Russia-Ukraine Disputes Taskforce: Risk of Criminal Liability

As the next part of our series of updates focusing on the key disputes and risk related issues arising from the conflict in Ukraine, we have highlighted specific instances where EU companies and executives may be exposed to risks of criminal liability.

(Our first update focusing on the effect of the conflict on contractual obligations is here). Whether you are directly affected by these risks, or have a counter party which is constrained by them, it is essential to navigate them effectively.

Criminal risks in Europe

Violations of sanctions adopted in relation to the conflict in Ukraine can result in criminal penalties for legal entities (mostly for companies incorporated or engaging in activities in the EU, UK, US), but also for any nationals of and individuals present in such states. In addition to this territorial/personal nexus, US sanctions have an even broader application (e.g. prohibiting US dollar transactions with sanctions targets).

Companies and their executives should also be aware of the risks of being found complicit to the commission of a crime:

• companies should evaluate whether they or their affiliates have any relationships with Russian entities or in Russia / Ukraine which could be characterized as direct or indirect complicity in unlawful conduct (e.g. breach of sanctions, endangering of employees or financing unlawful activities); and
• where an executive, a corporate body or a manager is or should have been aware of unlawful conduct and has the power, including though a majority shareholding or reporting lines, to prevent or put an end to such offence, a failure to do so (i.e. negligence) may put them and/or the company at risk of being an accomplice to the offence.

Criminal risks in Russia

A draft federal law “On amendments to article 201 of the Criminal Code of the Russian Federation”, which would criminalize compliance with foreign sanctions, was submitted to the Russian State Duma for consideration in April 2022 and remains pending in the legislative process:

• the draft law proposes amendments to the Russian Criminal Code so that acts performed in order to comply with a decision of a foreign state or international organization to impose sanctions against the Russian Federation shall be a criminal offence.
• the scope of what would constitute a crime is not entirely clear at this point and the law is the subject of ongoing discussions but it should be kept in mind when planning termination/suspension of Russian operations.

We have created a dedicated taskforce of specialists that aims to help our clients through this challenging time as the number of business and legal issues arising from the conflict continues to increase. Please do let our taskforce leaders James Brady and/or Delphine Michot know if there’s something you want to discuss. You can also contact our taskforce directly at RussiaUkraineTaskforce@cgsh.com.