iba2016 washington navigating sanctions kulik

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YAROSLAV KULIK PARTNER, ART DE LEX LAW FIRM CHAIR, GOVERNMENT PROCUREMENT SUBCOMMITTEE WASHINGTON D.C., 19 SEPTEMBER 2016 NAVIGATING SANCTIONS IN A CHANGING WORLD: RUSSIAN VIEW ANNUAL CONFERENCE OF THE INTERNATIONAL BAR ASSOCIATION

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Page 1: IBA2016 Washington Navigating sanctions Kulik

YAROSLAV KULIKPARTNER, ART DE LEX LAW FIRMCHAIR, GOVERNMENT PROCUREMENT SUBCOMMITTEEWASHINGTON D.C., 19 SEPTEMBER 2016

NAVIGATING SANCTIONS IN A CHANGING WORLD: RUSSIAN VIEW

ANNUAL CONFERENCE OF THE INTERNATIONAL BAR ASSOCIATION

Page 2: IBA2016 Washington Navigating sanctions Kulik

EXPERIENCE OF RUSSIAN LAW FIRMS IN

COUNSELING ON SANCTIONS MATTERS

PRESENTATION OF SURVEY RESULTS CONDUCTED BY A PRESENTER

AMONG THE RUSSIAN LAW FIRMS IN SEPTEMBER 2016 22

Page 3: IBA2016 Washington Navigating sanctions Kulik

2

DID RUSSIAN LAW FIRMS ESTABLISH SPECIAL DIVISIONS DEALING WITH

SANCTIONS MATTERS?

3

Series1

50 50

Yes No

NOTE: Hereinafter percentage among firms who advise on sanctions matters

50

Page 4: IBA2016 Washington Navigating sanctions Kulik

2

INDUSTRY SECTORS OF ADVISING (1)

OIL AND GAS

BANKING AND FINANCE

MACHINERY PRODUCTION

AIRCRAFT CONSTRUCTION

TELECOMMUNICATIONS

DEFENSE INDUSTRY4

Page 5: IBA2016 Washington Navigating sanctions Kulik

2

INDUSTRY SECTORS OF ADVISING (2)

LOGISTICS

FOOD INDUSTRY

CONSTRUCTION

MEDICAL DEVICES AND EQUIPMENT

MICROELECTRONICS

PUBLIC PROCUREMENTS5

Page 6: IBA2016 Washington Navigating sanctions Kulik

2

DO RUSSIAN LAW FIRMS CONDUCT COURT OR ARBITRATION CASES?

6

Series1

20

80

Yes No

80

Page 7: IBA2016 Washington Navigating sanctions Kulik

2

TYPICAL COURT OR ARBITRATION CASES INVOLVING SANCTIONS-RELATED

MATTERS

7

DISPUTES BETWEEN RUSSIAN BANKS AND

THEIR CLIENTS ARISING OUT OF

PERFORMANCE (NON-PERFORMANCE) OF A

BANK ACCOUNT AGREEMENT

CONTRACTUAL DISPUTES ARISING

OUT OF NON-PERFORMANCE OF

OBLIGATIONS DUE TO SANCTIONS

(TERMINATION OF CONTRACTS,

PENALTIES AND DAMAGES RECOVERY,

ETC.)

Page 8: IBA2016 Washington Navigating sanctions Kulik

2

SANCTIONS AS A FORCE-MAJEURE

IN PRACTICE OF RUSSIAN COURTS

WORKS DOESN’T WORK

8

IF SANCTIONS ARE MENTIONED IN

FORCE-MAJEURE CLAUSE

IF CONTRACT DOES NOT CONTAIN

CLAUSES RELATED TO SANCTIONS

NOTE: A CERTIFICATE ISSUED BY A CHAMBER OF COMMERCE AND

INDUSTRY MAY BE REQUIRED TO PROVE THE FORCE-MAJEURE

EVENT

Page 9: IBA2016 Washington Navigating sanctions Kulik

2

SANCTIONS-RELATED REPS, WARRANTIES AND INDEMNITIES UNDER

RUSSIAN LAWSINCE 1 JUNE 2015 THE CIVIL CODE ALLOWS PARTIES TO USE IN CONTRACTS LEGAL

INSTRUMENTS SIMILAR TO REPRESENTATIONS, WARRANTIES AND

INDEMNITIES IN COMMON LAW

9

Page 10: IBA2016 Washington Navigating sanctions Kulik

2

DO RUSSIAN LAW FIRMS ADVISE ON TRANSACTIONS ASSOCIATED WITH

SANCTIONS MATTERS?

10

Series1

90

10

Yes No

90

Page 11: IBA2016 Washington Navigating sanctions Kulik

2

TYPES OF TRANSACTIONS (1)

ESTABLISHING JOINT VENTURES WITH FOREIGN PARTNERS

ACQUISITIONS OF SHARES/INTEREST IN SHARE CAPITAL

PLACEMENT OF SECURITIES DENOMINATED IN USD OR EUR

ATTRACTING FINANCING FROM US OR EU

11

Page 12: IBA2016 Washington Navigating sanctions Kulik

2

TYPES OF TRANSACTIONS (2)

SUPPLY OF GOODS

FIELDS DEVELOPMENT

CONSTRUCTION INVESTMENT AGREEMENTS

DOING BUSINESS IN CRIMEA

12

Page 13: IBA2016 Washington Navigating sanctions Kulik

2

SIEMENS TURBINES STORY: SUPPLY TO A THIRD PARTY ON “NEUTRAL” TERRITORY

13

vs

A JV OF SIEMENS AND POWER MACHINES TO SUPPLY TURBINES TO A POWER PLANT ON RUSSIA’S TAMAN PENINSULA. THERE MAY BE SOME DOUBTS ABOUT AWARENESS OF SIEMENS WITH RESPECT TO THE FINAL DESTINATION OF TURBINES. WHAT ARE THE RISKS FOR SIEMENS TO BREACH THE EU SANCTIONS?

?

Page 14: IBA2016 Washington Navigating sanctions Kulik

2

DO RUSSIAN LAW FIRMS ADVISE ON DEVELOPING COMPLIANCE PROGRAMS?

14

Series1

20

80

Yes No

80

Page 15: IBA2016 Washington Navigating sanctions Kulik

2

HOW CAN YOU DESCRIBE THE CURRENT SITUATION

FOR YOUR RUSSIAN CLIENTS?

1• CLIENTS CREATE SCHEMES BASED ON USING COMPANIES

NON-AFFILIATED WITH SANCTIONED ENTITY OR ENTITIES

2• SANCTIONS SIGNIFICANTLY COMPLICATE DOING

BUSINESS FOR CLIENTS

3

• CLIENTS FOCUS ON DOMESTIC MARKET (INCLUDING IMPORTS PHASE OUT) AND PARTNERS FROM COUNTRIES WHO DID NOT IMPOSE SANCTIONS

4

• BIG COMPANIES CAUGHT THE MOMENT AND HAVE SUCCESSFULLY RESTRUCTURED CONTRACTS AND TRANSACTIONS. SMALL COMPANIES FACE CONFLICT SITUATIONS

5• CLIENTS LOOK FOR NEW FORUMS FOR DISPUTE

RESOLUTION (E.G. IN HON-KONG)

6• BIG TURN TO THE EAST HAS NOT YET TOOK PLACE

15

Page 16: IBA2016 Washington Navigating sanctions Kulik

THANK YOU FOR YOUR ATTENTION!

[email protected]+7 (495) 937-71-23

WE THANK ALRUD, FBK LEGAL, KIAP, LIDINGS, LINIYA PRAVA, MURANOV,

CHERNYAKOV & PARTNERS, NEKTOROV, SAVELIEV & PARTNERS, PEN & PAPER,

YUST, AND OTHER RUSSIAN LAW FIRMS FOR PARTICIPATING IN OUR SURVEY