The European Union’s recent approval of its 19th Sanctions Package marks a pivotal shift in its stance on Russian energy. A central feature of this package is a comprehensive ban on the import of Russian Liquefied Natural Gas (LNG), creating urgent and complex challenges for EU companies with ongoing supply contracts. The ban is set to be phased in, starting on 25 April 2026 for short-term contracts and extending to long-term agreements by 1 January 2027.
For businesses tied to these contracts, an immediate requirement will be to suspend performance or terminate these agreements to avoid breaching EU law. While many contracts contain provisions like force majeure, sanctions, or hardship clauses that should offer a legal solution, invoking them may be far from straightforward. The interpretation of such provisions varies significantly depending on the governing law, and Russian counterparties are unlikely to accept termination without a fight.
A key litigation risk stems from a tactic routinely deployed by sanctioned Russian entities. In 2020, Russia amended its Commercial Procedural Code to grant Russian commercial courts exclusive jurisdiction over disputes involving sanctioned companies, overriding (at least from a Russian law perspective) foreign forum selection or arbitration clauses in applicable contracts.
This creates a potential high-stakes exposure for EU companies. Russian courts have shown a strong tendency to rule against foreign parties and can issue “anti-suit injunctions” that penalize companies for pursuing arbitration elsewhere, with fines that can equal the entire amount in dispute. These judgments can then be enforced against a company's assets in Russia, or potentially in “neutral” jurisdictions around the globe. Simply ignoring Russian court proceedings can backfire, as it can actually facilitate enforcement abroad of the resulting judgment.
Mitigating these risks requires a sophisticated, multi-front strategy. It is no longer enough to rely on contractual exit clauses alone. Proactive measures are essential, including (in many situations) contesting jurisdiction in Russia and using international arbitration in parallel to protect the original dispute resolution agreement. In certain cases, it may be advisable to initiate expedited arbitration to seek a declaration that the arbitration clause remains valid. Furthermore, companies can turn to foreign courts in key jurisdictions like England or Germany, to obtain anti-suit injunctions or to affirm an arbitral tribunal’s authority.
As the deadlines for the EU's gas ban approach, EU companies must urgently reassess their contractual exposure and prepare a robust defensive strategy alongside their compliance strategy. Navigating this web of conflicting legal regimes demands expert guidance and strategic foresight to safeguard against significant financial and operational risks.
