Reed Smith Client Alerts

Key takeaways

  • 2020 to 2023 unsurprisingly saw an uptick in sanctions-related disputes and cases before the English courts and many of these cases have set precedents for various conceptual issues under English law. These precedents could have a profound impact on businesses and their existing contracts.
  • This update follows our recent client alert highlighting some of these key cases and trends.
  • This update discusses key elements of a sanctions clause, the relevant risks that they cover, and the pros and cons of different approaches to sanctions clauses.

Protecting your business: Is your sanctions clause robust?

Once considered as a “nice to have”, the sanctions clause has become a highly negotiated “must have” contractual clause in recent years. Any business that engages in activity relating to or in connection with high-risk jurisdictions, or involving high-risk goods or services, should incorporate clear and robust sanctions clauses in its contracts. These clauses should include a degree of flexibility to ensure that they stand up to frequently changing geopolitical circumstances and sanctions regimes. Parties must also remember that sanctions clauses which suit one transaction may be very different to what is acceptable to parties in another transaction.

In other words, there is no one-size-fits-all position so it is vital for businesses to understand the key elements of a sanctions clause to be able to assess any “non-negotiable” points.

Broadly speaking, a sanctions clause should have the following key elements:

  • Sanctions regimes that should be captured
  • The type of sanctions restrictions that should be within scope
  • The party that has the right to exercise the remedy
  • The remedy