The Higher Regional Court of Frankfurt am Main addressed the foreign trade law provisions of the Russia embargo in a decision (decision of 12 June 2025 – 26 Sch 12/24), which also concerned the question of the enforceability of an arbitral award.
I. Facts of the case
A Russian company (applicant) entered into a contract with a German company (respondent) in October 2022 for the supply of polymer alloys. The purchase price was paid in advance and delivery was to take place within 21 working days.
At the same time, the respondent entered into a business agreement “V” with company Q in Kazakhstan and undertook to supply products manufactured by W, while the respondent knew that the purchase price would be paid directly to it by the applicant. Shortly thereafter, the respondent received a credit to its business account from the applicant. The bank reported the incoming payment to the investigative authorities on suspicion of money laundering. The Frankfurt am Main Public Prosecutor’s Office then filed a criminal complaint against the respondent on suspicion of a violation of Section 18 (1) No. 1(a) AWG in conjunction with Article 3k (1) of Regulation (EU) No. 833/2014 in conjunction with Annex XXIII to Regulation (EU) No. 833/2014. An asset freeze was also ordered in respect of a claim amounting to EUR 261,000, and the respondent’s account was garnished.
A penalty order was issued against the respondent’s managing director, imposing a fine of 100 daily rates for violating a prohibition on sales under the Russia embargo, and an order was issued for the confiscation of the value of the proceeds obtained in the amount of EUR 261,015.92. The ordered goods were subsequently no longer delivered to the applicant. As the respondent did not refund the purchase price paid in advance, the applicant asserted its purported repayment claim before the International Commercial Arbitration Court in Moscow. The court awarded repayment plus a contractual penalty and reimbursement of costs. The applicant then applied in Germany for a declaration that the arbitral award was enforceable.
II. The decision
The court held that the application for a declaration of enforceability was admissible but unfounded.
In the view of the Higher Regional Court of Frankfurt am Main, the application was contrary to the ordre public, which must be taken into account ex officio pursuant to Section 1059 (2) (b) ZPO. For the sake of clarity, the detailed reasoning will not be addressed here, as the focus below is on the provisions of foreign trade law.
In the court’s view, the amount claimed back constituted the purchase price for polymer alloys that the respondent was to supply to the applicant in Russia via a company based in Kazakhstan. These goods fell under the goods classified under customs code 3809 and covered by Annex XXIII to Regulation (EU) No. 833/2014.
The sale of these products for use in Russia was prohibited under Article 3k of Regulation (EU) No. 833/2014 and was therefore subject to criminal penalties pursuant to Section 18 (1) No. 1a AWG. The prohibition expressly also extended to indirect deliveries where the products were intended for use in Russia.
In the court’s view, it was irrelevant whether, at the time the purchase contract was concluded or the advance payment was made, the applicant had actual knowledge or was negligently unaware that the conclusion of the contract violated embargo provisions. The potentially absent culpability could be relevant to the criminal liability of the applicant’s decision-makers under Section 18 AWG, but this did not affect the fact that the purchase contract as such objectively fell within the scope of Article 3k of Regulation (EU) No. 833/2014.
The repayment of an advance payment made under a purchase contract sanctioned pursuant to Article 3k of Regulation (EU) No. 833/2014 was itself subject to the prohibition on satisfying claims under Article 11 (1) (b) of Regulation (EU) No. 833/2014, as this also covered the repayment of advance payments made under a purchase contract affected by sanctions. The wording of Article 11 (1) of Regulation (EU) No. 833/2014 was deliberately broad and expressly extended to “claims for damages and similar claims, such as claims for compensation or claims under guarantees”. The list was not exhaustive, but merely illustrative. According to the court, a claim for repayment of an advance payment constituted a “similar claim” within the meaning of the provision if and insofar as it was connected with a purchase contract subject to sanctions. In its view, it was consistent with the purpose and objective of the Regulation to prevent any transfer of funds to Russian persons, entities and bodies that was connected with a contract subject to sanctions.
Nor did anything to the contrary follow from the fact that the Federal Ministry for Economic Affairs and Energy (BMWE), under “Questions and Answers on Russia Sanctions” on its website, had stated under Question 51 until 13 December 2022 that the repayment of an advance payment did not violate the prohibition on satisfying claims under Article 11 of Regulation (EU) No. 833/2014, since the BMWE had already marked this position as “under revision” as of 14 December 2022 and had meanwhile indicated that repayment of an advance payment was prohibited (FAQ International Relations – Questions and Answers on Russia Sanctions, FAQ No. 51, available at https://www.bmwk.de/Redaktion/DE/FAQ/Sanktionen-Russland/faq-russland-sanktionen.html – status as of 02 June 2025). Moreover, these statements had no binding effect on the court in the proceedings.
In the proceedings, the issue in the court’s view also concerned the repayment of an advance payment received before sanctions had been imposed. Article 3k of Regulation (EU) No. 833/2014 and the provisions applicable here in Annex XXIII had already been introduced on 8 April 2022 by Regulation (EU) 2022/576 as part of the fifth sanctions package. The advance payment made by the applicant was not made until after the sanctions had been imposed, in October 2022, and therefore would in any event not have been covered by the interim information previously issued by the BMWE.
The applicant was also unsuccessful in arguing that the court was precluded from examining the violation of sanctions, since, in the court’s view, recognition and enforcement of the arbitral award would lead to a result that was manifestly incompatible with fundamental principles of German law because it would violate a provision governing the foundations of the state or economic system or stand in intolerable conflict with German notions of justice (with reference to its decision of 29 February 2024 – 26 Sch 12/23 and the decision of the Federal Court of Justice of 6 October 2016 – I ZB 13/15). According to the court, this was to be assumed in the case of a sanctions violation subject to criminal penalties.
Nor did the applicant’s reference to restitution under the law of unjust enrichment lead to a different assessment, since enforcement of the repayment claim established in the arbitral award conflicted with the legislative assessment expressed in Section 817 sentence 1 BGB, according to which restitution under the law of unjust enrichment for a contract violating a statutory prohibition is generally excluded where the party making the performance is likewise culpable of violating the law. In view of the objectively existing violation of Article 3k of Regulation (EU) No. 833/2014, this was to be assumed irrespective of whether the applicant had knowledge of the violation.
The applicant’s further argument that it had assumed that the respondent would obtain the necessary authorisations was likewise unsuccessful. The applicant had not substantiated whether and why the contract falling under Article 3k of Regulation (EU) No. 833/2014 would exceptionally have been eligible for authorisation, nor was this apparent to the court in view of the type of goods ordered.
Even the reference to the possibility of authorisation subsequently provided for in Article 11 (4) of Regulation (EU) No. 833/2014 did not lead the court to a different assessment. Although, under that provision, the satisfaction of a claim referred to in Article 11 (1) of Regulation (EU) No. 833/2014 could be eligible for authorisation on the basis of a specific case-by-case assessment, this was contingent on the satisfaction of the claim being strictly necessary for the withdrawal of investments from Russia or the winding-up of business activities in Russia, according to the court. It could not infer this from the applicant’s submissions.
The applicant’s final argument, namely that the sanctions violated higher-ranking law and were therefore invalid, was likewise unsuccessful. According to the court, the sanctions imposed by the European Union constituted a response under international law to Russia’s violation of the territorial integrity of Ukraine and were permissible pursuant to Article 215 TFEU.
The court therefore rejected the application.
III. Commentary
Decisions on this issue are rare; however, questions relating to the Russia embargo are increasingly reaching the courts, which are required to address them.
The present case concerns the recurring problem of the repayment of advance payments that have not been refunded, where no goods have been delivered and a sanctions violation has occurred. Articles 3k and 11 of Regulation (EU) No. 833/2014 were relevant here. Article 3k of Regulation (EU) No. 833/2014 concerned the prohibition on supplying listed goods (here: polymer alloys) to Russia, including indirectly. The violation is subject to criminal penalties under Section 18 (1) No. 1a AWG.
Article 11 (1) (b) of Regulation (EU) No. 833/2014 concerned the prohibition on satisfying claims of Russian persons in connection with sanctioned contracts. According to the decision discussed here, this also includes claims for repayment of advance payments, since repayment would effectively circumvent the embargo and enable a prohibited flow of capital to Russia.
The statements concerning the BMWE’s FAQs were interesting, as the Ministry took the position in its FAQs until 13 December 2022 that repayments were permissible, but subsequently changed its position, which was also apparent to the court from the designation as “under revision”. In addition, the FAQs had no binding effect on the court in the proceedings. Accordingly, such FAQs must be studied very carefully, particularly where statements are currently being revised.
