I was recently joined by Sam Norris, head of our European special situations team, Amanda Raad, global co-leader of our international risk practice, and Sean Seelinger, partner in our anti-corruption and international risk group, for a discussion with a number of clients active in distressed, special situations and event-driven strategies, regarding the fast-developing Russian sanctions situation.
In recent weeks we have seen unprecedented coordinated action from the UK, U.S. and EU to impose sanctions, asset freezes and blocking measures on certain Russian banks, financial institutions, prominent Russian business owners and oligarchs.
The impact of these measures upon Russian businesses, including those in financial services, technology, energy and energy services, has had an immediate and detrimental impact. In addition, we have seen international businesses with a footprint in Russia that are “self-sanctioning” by ceasing or suspending their operations in Russia, driven in part by the risks associated with increasing regulatory complexity.
For private capital investors, negotiating the rapidly evolving sanctions framework presents many challenges. The repercussions of transacting, whether directly or indirectly, with a person subject to asset freezing measures or otherwise breaching sanctions can be significant – criminal liability can arise.
Investors need to undertake careful jurisdiction-by-jurisdiction analysis to ensure that appropriate processes are in place across their portfolio. This may include implementing risk-based diligence to understand the ownership and control structure of counterparties and establishing processes for screening counterparties against applicable sanctions.
Existing investments may prove problematic for investors as sanctions might prevent funds flow, and issues may arise with the means of repayment itself, given the exclusion of Russian banks from SWIFT and Russian restrictions on the repayment of loans in any currency other than rubles.
Our market-leading risk practice continues to work closely with the Ropes special situations and business restructuring team and our private capital clients to interpret the issues and consider latest developments. Please don’t hesitate to reach out to your usual Ropes & Gray contact to discuss further.