Since 2022, the European Union (“EU”) and the United Kingdom (“UK”) have imposed sanctions against Russia including economic sanctions. Economic sanctions cover import and export restrictions on Russia. Export restrictions prohibit EU and UK entities from selling certain products to Russia. To prevent the circumvention of sanctions, since December 2023, the EU requires EU entities to use a ‘No Re-Export to Russia Clause’ in contracts when selling, supplying, transferring or exporting certain sensitive goods to a non-EU country (with the exception of partner countries). Similarly, on 7 January 2025, the UK government has published its so-called ‘No-Russia clause guidance’ that encourages (rather than requires) UK entities to use the ‘No-Russia Clause’ in certain contracts. This legal briefing provides an overview on these clauses and the level of due diligence expected to be conducted by exporters.
1. Which economic sanctions have the EU and the UK imposed on Russia?
Since 2022, the EU and the UK government have imposed a comprehensive sanctions scheme on Russia. These sanctions target individuals and organisations and additionally cover economic sanctions which aim to prevent certain goods from entering Russia. Following the introduction of economic sanctions, direct trade between the EU and the UK on the one hand and Russia on the other hand has fallen significantly.
As a component of due diligence best practice, following the implementation of sanctions, some EU and UK based businesses started to insert in their contracts a clause restricting buyers from re-exporting products in scope of the contract to Russia. However, this was (initially) not mandatory and in practice, EU and UK sanctioned goods still found their way to Russia despite the sanctions, mostly through increasingly indirect routes and complex supply chains.
2. What is the purpose of the EU’s ‘No Re-Export to Russia Clause’ and the UK’s ‘No-Russia Clause’?
With the aim to close existing loopholes and to prevent sanctions circumvention more effectively, in December 2023, the EU introduced various new legal instruments, amongst others, the so-called ‘No Re-Export to Russia Clause’ by way of Council Regulation (EU) No. 2023/2878 which amends Council Regulation (EU) No. 833/2014. The newly added Art. 12g of Council Regulation (EU) No. 833/2014 sets out the legal requirements to be considered in terms of the ‘No Re-Export to Russia Clause’.
Art. 12g requires operators selling, supplying, transferring or exporting certain sensitive goods to a non-EU country to include the ‘No Re-Export to Russia Clause’ in respective contracts. Exceptions only apply in relation to partner countries that have implemented equivalent sanctions and export bans on Russia. The EU believes that the legal requirement to include the ‘No Re-Export to Russia Clause’ for certain goods in export, sale, supply, transfer or similar contracts creates a deterrent effect on those non-EU operators that redirect sanctioned EU goods to Russia. To support EU businesses in dealing with the ‘No Re-Export to Russia Clause’ requirement, the EU’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union has published its guide ‘FAQs on sanctions against Russia and Belarus’ which was last updated on 18 December 2024 and includes a template that can be considered by EU operators when negotiating contracts. EU operators are free to choose another wording if the outcome fulfils all requirements set out in Art. 12g. Council Regulation (EU) No. 2024/1745 creates an exemption for Art. 12g in relation to public contracts entered into with a third country public authority or with an international organisation.
In June 2024, the EU adopted additional sanctions on Belarus and introduced by way of Art. 8g of Council Regulation (EU) No. 2024/1865 a ‘No Belarus Clause’ requirement which requires exporters under certain conditions to contractually prohibit re-exportation of certain goods to Belarus and re-exportation for use in Belarus.
On 7 January 2025, the UK government issued its ‘No-Russia clause guidance’. This guidance aims to support businesses involved in the export and provision of so-called Common High Priority Items and other items critical to Russian weapons systems and the country’s military development in their due diligence of export contracts. As opposed to the EU, the UK government does not mandate businesses to incorporate the ‘No-Russia Clause’ in their relevant contracts. Instead, the UK government only encourages businesses to do so and provides a template text which exporters can consider when setting up and negotiating respective contracts.
3. How exactly do the ‘No Re-Export to Russia Clause’ and the ‘No-Russia Clause’ work?
As per Art. 12g, EU exporters must include a ‘No Re-Export to Russia Clause’ which contractually prohibits re-exportation to Russia and re-exportation for use in Russia in contracts that involve any selling, supplying, transferring or exporting of specific types of sensitive goods to a third country. However, the obligation is not applicable in relation to goods destined to an EU member state or a partner country, which currently include Switzerland, the United States of America, Canada, Norway, Liechtenstein, Iceland, the UK, Japan, South Korea, Australia, and New Zealand.
As per Art. 12g, the obligation to include a ‘No Re-Export to Russia Clause’ is only applicable in relation to specific types of goods considered sensitive. This currently includes goods related to aviation, jet fuel, firearms and so-called Common High Priority Items that are listed in the relevant Annexes referred to in Art. 12g. It is important for businesses to carefully check the relevant lists as they cover a rather broad range of products. In cases of doubt, it is recommended to insert a ‘No Re-Export to Russia Clause’ into relevant contracts.
The EU regulations require the ‘No Re-Export to Russia Clause’ to include adequate remedies to be activated in case of a breach, for example, ceasing deliveries, contract suspension or contract termination as well as financial penalties to ensure the effectiveness of the clause as a deterrent. As per Art. 12g, exporters are further obliged to inform the competent authorities of the EU member state where they are resident or established as soon as they become aware of the breach or circumvention of the ‘No Re-Export to Russia Clause’.
The UK government’s guide includes a text template for the ‘No-Russia Clause’ similar to the wording used by the EU. Amongst others, the template includes an obligation on the importer or buyer not to sell, export or re-export to Russia or for use in Russia, directly or indirectly, any sanctioned goods and an additional obligation on the importer or buyer to undertake its best efforts to ensure that the clause is not frustrated by any third parties further down the commercial chain (including resellers).
4. Are businesses obliged to insert a ‘No Re-Export to Russia Clause’ or a ‘No-Russia Clause’ in their contracts?
As per Art. 12g, relevant contracts that were already concluded before 19 December 2023 (i.e. when Council Regulation (EU) No. 2023/2878 came into force) were initially subject to a one-year transition period until 19 December 2024 or until the expiry date of the contract, whichever is earliest. However, by way of Council Regulation (EU) No. 2024/1745, this deadline was later extended from 20 December 2024 to 1 January 2025. Contracts concluded on or after 19 December 2023 must contain a „No Re-export to Russia Clause“ as of 20 March 2024, provided that the relevant contract falls within the scope of Art. 12g.The EU’s ‘FAQs on sanctions against Russia and Belarus’ further iindicate that exporters’ contracts must comply with the obligation set out in Art. 12g before or at the latest at the time of the export, sale, supply or transfer of the relevant goods to a third country. EU exporters should not sell their products to any non-EU operator that is not willing to incorporate a ‘No Re-Export to Russia Clause’ in contracts falling under the scope of Art. 12g.
The EU’s ‘No Belarus Clause’ requirement applies only to new contracts concluded on or after 1 July 2024.
In contrast to the EU regulation, the UK guidelines do not require businesses to insert a ‘No-Russia Clause’ in their contracts. However, the UK guidance encourages businesses to use the clause, stressing that the inclusion of such clauses or other statements in export documentation could reduce the risk of a customer implicating a company in what could be seen as a sanction violation.
5. Conclusion & Outlook
The EU and the UK government started to impose economic sanctions on Russia in 2022 with the aim to prevent certain goods from entering Russia. As EU sanctioned goods still found their way to Russia, the EU decided in late 2023 to require EU operators to insert a ‘No Re-Export to Russia Clause’ into contracts that cover sensitive goods. Contrary to the EU, the UK government currently does not require businesses to incorporate a ‘No-Russia Clause’ in their contracts. However, the UK government encourages businesses to consider the clause when concluding relevant contracts and has issued a respective template text on 7 January 2025.
The EU and the UK government both point out that independently from the EU’s ‘No Re-Export to Russia Clause’ or the UK’s ‘No-Russia Clause’, businesses in the EU and the UK should continue to implement strong internal compliance processes in relation to sanctions which should include due diligence checks on counterparties, even in cases where the immediate destination of the relevant goods is not Russia but a third country. Businesses should carry out respective due diligence measures periodically to ensure sanctions compliance. They should consider as part of their assessment the specific risks resulting from the product as well as their business activity, their operational model and the final destination of the products (e.g. countries that continue to trade goods with Russia). The EU and the UK government also urge economic operators to remain vigilant against any attempts by third parties to involve them in sanctions evasion schemes.
Dr. Constantin Frank-Fahle, LL.M.
Founding Partner
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