Bill on Exemption from Contractual Liability Due to Foreign Sanctions

On March 22, 2022, a Bill (the “Bill”) was submitted to the State Duma on the specifics of contractual performance under the conditions of unfriendly actions of foreign states and international organizations related to the introduction of restrictive measures (foreign sanctions) against Russian legal entities and individuals.

The Bill proposes the following:

1. Termination of the obligation (in whole or in part) due to its objective impossibility of fulfillment under the conditions of the introduction of foreign sanctions.
   

2. Release from liability for non-performance or improper performance if the party proves that the performance objectively became temporarily impossible under foreign sanctions.

3. The right of a party to refuse to perform the contract if the other party failed to fulfill its obligation or performed it improperly due to foreign sanctions (see paragraph 2 above).

4. Under the agreement of the parties concluded after February 23, 2022, the security payment against the security may consist in the deposit of securities or in kind.

5. The right of a Russian joint-stock company to place additional shares of a certain category (type) in favor of the lender instead of returning all or part of the loan amount under a loan agreement from its foreign controlling person.

At the same time, the Bill suggests that the above rules are not extended to those persons who contributed to the introduction of foreign sanctions.

Additionally, the Bill proposes intellectual property changes:

• The Bill proposes to establish a prohibition on unilateral amendment or termination of agreements related to the exclusive rights to the results of intellectual activity and means of identification. The possibility of termination is proposed to be granted only when the other party significantly violates its obligations.
  

• The Bill extends the validity period of agreements on the use of intellectual property rights by Russian legal entities and individuals for the period of foreign sanctions. At the same time, Russian legal entities and individuals retain the right to notify the other party about the unilateral refusal to extend the agreement.

If the Bill is published as a Federal Law, it is proposed to extend its effect to contracts concluded from February 24, 2022, as well as contracts for which the deadline for fulfilling obligations came after February 23, 2022.