The impact of sanctions on existing contracts is an acute legal question with every expansion of EU or OFAC sanctions. At Musch Legal, we have reviewed hundreds of contracts since 2022 regarding the impact of sanctions on Russia. The core legal question: does performance remain possible, and if so, how? Sanctions have direct effect — violation is punishable under the Sanctions Act 1977 and the Economic Offences Act. At the same time, Dutch law often provides a defense through Article 6:75 of the Dutch Civil Code (force majeure).
What is the legal problem? (What changes due to new sanctions?)
New sanctions can prohibit delivery, payment, or service provision from one moment to the next. For existing contracts, three questions arise: does performance remain possible, what are the consequences, and who bears the damages? Without a sanctions clause, one must fall back on Article 6:75 of the Dutch Civil Code (force majeure). Non-compliance with sanctions is punishable under the Economic Offences Act with heavy fines and imprisonment. Waiting is not an option.
What does the law say? (Which rules apply regarding sanction impact?)
EU sanctions via Regulation 833/2014 (Russia), 269/2014 (assets), and 765/2006 (Belarus) apply directly in all EU Member States. The Sanctions Act 1977 provides for Dutch enforcement under the Economic Offences Act. Article 6:75 of the Dutch Civil Code regulates force majeure (no attribution in the event of an impediment beyond one's control). Article 6:265 of the Dutch Civil Code regulates dissolution. Article 6:262 of the Dutch Civil Code regulates suspension. Under Article 79 of the CISG, this is comparable to the Vienna Sales Convention. For anti-circumvention under Article 12 of Regulation 833/2014.
For 'no-Russia' clause under the 11th sanctions package (Article 12g), mandatory export contract clause.
Scenario
Legal action
Point of attention
Delivery prohibited
Force majeure Art. 6:75 Dutch Civil Code
Immediate notification to counterparty
Payment prohibited
Suspension + force majeure
Customer freeze funds, not embezzlement
Delivery still possible but risky
Compliance screening
Sanctions change frequently
Customer on SDN list
Immediate termination + notification
Fine for continuation
Anti-circumvention required
Contract clause + monitoring
Mandatory under Art 12g Regulation 833/2014
Scenario
Legal action
Point of attention
Delivery prohibited
Force majeure Art 6:75 BW
Immediate notification to counterparty
Payment prohibited
Suspension + force majeure
Freeze customer funds, do not embezzle
Delivery still possible but risky
Compliance screening
Sanctions change frequently
Customer on SDN list
Immediate stop + notification
Fine for continuation
Anti-circumvention required
Contract clause + monitoring
Mandatory under Art 12g Regulation 833/2014
What risks do companies face? (What threatens in the event of a sanctions violation?)
Criminal prosecution under the Economic Offences Act with fines of up to millions and imprisonment for directors. Freezing of assets under Regulation 269/2014. Exclusion from SWIFT and international payments. Loss of banking relationship and insurance coverage. Reputational damage in the event of public enforcement. Civil claims by customers in the event of forced delivery or suspension without basis. Personal liability for directors.
Practical example from our practice (How did Musch Legal save a Russia contract?)
Musch Legal represented a Dutch supplier with a multi-year contract with a Russian client that did not contain a sanctions clause. Under the fifth sanctions package of February 2022, delivery was prohibited under Regulation 833/2014. The client demanded performance or damages of 1.8 million euros. We successfully defended the case under Article 6:75 of the Dutch Civil Code (force majeure due to statutory impossibility). Important procedural step: immediate written notification to the client within 48 hours, formal suspension under Article 6:262 of the Dutch Civil Code, prepared force majeure file. Defense accepted by the judge.
What can you do? (What steps do you take regarding sanction impact?)
Step 1: Assess the impact of new sanctions per contract (assessment per Russia package within 14 days). Step 2: Immediate written notification to the counterparty regarding the impossibility of performance. Step 3: Formal suspension under Article 6:262 of the Dutch Civil Code or termination under Article 6:265 of the Dutch Civil Code with justification. Step 4: Document force majeure file (regulations, screening result, legal advice). Step 5: Sanction screening for future relationships. Engage Musch Legal for a sanctions impact assessment.
Sanctions clauses in international agreements