The EU-Russia embargo and the new EU embargo against Belarus oblige EU companies to require their customers in third countries not to supply or transfer certain goods, i.e. goods, software or technology and intellectual property to Russian customers. The aim is: The contract that is concluded with partners (including subsidiaries) in these countries must also be based on the law of these countries. By simply agreeing to EU law, there is at least a risk that such clauses will become ineffective. It is even possible that the agreement could trigger local prohibition standards, so-called blocking statutes. We asked local lawyers, specialized in international trade law, how such a request would be viewed by India, China and Turkey, which are repeatedly cited as having less stringent restrictions on trade with Russia. With Consulegis, we have a large network of commercial lawyers worldwide.
What applies in India, Turkey and China? These are the answers:
Our Indian colleague Janak Bathiya, Partner at Bathiya Legal, referred to blocking law in India. „However, as a general principle being followed by courts in India, a contract cannot be against public policy of India. If it is against public policy of India then the same would not be enforceable by courts in India.“ It must be ensured in the formulation that it is a purely contractual regulation and not an agreement of another public law so that any clauses are effective. (www.bathiyalegal.com).
Our Turkish colleague Cengiz Söylemezoglu from Istanbul explained in response to our enquiry that Turkey does have legal export restrictions against Russia. They are just not as broadly defined as the EU. „Turkey is prioritising its national interests. Due to the strategic location it has tried to position itself as an important intermediary and transit country for trade and energy flows.“ (www.unitedks.com)
From China and Hong Kong Frank Szeto, Robertsons Solicitors, Hong Kong, points out „China recently enacted an „Anti- Foreign Sanctions Law (AFSL)“ to provide counter-measures against sanctions imposed by foreign governments that interfere with China’s sovereignty, national security or internal affairs or which have the effect of discriminatory restrictive measures against Chinese persons. The recent EU sanctions imposed upon 19 Chinese companies (24 June 2024 – which include companies located in Hong Kong) could be subject to AFSL counter-measures.“ (www.robertsonshk.com)
It follows from all this that clauses on the recognition of EU law abroad must be precisely measured in terms of contract law. They are intended to oblige contractual partners in other countries to a higher level of embargo rules than exists there. In India and China in particular, this can be seen as a breach of local public law, which renders the clause invalid under Indian law and is even expressly prohibited under Chinese law. It seems to me that in all three countries it will be difficult to agree on EU law as such. It will be very difficult to agree that the parties to such a contract are obliged to comply with certain articles of the EU embargo or even an entire EU embargo regulation. Instead, it is advisable to formulate the obligations precisely, for example by agreeing to exclude the onward delivery to Russia of goods supplied from the EU or even the goods delivered by the contract partner, which should equally apply to the non-transfer of intellectual property and technology. It may also make sense to agree a reservation of mandatory local public law. This should be included in contracts with daughter firms or other subsidiaries in those countries. Please be aware that EU Persons are bound to EU Law even abroad.
It is advisable to have any clauses checked legally so as not to risk their invalidity or – in the case of China – even legal violations through the agreement or implementation of such clauses by personnel in China.
Please do not hesitate to contact us. Our Consulegis colleagues will of course also be happy to assist you.
Verfasser: Rechtsanwalt Dr. Ulrich Möllenhoff
