In recent years, the sanctions clause has become a “must have” contractual clause. Any company that engages in activity involving high-risk goods or services, or relating to or in connection with high-risk jurisdictions, should incorporate clear and robust sanctions clauses in its contracts. Businesses face complex issues when interpreting and drafting sanctions clauses, requiring an analysis of the business intent, the business’ ancillary obligations, its global footprint and its concerns about reputation, amongst other things.

To ensure they stand up to frequently changing geopolitical circumstances and sanctions regimes, sanctions clauses should include a degree of flexibility. Parties must also remember that what is acceptable in one transaction, may be very different to sanctions clauses which suit other transactions. There is no one-size-fits-all position, so it is crucial for businesses to comprehend the key elements of a sanctions clause to be able to assess any “non-negotiable” points.

Our lawyers examine the key elements of a sanctions clause, the relevant risks that they cover, and the pros and cons of different approaches to sanctions clauses in their latest client alert.