• Tue. Nov 28th, 2023

    New Article: The Impact of Sanctions on Commercial Contracts

    ByEmma Wolukau-Wanambwa

    Nov 21, 2023
    New Article: The Impact of Sanctions on Commercial Contracts
    Introduction

    The application of sanctions in the context of commercial contracts has become increasingly complex and can pose significant challenges for parties involved. A recent case, Litasco SA v Der Mond Oil and Gas Africa SA, sheds light on the interpretation of regulations and the potential consequences for contractual obligations in the face of sanctions. This article explores the implications of this case and provides insights into the broader issues surrounding sanctions and commercial contracts.

    The Case: Litasco SA v Der Mond Oil and Gas Africa SA

    In Litasco SA v Der Mond Oil and Gas Africa SA, Litasco sought payments owed by Der Mond under a contract for the sale of crude oil. Der Mond argued that making payments to Litasco would contravene sanctions regulations, as Litasco was allegedly controlled by President Putin. However, the court rejected this defense, stating that there was no evidence to support the claim that President Putin exercised control over Litasco. Additionally, the court emphasized that the sanctions regulations did not prevent the court from issuing a money judgment in favor of a sanctioned party.

    The Impact of Sanctions on Commercial Contracts

    This case raises important considerations for parties involved in commercial contracts. It highlights the need for a clear understanding of the scope and application of sanctions regulations and their potential impact on contractual obligations. Parties should conduct thorough due diligence to assess any potential risks and ensure compliance with applicable sanctions regimes.

    FAQ:
    Q: Can sanctions regulations void a commercial contract?

    A: Sanctions regulations themselves do not automatically invalidate a commercial contract. However, they may restrict certain activities or make performance of the contract more difficult or prohibited. Parties should assess whether the sanctions impact their ability to fulfill contractual obligations.

    Q: Is it necessary to prove control by a sanctioned entity to invoke sanctions regulations?

    A: The burden of proof lies with the party invoking sanctions regulations. It must demonstrate that the other party is a sanctioned entity and that the contractual obligations would contravene the sanctions regime. Mere allegations without sufficient evidence may not be sufficient to invoke sanctions.

    Q: How can parties mitigate the impact of sanctions on their contracts?

    A: Parties should conduct appropriate due diligence and seek legal advice to understand the implications of sanctions on their specific contractual arrangement. They may need to include specific contractual provisions addressing compliance with sanctions regulations and potential remedies in case of non-compliance.

    Conclusion

    The Litasco case serves as a reminder of the complexities surrounding sanctions and their impact on commercial contracts. Parties must navigate these challenges by staying informed about regulatory developments, conducting due diligence, and seeking expert legal advice. By doing so, they can mitigate risks and ensure compliance with sanctions regimes while fulfilling their contractual obligations.