Conflicts of Law arising from Russia’s Counter-Measures

Corporate Clients Insights, AML

Since 2022, the legal landscape of sanctions has been shaped not only by the extensive restrictive measures adopted by the European Union, the United States and allied states, but also by Russia’s own counter-measures and anti-sanctions regime. These measures are designed to mitigate the impact of foreign restrictions, control the flow of capital, and impose costs on states and companies considered unfriendly or designated as such. They now represent a parallel legal framework with direct consequences for international trade, corporate transactions, and compliance strategies in both Russia and the EU.

The Concept of Russia’s Anti-Sanctions Framework

The term “anti-sanctions” in Russia denotes a bundle of legal instruments introduced in response to measures imposed by foreign states. Unlike traditional defensive measures, which aim only to shield the domestic economy, Russia’s regime combines protective mechanisms with offensive retaliation. The legal foundation was laid prior to 2022 through Federal Law No. 127-FZ of 2018, which authorised counter-measures against unfriendly states. Since 2022, however, presidential decrees and government resolutions have operationalised this authority across multiple sectors: finance, energy, intellectual property, taxation, and corporate governance.

Key Anti-Sanctions Measures Adopted Since 2022

The early months of 2022 saw the introduction of emergency currency controls and the creation of so-called “C-type” rouble accounts. These allowed Russian debtors to discharge obligations to creditors from “unfriendly” jurisdictions by depositing funds in roubles at official rates, even where contracts provided for payment in foreign currency. While ensuring that Russia avoided a wave of defaults, this mechanism left many foreign investors with inaccessible funds and forced a re-evaluation of cross-border financing structures.

In parallel, the Russian Government adopted Order No. 430-r, designating all EU Member States, the United Kingdom, the United States, and several others as “unfriendly.” This designation became the trigger for a range of restrictions, including approval requirements for the sale of shares or interests in Russian companies. Decree No. 618 of September 2022 formalised this approval regime, obliging foreign investors to seek permission from a government commission before exiting Russian subsidiaries or receiving dividends. In practice, these approvals often came with conditions such as discounted sale prices or the imposition of an “exit tax,” materially altering the economics of divestment.

Energy trade, the backbone of Russia’s external revenue, was restructured through specific counter-measures. The “gas-for-roubles” scheme, established by Decree No. 172 of 31 March 2022, required foreign buyers to open special accounts with Gazprombank and accept conversion into roubles under central bank procedures. The EU warned that this mechanism risked breaching sanctions by involving dealings with restricted entities. Later, in response to the G7 and EU price cap on Russian oil, Decree No. 961 prohibited the supply of crude and petroleum products to buyers applying the cap. This measure has since been extended, directly colliding with the EU’s sanctions framework and further complicating compliance for traders and shippers.

Other counter-sanctions have targeted intellectual property and taxation. Government Decree No. 299 introduced a mechanism for compulsory use of patents belonging to right-holders from “unfriendly” states, at a remuneration rate of zero. More recently, Decree No. 585 suspended double taxation treaties with 38 states, including all EU member states, Japan, and the United Kingdom. Together, these steps signal Russia’s willingness to disregard established international norms in order to strengthen its negotiating position.

Finally, the use of temporary external administration under Decree No. 302 has enabled the Russian state to take control of assets owned by foreign investors, often with the stated objective of ensuring operational continuity. This tool has been deployed selectively, but its existence increases the uncertainty for international businesses with residual exposure in Russia.

Conflicts of Law Between EU Sanctions and Russia’s Anti-Sanctions

From the EU’s perspective, Russia’s counter-measures and anti-sanctions create a multi-layered compliance dilemma. Companies are confronted with Russian decrees that mandate particular payment or corporate structures, while EU law prohibits engagement with sanctioned banks, state entities, or export arrangements that could amount to circumvention. The most visible example was the gas-for-roubles scheme, where EU buyers faced a stark choice between violating Russian law by refusing to comply, or breaching EU sanctions if they participated in payment mechanics that involved the Central Bank of Russia.

The EU has responded by strengthening its own legal framework. Regulation (EU) 833/2014, the main instrument for sectoral sanctions, has been repeatedly amended to address circumvention risks. In December 2023, a “No-Russia” clause was introduced as a requirement under Article 12g of the Regulation, requiring exporters of sensitive goods and technology to insert contractual prohibitions on re-export to Russia. This contractual obligation was unprecedented in EU sanctions law and represents a significant shift towards extraterritorial enforcement through private contracts.

Moreover, the fourteenth package of sanctions in June 2024 expanded these anti-circumvention duties and further tightened restrictions on logistics, shipping, and financial services. In parallel, the adoption of the Sanctions Violations Directive in 2024, Directive (EU) 2024/1226, created a harmonised framework for criminal penalties across the EU, meaning that breaches of sanctions are no longer merely administrative infractions but criminal offences, with liability extending to corporate executives.

These developments leave EU companies in an increasingly precarious position. Compliance programmes must reconcile Russian legal requirements with EU prohibitions, often in situations where performance is legally impossible in one jurisdiction without incurring liability in another.

Business Impact and Compliance Challenges

The combined effect of Russia’s anti-sanctions and the EU’s legal responses is a disruption of cross-border business. Banking and treasury functions face trapped cash in rouble accounts, complicated by the fact that conversion or transfer may involve sanctioned banks. Energy companies must navigate the dual constraints of Russia’s oil export bans and the EU’s price cap, with both regimes requiring detailed documentation and attestations. In mergers and acquisitions, exit strategies are no longer commercially straightforward: government approvals, imposed discounts, and the risk of expropriation diminish asset values and increase transaction timelines.

Tax planning has also become destabilised, as the suspension of double taxation treaties renders traditional structures unworkable and exposes profits to higher effective rates.

The compliance burden on companies has increased correspondingly. Beyond conducting due diligence on counterparties, businesses must now embed contractual clauses, audit rights, and termination triggers directly into agreements to comply with EU rules. At the same time, they must prepare to defend themselves against possible Russian administrative or civil proceedings for failure to comply with domestic counter-sanctions. This dual exposure underscores the need for sophisticated conflict-of-law strategies and, in many cases, for rethinking the viability of maintaining operations in Russia.

Conclusion

Russia’s anti-sanctions regime is no longer a collection of temporary crisis measures. It has become an entrenched legal framework with systemic implications. By reordering rules on payments, corporate governance, intellectual property, and taxation, Russia has sought to insulate its economy while raising costs for foreign investors from designated states. The European Union, in turn, has reinforced its sanctions architecture with new contractual duties, enhanced anti-circumvention rules, and criminal penalties for violations.

The outcome is a landscape of direct conflict between legal systems, where compliance in one jurisdiction may constitute illegality in another. For international business, this creates not only commercial risk but also unprecedented legal dilemmas. Boards and compliance officers must reassess exposure, adapt contracts and corporate structures, and where necessary consider strategic disengagement.

New Balkans Law Office advises international businesses and financial institutions on sanctions and counter-sanctions compliance, including transactional due diligence, licencing strategies, and risk assessments. For tailored assistance, contact: AML@newbalkanslawoffice.com