On March, 2021 the US Department of Commerce has imposed sanctions on Russian suppliers of medical devices and equipment due to suspicion of developing chemical weapons1.
9 Russian companies were included in sanction list2:
- Chimmed Group;
- Analit Products;
- Intertech Instruments;
- Pharmcontract GC;
- Rau Farm;
Apart from Russian organizations in the list there are three companies from Germany and one company from Switzerland.
Companies subject to US sanctions are engaged in supply and maintenance of various analytical instruments and other equipment, including chromatographs, mass spectrometers, etc.
In particular, Chimmed Group sells chemical reagents and equipment for laboratories. Femteco specializes in supply of high-tech equipment and consumables for chemical analysis and spectrometry, and closely cooperates with the RosatomCorporation, the structures of the State Drug Control Service and the Ministry of Internal Affairs3. Labinvest and Interlab deliver laboratory equipment and consumables, provide for consultations of specialists, beginning of start-ups and service attendance of laboratory equipment4.
Since March 18, 2021 the list of sanctions against Russian companies is expanding, in particular5:
- The United States will refuse to export goods related to national security to Russia;
- The validity of previously issued licenses for maintenance and replacement of parts and equipment, as well as for use of technologies and software for goods intended for Russia, will be suspended;
Additionally, the State Department has included Russia to the list of countries with which the export and import of weapons is prohibited.
The measures imposed on Russian companies consist of restricting cooperation of American companies with organizations from the sanctions list. Currently, in order to export, re-export and transfer a number of US goods to companies named in the sanctions list, it is necessary to obtain a license.
The issuance of licenses for companies under sanctions, as noted on the official website of the US Department of Commerce, will be carried out with the "presumption of refusal”. The "presumption of refusal" means that when considering the application of American companies to conduct transactions with a company from the sanctions list, the refusal to issue such a license will be prevail.
Because of the imposed sanctions, companies included in the sanctions list and American companies that supply equipment to companies under sanctions will be primarily under risk.
However, it should be noted that for Russian and foreign companies located in the territory of the Russian Federation, interaction with companies from the sanctions list also entails certain risks.
Under American law, interaction with companies on the sanctions list entails the following risks:
1. The risk of falling under sanctions in the case of purchasing equipment from American companies for subsequent resale to companies on the sanctions list
As stated in section 235 of the Countering America's Adversaries Through Sanctions Act, which regulates the imposition of sanctions against foreign companies in the United States, any transfer of ownership of goods under the jurisdiction of the United States, in the interests of a company on the sanctions list, serves as a basis for the imposition of sanctions against organizations engaged in such operations.
2. The risk of a check of transactions with a company on the sanctions list that are settled in foreign currency
In accordance with paragraph 8 of section 235 of the Law "On Countering America's Adversaries"6, transactions involving non-cash payments in foreign currency with companies from the sanctions list will be verified by the US Department of Commerce to identify possible violations.
Under Russian law and court practice, there is a risk of non-performance of obligations within the transactions between Russian companies and their counterparties from the sanctions list. In accordance with court practice, the imposition of sanctions against the counterparty is not a ground for termination of the contract7. An affected party may apply to the court for termination of the contract, but only if there is a sanction clause in the contract, which is confirmed by the Supreme Court's Ruling8.
According to the State Department of Commerce, the measures taken against Russia will ensure that US goods will not be used in activities that threaten the national security and foreign policy interests of the United States.
Despite the fact that the introduction of sanctions will not directly affect the interaction between Russian companies and companies on the sanctions list, Russian counterparties should be extremely careful when conducting transactions in foreign currency, as well as when selling American equipment to these companies in connection with the checks of these transactions by the US Department of Commerce and the risk of companies being included in the sanctions list. In addition, when concluding contracts with companies from the sanctions list, it is necessary to include a sanctions clause in the contracts in case the counterparty is unable to fulfill its obligations due to imposed sanctions.
7Resolution of the AC of the North Caucasus District No. A53-3447/2018 dated 13.09.2018
8Ruling of the Supreme Court of the Russian Federation No. 301-ES16-18586 dated May 23, 2017