It has been a week today since Russia invaded Ukraine. In response to this invasion, much of the world, including the European Union, imposed far-reaching sanctions on Russia. This leads to uncertainty and questions, including within the AGF sector. What about the import and export of fruits and vegetables to Russia? Will I still get payment from Russian parties? How to deal with logistical challenges?
This article briefly discusses EU sanction measures and their legal implications for fruit and vegetable trade.
Russian aircraft are prohibited from flying, landing or taking off in the airspace and territory of the European Union. At the same time, Russia closed its own airspace. In particular, this has a major impact on trade in grain, rye, corn and sunflower oil, as Russia is a major exporter of these products.
So while there is no formal import and export ban on AGF products from and to Russia, in practice it is severely hampered. Land transport is very difficult because the situation in Ukraine is too dangerous and there are too few truck drivers. Shipping is also affected. For example, the United Kingdom has already decided to ban Russian ships. Major shipping companies are also shutting down transportation of goods to and from Russia.
A bright spot is that customs gives priority to perishable goods during export controls. Business association Evofenedex is also pushing for alternatives to transport goods to and from Russia. In any case, it is not prohibited to import and export AGF products through alternative routes.
Seven Russian banks have been excluded from the SWIFT international payment system and no further business may be conducted with them. As a result, it is much more difficult for Russian parties to transfer money to parties based in EU member states.
What can you do?
- Suspend your obligations: depending on the contractual arrangements made, a supplier can suspend its obligation to deliver if its (Russian) counterparty does not pay or has good reason to believe that it will not. Conversely, when importing products from Russia, it is advisable to check whether the (Russian) other party can actually fulfill its delivery obligation. If not, under circumstances the importer’s payment obligation may be suspended.
- Dissolution of contract: there may also be reason to want to get rid of a contract with a Russian party. This may be because there is a shortcoming (default), but also because people no longer want to be associated with this Russian party. In the former case, the law offers broader options than in the latter. If the other party defaults, then the contract can be rescinded. If not, then termination of the contract for unforeseen circumstances could be invoked. This possibility has not yet been crystallized in case law, but it seems defensible under circumstances to take the position that one no longer wants to be associated with a Russian counterparty (which includes the social position and nature of the cooperation).
The situation in Ukraine is changing rapidly. This also brings challenges within the AGF sector. If you have questions about how to deal with the EU sanction measures imposed or the execution of a contract, the AGF specialists at Wille Donker lawyers will be happy to provide you with advice.