Violating Russia sanctions: consequences for your business and contracts

Violating Russia sanctions is a criminal offence in the Netherlands. Breaches of the EU restrictive measures are economic offences under the Sanctiewet 1977 read with the Wet op de economische delicten, and an intentional breach carries a maximum of six years' imprisonment for the individuals involved as well as a fine for the company. Just as important for most businesses, a sanction does not only create a risk of prosecution: it changes the contracts you already have. Performance can become prohibited overnight, payments can be blocked, and the counterparty can lose the right to claim anything at all.

This article sets out what the Russia package actually prohibits, how the ownership and control test works, and what happens to a contract that is already running when a counterparty or a product becomes sanctioned. For the enforcement side we have a separate article on the criminal enforcement of international sanctions, and for building the internal controls that keep you out of trouble, see our guidance on sanctions compliance for businesses trading with Russia, Iran and China.

What the Russia sanctions package actually contains

Two Council regulations do most of the work, and they operate differently.

Regulation (EU) No 269/2014 is the listing regulation. It names individuals and entities whose funds and economic resources are frozen, and it prohibits making funds or economic resources available to them, directly or indirectly. It is personal: the question is who you are dealing with.

Regulation (EU) No 833/2014 is the sectoral regulation. It bans categories of activity regardless of who the counterparty is: exports of dual-use goods, advanced technology, machinery and industrial inputs; imports of oil, coal, steel, gold and a growing list of other products; a range of financial transactions; and the provision of specified services to the Russian government or to entities established in Russia, including accounting, auditing, tax advice, business and management consultancy, public relations, IT and, subject to defined exceptions, legal advisory services. It is transactional: the question is what you are doing.

Both are directly applicable in the Netherlands. There is no Dutch implementing act to consult for the prohibitions themselves; the Sanctiewet 1977 supplies the enforcement, the licensing structure and the criminal liability, while the substance comes straight from Brussels and changes with every package.

The packages, and why the version matters

The restrictive measures have been extended in successive packages since February 2022, each amending the two regulations rather than replacing them. The twenty-first package was adopted on 23 July 2026 and entered into force the following day, extending the divestment and wind-down deadlines for several categories to the end of 2027 and adding further trade and financial restrictions.

The practical consequence is that a consolidated text is a snapshot, not the law. Screening a counterparty against a list downloaded three months ago is not compliance, and an internal policy that cites a package number is out of date the moment the next one appears. What should be documented is the process, including the date on which each check was carried out and against which version of the lists, because that is what an investigation will ask for. Our overview of the additional sanctions against Russia tracks what successive packages have added.

Who is bound

The regulations bind anyone within the territory of the European Union, all EU nationals wherever they are, every company incorporated under the law of a Member State, and any business done in whole or in part within the Union. A Dutch BV is therefore bound by the Russia measures for its worldwide activities, and a Dutch national working abroad for a foreign employer remains personally bound.

The reach goes further than that. Under article 8a of Regulation 833/2014 an EU operator must use its best efforts to ensure that non-EU companies it owns or controls do not undermine the measures. That obligation is one of result-oriented effort rather than strict liability, but it means a Dutch parent cannot treat a subsidiary in a third country as beyond its responsibility, and it should be able to show what steps it actually took.

The ownership and control test: fifty per cent, not twenty-five

The most expensive mistake in sanctions practice is applying the wrong threshold. A company that is not itself listed is nevertheless caught by an asset freeze if a listed person or entity owns or controls it. Under the European guidance on implementing restrictive measures, ownership means holding fifty per cent or more of the proprietary rights or a majority interest, directly or indirectly, including through cumulative holdings by several listed persons. Control is a separate and broader criterion, covering the power to appoint or remove a majority of the board, the ability to determine the use of the assets, dominant influence through a contract or the articles of association, and comparable arrangements. Control can exist without any shareholding at all.

Twenty-five per cent is a different threshold from a different regime. It is the level at which a natural person qualifies as an ultimate beneficial owner under the Wwft and the anti-money-laundering rules, and it has nothing to do with whether an entity is caught by a freeze. Businesses that screen at twenty-five per cent because that is the figure their onboarding software uses will over-report in one direction and, more dangerously, miss entities that are controlled without being owned. Our article on the KYC investigation under the Wwft sets out the UBO test and why it is not a sanctions check.

Two further points follow from this. First, the analysis has to run through the whole chain, because ownership can be indirect and control can sit two or three levels up. Second, the position changes without notice: a counterparty that was clean at contract date can be caught the day its ultimate shareholder is listed, and nothing in your contract will have changed.

What sanctions do to a contract that is already running

This is where most Dutch businesses actually feel the measures. The contract was concluded lawfully, the goods are half delivered, an instalment has been paid, and then a package lands. Four questions then arise in sequence: may you still perform, must you still perform, who bears the loss, and can you get out.

Performance becomes prohibited

Where a regulation prohibits the very performance the contract requires, the obligation cannot lawfully be carried out. Under Dutch law that is a non-attributable failure: the debtor cannot perform and the impediment is not something for which it bears the risk, so the creditor cannot claim damages or specific performance. What the creditor can normally do is dissolve the contract, which unwinds it and creates obligations to undo what has already been performed. A contractual force majeure clause may regulate this differently, and many supply contracts define force majeure narrowly enough to exclude changes in the law, so the clause has to be read before the statute is relied on.

An agreement that requires a prohibited performance is also vulnerable in itself. A contract whose content or performance conflicts with a mandatory statutory provision is void, and sanctions regulations are mandatory in that sense. The distinction matters: a contract that is void never produced obligations, whereas a contract that has become impossible to perform continues to exist and has to be unwound. Which of the two applies depends on whether the prohibition existed at the moment the contract was concluded.

Unforeseen circumstances and renegotiation

Where performance is not prohibited but has become radically more onerous, the doctrine of unforeseen circumstances in article 6:258 of the Burgerlijk Wetboek allows a court to amend or dissolve a contract, in whole or in part and with retroactive effect if it chooses. Sanctions, counter-sanctions and the collapse of a payment channel are capable of qualifying, but the bar is high. The circumstance must not have been anticipated in the contract, and the party invoking it must show that the other party cannot reasonably expect the contract to be maintained unchanged. Since February 2022 that argument has become significantly harder for contracts concluded after the measures began, because the risk was foreseeable by then. A well-drafted hardship or renegotiation clause remains the better route.

Suspension, termination and sanctions clauses

Many commercial contracts now contain a sanctions clause that entitles a party to suspend or terminate if the counterparty, or anyone in its ownership chain, becomes listed or if performance would breach restrictive measures. Where such a clause exists it usually decides the matter. Where it does not, the options are the general ones: suspension of performance where the counterparty cannot perform its own side, dissolution for a failure to perform, and termination on notice in a continuing contract, which under Dutch law is not always available at will and may require a sufficiently serious ground and a reasonable notice period.

Two drafting points repay attention when contracts are renegotiated. The clause should cover indirect exposure, so that it also bites where the counterparty is controlled by a listed person rather than listed itself, and it should distinguish between suspension and termination, because a permanent exit is not always in the interest of the party that has to invoke it. It should also state clearly what happens to sums already paid and to goods already delivered.

The no-claims rule

Article 11 of Regulation 833/2014 contains a provision that is frequently overlooked and that can decide an entire dispute. No claim in connection with a contract or transaction the performance of which has been affected by the measures may be satisfied, if it is made by a Russian government body, a Russian person or entity, or a person acting through or on behalf of one of them. That covers claims for damages, for indemnity, under a guarantee and for the payment of a bond. The effect is that a Dutch business which stops performing because of the sanctions is protected against a claim by the Russian counterparty, and the burden of proving that the rule does not apply lies on the claimant. It is also the reason why some Russian counterparties have shifted to litigating in Russia, and why the enforceability of a Russian judgment in the Netherlands is a question that should be considered before proceedings start rather than after.

Wind-down periods and derogations

Sanctions packages usually contain transitional provisions allowing the execution of contracts concluded before a given date for a limited period afterwards, and the twenty-first package extended several of those deadlines. Those wind-down windows are the safe route out of a legacy contract, and they are strictly interpreted: they normally apply only to contracts concluded before the cut-off, including ancillary contracts necessary for their performance, and only until the stated date.

Beyond that, most prohibitions have derogations for which a competent authority can grant an authorisation, for example for humanitarian purposes, for the divestment of an existing shareholding, for the wind-down of operations, or for the payment of amounts due under a pre-existing contract. In the Netherlands these applications go to the Ministry of Foreign Affairs, with Customs administering the export and import side. Applications take time and require complete documentation, so a request submitted a week before a shipment is due will not save it. Where a frozen account is involved, an authorisation from the Ministry of Finance may be needed to release funds.

Obligations that reach into your contract terms

Some of the measures do not merely prohibit conduct; they dictate what your contracts must say.

The clearest example is the no-re-export obligation in article 12g of Regulation 833/2014. For defined categories of sensitive goods and technology, an EU exporter selling to a counterparty in a third country must contractually prohibit that counterparty from re-exporting the goods to Russia or for use in Russia, and must provide for adequate remedies in case of breach, including termination and a meaningful penalty. The exporter also has to notify the competent authority if it becomes aware of a breach. A contract that omits the clause is itself a compliance failure, quite apart from what happens to the goods.

Alongside that sits a general expectation of due diligence in the supply chain. Where goods are of a type known to be diverted, an exporter is expected to look at the plausibility of the stated end use, at unusual routing through countries whose trade with Russia has grown sharply, at payment routes that do not match the transaction, and at counterparties with no history in the products concerned. Documenting the questions you asked and the answers you received is what distinguishes a business that was deceived from one that did not want to know, and that distinction is precisely what determines whether a breach is treated as intentional.

The services restrictions have their own contractual consequences. Where a Dutch adviser, accountant or IT supplier has an ongoing engagement with an entity established in Russia, the question is not only whether new work may be taken on but whether the existing retainer may continue, and the exceptions are narrow. For lawyers, representation in judicial, administrative or arbitral proceedings and advice needed to assess compliance with EU law remain permitted; general commercial advisory work does not.

Payments, banks and frozen funds

Even where the underlying transaction is lawful, the money may not move. Dutch banks apply their own risk appetite on top of the regulations, and a payment to or from a country associated with circumvention is routinely delayed, returned or refused. That is a commercial decision by the bank rather than a legal prohibition, and there is limited scope to compel it, although a bank that terminates an entire relationship must still observe its duty of care.

Where funds actually belong to a listed person or to an entity owned or controlled by one, they are frozen by operation of law. Freezing is not confiscation: the assets remain the property of the holder but cannot be used or made available. Anyone holding such funds, including a bank, a notary holding money in escrow or a company holding a payment obligation towards the listed party, must report the holding to the competent authority and must not pay out. Paying a listed counterparty is a breach in itself, which is why the correct response to an invoice from a newly listed supplier is to freeze and report, not to settle quickly before the position becomes awkward.

Sanctions and anti-money-laundering obligations overlap heavily here. A transaction that suggests an attempt to circumvent restrictive measures will usually also be an unusual transaction that has to be reported to FIU-Nederland by an institution subject to the Wwft, and the two duties run in parallel rather than as alternatives. Our guide to money laundering in the Netherlands sets out how that reporting duty works.

When a breach is suspected

Enforcement in the Netherlands runs along a familiar path. Customs detects most breaches at the border, through anomalies in declarations, mismatches between goods and stated end users and routing that makes no commercial sense. The FIOD then conducts the criminal investigation, with the powers that go with it, including searches of business premises, seizure of records and questioning of directors and staff. The Public Prosecution Service decides whether to prosecute, to offer a settlement or to drop the case, and the Openbaar Ministerie has shown itself willing to prosecute exporters who routed sanctioned goods through third countries and papered the transaction with false contracts. In such cases the Rotterdam District Court has convicted defendants on the basis of intent and false documentation even where it was not established that the goods reached Russia, and confiscation of the profit obtained is a standard part of the outcome.

An intentional breach is a serious economic offence carrying a maximum of six years' imprisonment, community service or a fine of the highest applicable statutory category; for a legal person, where that category does not allow appropriate punishment, a fine of up to ten per cent of annual turnover may be imposed. Where intent cannot be established, a negligent breach is still punishable, at a considerably lower level. The specific amounts are set out in article 23 of the Wetboek van Strafrecht and are adjusted periodically, so the current figures should be checked rather than assumed. Alongside the criminal track, permits can be withdrawn and a company can be excluded from public procurement.

If the FIOD contacts you, the practical advice is short. You are not obliged to answer questions as a suspect, employees have their own position and their own rights, and what is said in a first interview shapes everything that follows. Take advice before that interview. Our article on criminal procedure in the Netherlands from investigation to verdict explains how the process runs, and our separate piece on criminal enforcement of international sanctions deals with the substantive offences in more detail.

What to do with the contracts you have now

Start with the portfolio rather than with the policy. Identify every contract with a counterparty in Russia or Belarus, and every contract whose goods, technology or services fall within a restricted category, including contracts with counterparties in third countries through which those goods could reach Russia. For each of them establish three things: whether performance is still lawful, whether a wind-down period or a derogation applies, and what the contract says about suspension, termination and force majeure.

Then run the ownership and control analysis properly, to fifty per cent or more and to the control criteria, through the whole chain and on the current lists. Record when you did it. Where a counterparty is caught, freeze and report rather than improvise, and take advice before you communicate anything to the counterparty, because a poorly worded letter can amount to circumvention or can prejudice a later defence.

Finally, fix the forward-looking terms. Add or update the sanctions clause, add the no-re-export clause where the goods require it, and make sure your standard terms give you an information right and a right to suspend. Building the internal controls around that is a separate exercise, and our guidance on sanctions compliance for businesses sets out what a defensible programme contains.

Advice on Russia sanctions and your contracts

Sanctions questions are rarely abstract by the time they reach a lawyer. There is a shipment held at the border, an invoice that cannot be paid, a counterparty whose shareholder has just been listed, or a letter from the FIOD. Each of those has a short window in which the response still determines the outcome.

Law & More advises companies and their directors on the EU restrictive measures against Russia: assessing whether a transaction or a counterparty is caught, reviewing and renegotiating contracts affected by the measures, applying for authorisations and derogations, and defending businesses and individuals in investigations by the FIOD and proceedings brought by the Public Prosecution Service. If a transaction has been blocked or an authority has made contact, please contact us before you respond.

Frequently asked questions