In July we published an article reporting that Siemens had sued Technopromexport, a subsidiary of Russian state conglomerate Rostec, for breach of contract. Siemens, which had contracted with Technopromexport to provide power turbines to Russia, learned that the turbines in question had been directed to Crimea, breaching a contractual obligation not to violate international sanctions.
In response to Russia’s annexation of Crimea in 2014, all 28 EU Member States agreed to sanctions on Russia and the Crimea region. These have so far been renewed every six months. One of the measures prohibits exporting equipment used in energy sectors, such as power turbines, to Crimean companies or for use in Crimea. On 28 November, a Russian court refused to order the seizure of the power turbines, dismissing Siemens’ case. This decision highlights a problem with the enforcement of EU sanctions. If goods are delivered to a country that disagrees with the EU sanctions – such as Russia – and the goods are transferred from Russia to a prohibited region – such as Crimea – then it is unlikely that the Russian courts will be supportive of enforcing the sanctions. Therefore, regardless of the EU sanctioning Technopromexport for exporting the turbines to Crimea, only a Russian court has the authority to order the seizure of the turbines. In this case the court decided against ordering the seizure.
This case is a reminder of the risks present when trading with countries that disagree with EU trade restrictions. The courts of such countries are unlikely to be supportive of EU businesses’ efforts to adhere to EU prohibitions on circumventing EU trade restrictions. In light of this decision, EU businesses may become less willing to trade with Russian businesses for fear of appearing to facilitate the circumvention of EU trade restrictions.