Fresh US sanctions against Russian businesses and individuals are posing new challenges for corporate counsel working in companies affected.
Energy sector businesses are scrambling to obtain export licences ahead of the sanctions regime hardening and corporate governance has come under urgent review.
The effect of US Treasury and Commerce Department sanctions are immediate upon publication, and the export of items, or the provision of much credit, require a licence.
Peter Lichtenbaum, Washington-based partner at Covington & Burling, told the Gazette that based on past experience, ‘both agencies have shown they are willing to be helpful to businesses’, but that it was now urgent that ‘companies make their arguments and submit their requests for guidance or licences’.
The Commerce Department sanctions in particular restrict the export of items used in oil and gas exploration or production from ‘deepwater’, ‘Arctic offshore’ or ‘shale’ projects where the US-made component is greater than 25%.
That is a fairly straightforward calculation for ‘hardware’, Lichtenbaum notes, but may involve a harder ‘judgement call’ for software, technology and data exports.
Exports already en route to Russia are caught by the restrictions, and also require a licence. Companies are also reviewing share ownership and governance arrangements.
Earlier this week, Pirelli issued a statement on the ‘presence’ of Russian government-owned oil firm Rosneft in its share capital, and the place of Rosneft’s chairman on its board. Based on legal advice, it believed that neither fact put the company in breach of the sanctions rules.
Retaliatory import sanctions announced by Russia’s president Vladimir Putin (pictured) relate to agricultural imports from the US and EU. Businesses affected by the agricultural sanctions may be helped by Russia’s recent admission to the World Trade Organisation.
‘It is unclear that Russia is justified in imposing these sanctions under its WTO obligations,’ Lichtenbaum concluded. ‘The WTO allows for a “national security” exemption, but it is questionable as to whether broad restrictions on food and agriculture imports meet that justification.’