The Roadmap
On 6 May 2025, the European Commission (the EC) published a roadmap towards ending Russian energy imports (the Roadmap). The Roadmap proposes measures relating to the EC’s plan to phase out Russian gas, nuclear, energy and oil imports by 2027. It also elaborates on the transparency of contracts.
The proposed measures include a requirement on EU countries to prepare national plans outlining their intended contribution to the phasing out efforts. Among other things, the plans will need to set out timelines and milestones, diversification options and the volume of Russian gas imports under existing contracts. The Commission recommends that such plans be submitted by the end of this year.
Specific measures relating to gas include the prohibition of spot market contracts by the end of 2025 and long-term contracts by the end of 2027. Separately, EU executives have reportedly suggested that force majeure clauses should, and can, be invoked in order to comply with such prohibitions. With respect to nuclear energy, the EC plans to restrict new supply contracts for uranium, enriched uranium and other nuclear materials originating from Russia that are co-signed by the Euratom Supply Agency. Trade measures on the import of enriched uranium will also be imposed. Regarding oil, the EC is looking to tackle Russia’s ‘shadow fleets’, which transport oil while circumventing sanctions, through various new actions.
With regards to reporting, the Roadmap proposes that companies provide all information on Russian gas contracts, including volume and duration, to the relevant authorities and the EC. Further, information relating to actual imports of Russian gas will need to be distributed among the EC, customs, and national energy and security authorities. Notably, these requirements will be in addition to those already faced by wholesale traders under the EU Regulation on wholesale energy market integrity and transparency (REMIT) which, among other obligations, require market participants to provide the Agency for the Cooperation of Energy Regulators (ACER) with a record of wholesale energy market transactions.
The Roadmap acts as an initial proposal, with implementing legislation to be proposed in the coming weeks and months. Importantly, we understand that the measures in the Roadmap may be enacted through a qualified majority, as opposed to unanimity, which is generally required for sanctions measures. This has sparked political controversy, as access to Russian energy was a key concession for several EU member states during negotiations over previous sanctions packages. It raises doubts about how much of the Roadmap will actually be implemented – and how enforcement will play out among reluctant member states.
Potential issues
While the proposed measures in the Roadmap remain prospective, it is reasonably anticipated that several headline issues may arise from them:
- Compliance with law: Irrespective of the legal tool that will be used to implement these new measures, it is clear that eventually, the import of gas, oil and nuclear products of Russian origin (and perhaps exported from Russia) will be prohibited.
- Contractual rights: Companies will need to consider their contractual rights and positions to assess their ability to cease performance under the relevant contracts if the performance of such contracts involves a prohibited activity (e.g., the import of gas) under such future legislation.
We discuss these in turn below.
Compliance with law
While the form of the relevant restrictions remains uncertain, several learnings can be gleaned from the measures imposed by the EU in the past three years, such as the oil import ban under Article 3m of Regulation 833/2014 (as amended). Based on experience, in addition to the outright ban, it would be reasonable to expect there to be some form of ‘wind-down’ measure to enable companies to exit their contracts by a certain date.
In this regard, past wind-down measures under Regulation 833/2014 (as amended) required companies not only to cease engaging in the primary restricted activity (e.g., importing oil), but also to ensure that all related payments – such as transportation costs, demurrage costs and any other reconciliation amounts – were fully paid and satisfied before the relevant deadline. This was necessary because wider restrictions also applied to the provision of financial assistance or facilitation of these transactions, all of which had to cease by the relevant deadline.
In terms of the restrictions against entering into new contracts past a certain date, previous guidance in the form of the EU FAQs indicated that to benefit from the wind-down, a contract would need to include all the “necessary elements for the execution of a transaction (such as price, quantities, deliver[y] dates…)” and the entering into confirmations, amendment agreements or equivalent would constitute a “new” contract. The implication of this was that framework contracts, such as master sales and purchase agreements, which required commercial terms to be agreed from time to time, did not meet the requirements for being an ‘existing’ agreement that could benefit from the relevant wind-down periods.
Contractual rights
A company’s ability to be excused, without liability, from performance of a contractual obligation that would be contrary to new legislation will depend on the terms of the relevant contract itself.
A well-drafted agreement with a robust sanctions clause, compliance with law clause or illegality clause will provide a clear right for the affected party to be excused from performance without incurring liability to its counterparty. In the absence of such rights, an affected party may be entitled to invoke a force majeure clause to excuse its non-performance where performance would be contrary to applicable laws following a change of law. While the EC has suggested that affected parties should consider invoking force majeure clauses in their existing contracts, whether an affected party is entitled to do so will depend upon the specific terms of the force majeure clause in each case, and its proper interpretation under the governing law of the contract.
Ultimately, depending on the rollout of the phase-out measures and legislation, companies may be faced with a Catch-22 situation in which performance of the contract would place them in breach of the relevant restrictions, but non-performance would risk contractual liability and damages. Accordingly, close scrutiny of these new measures and companies’ existing contractual terms will be key in managing such risks.
How can Reed Smith help?
In light of these developments, it may be necessary to consider how your obligations may change. Current contracts may need to be reviewed and operational adjustments considered. Reed Smith has extensive experience in the sanctions, regulatory, trading and physical commodities spaces. We can use our broad and deep knowledge to help you accurately assess and effectively review your practices and their compliance with the impending regulations.
If you would like to discuss how these changes may impact you, please get in touch with one of the authors of this alert or your usual contact at Reed Smith.
Client Alert 2025-132
