Influence of Economic Sanctions on Private Business Transactions

This paper focuses on the current sanctions regime for the Russian Federation and Russian individuals and its impact on private business transactions. The author investigates in detail the legal basis and content of the American and European economic sanctions regime, considers the practice of bringing to justice for non-compliance with sanctions, and carries out a comparative analysis of these regimes by key attributes. An important aspect of the sanctions regime in which business operates in Russia is the state's counter-sanction policy, which is implemented through the introduction of restrictive measures against foreign states, as well as the attempts made by the legislator to minimize the harmful potential of Western sanctions. The paper investigates the legal framework of Russian counter- sanctions, as well as a number of legal mechanisms adopted or proposed in the draft laws to minimize the negative consequences of Western sanctions or the risk of their proliferation as such. A number of legal mechanisms and procedures are used by private business entities, both by the sanctioned individuals themselves and by third parties, in order to carry out their activities under the conditions of sanctions restrictions, and to eliminate or reduce the risk of transactions being sanctioned. The author considers the mechanisms as removal from the sanctions lists, obtaining a licence to carry out a prohibited transaction, a condition of force majeure and compliance with the sanctions. On the basis of a study of the legal framework and key aspects of the US and European Union sanctions regimes, it has been concluded that, despite the external similarities expressed in similar policy objectives of the restrictive measures adopted, there are nevertheless a number of conceptual differences between the regimes considered. These differences are not only relevant for theoretical analysis and description in the literature but are also clearly seen in various practical aspects. The author notes the low efficiency of response measures for Western states, and at the same time draws attention to the creation of incentives for the development of domestic production in some sectors of the economy, as well as the development of cooperation and cooperation with countries that are not members of the alliance of states parties to economic sanctions against Russia. In the author's opinion, the methods proposed by the Russian legislator to counteract Western sanctions have a malicious potential and expose Russian business, as well as units of foreign companies operating in Russia, to various types of risks. They also have a negative impact on the business climate, creating an atmosphere of uncertainty in which it is difficult to attract the investment in the Russian economy necessary for its development and modernization. Analysing the legal mechanisms for mitigation of sanctions risks, the author concludes that the most effective and safe strategy for business is to comply in good faith with all prescriptions, prohibitions and restrictions, as well as to inspect counterparties and persons authorized to sign contracts, obtain assurances from counterparties not to violate sanctions restrictions, and clearly indicate in contracts what the parties accept as a force majeure and what consequences apply to their relations when it occurs. At the same time, practice has shown that no measure taken can guarantee protection from the unfair conduct of the counterparty, because of which the company is at risk of imposing secondary sanctions. However, in determining the penalty, the authorized body pays attention to the assistance of the person, the measures taken by him/her to prevent violation of sanctions, the policies and compliance procedures adopted in the organization.