to fit their contractual contexts, provided the core elements of the prohibition are preserved.
Recommendations for exporters
As the initial compliance deadline of 20 March 2024 has lapsed, it is crucial for exporters who entered into contracts after 18 December 2023 to amend their standard agreements to include a "no re-export to Russia" clause. This ensures adherence to the new regulations pertaining to the sale, supply, transfer, or export of restricted goods and technologies to third countries. For contracts established before 19 December 2023, there is a slightly extended timeframe available to make these necessary adjustments.
In operational terms, many exporters may opt to implement a separate "no re-export to Russia" declaration, which must be signed by third-country buyers before any transaction involving the specified goods and technologies can proceed. Once executed, these declarations should be integrated into the formal contract between the exporter and the buyer, solidifying the agreement's compliance with EU sanctions. This approach serves as a practical method to enforce the prohibition on re-exports to Russia and facilitates the modification of existing contracts, particularly for businesses dealing with a large volume of international contracts. These standalone declarations are beneficial not only for contractual enforcement but also for emphasizing the importance of compliance with the re-export ban to all parties involved.
