Drawing on recent legal and regulatory developments in the UK and elsewhere, we debunk the most persistent myths and offers practical tips you can use to help protect your business.
Myth 1: “Sanctions don’t affect us — we don’t trade directly with sanctioned countries.”
Reality:
Sanctions exposure often arises indirectly. Even if your business does not export to a sanctioned country, it can still be exposed along its supply chain or by so-called secondary sanctions which are designed to prevent sanctions circumvention.
The UK and EU have recently stepped-up efforts to combat the circumvention threat. On 15 October 2025, the UK government announced a new wave of sanctions targeting entities in China, India, and the UAE involved in the Russian energy trade.
Meanwhile, the EU requires exporters to include a “no re-export to Russia” clause in contracts with contracting counterparties based in non-EU or partner countries (this list of partner countries includes the United States of America, Japan, United Kingdom, South Korea, Australia, Canada, New Zealand, Norway, Switzerland, Liechtenstein and Iceland) which relate to certain categories of goods (primarily those of an electronic or technological nature) which are deemed to be sensitive.
To ensure its effectiveness, the “no re-export to Russia” clause must contain “adequate remedies”, which are sufficiently strong and aim to deter non-EU operators from any breaches. Whilst the UK government does not require such clauses, it has published guidance (available here) to assist those involved in exporting sensitive goods and a broader piece of guidance (available here) intended to support all UK business in understanding and combating Russian circumvention practices.
For a deeper look at how sanctions related to Russia can disrupt supply and distribution arrangements, see our earlier article here.
Action:
Include robust sanctions and export control clauses in your contracts. These should always be tailored to individual requirements but should:
- Require compliance with sanctions and export control regimes (e.g. those of the UK, EU and US).
- Include warranties that the buyer is not sanctioned nor controlled by sanctioned persons.
- Grant clear rights to suspend or terminate performance of the contract if performance places either party in breach of a sanctions regime.
- Impose an obligation to notify the seller of any sanctions-related developments.
Myth 2: “Once the agreement is signed, our compliance obligations are done.”
Reality:
Sanctions and export control laws are highly dynamic and can change overnight. A counterparty to the contract or destination can become sanctioned mid-contract, instantly rendering performance unlawful. A recent Commercial Court judgment has highlighted this issue and reaffirmed how the English courts are willing to prevent the enforcement of a contract if its performance is illegal in the place of performance (the so-called Ralli Bros principle).
Action:
- Define a “sanctions event” in your contacts. This may be done by reference to either a force majeure clause or material adverse change clause. Such clauses should clearly set out what happens next, such as suspension, negotiation, or termination of the contract.
- Ensure contracts identify where obligations are to be performed, One of the most notable aspects of the recent judgment was that the English court was willing to incorporate a foreign sanctions regime (in this case that of the EU) into its analysis of whether the contract was enforceable, even when the contract was governed by English law and the Claimant was a non-designated entity under UK sanctions law.
Myth 3: “Due diligence is a one-off exercise.”
Reality:
One-time checks are not sufficient. Relevant enforcement authorities expect ongoing, risk-based due diligence that reflects evolving sanctions designations and circumvention risks. The UK government’s starter guide on sanctions (available here) stresses the importance of repeat due diligence, even for established counterparties, to ensure that that the sanctions risk has not changed through a change of directors, ownership, or products or services provided.
To support businesses, the UK government also regularly publishes country specific guidance and, in October 2024 launched the new Office of Trade Sanctions Implementation (OTSI) which is part of the Department for Business and Trade and separate to the Office of Financial Sanctions Implementation (OFSI). A stated aim of the OTSI is to support businesses with compliance. To that end, it encourages businesses to contact the Office with questions.
Action:
- Monitor and review the latest guidance issued by the OTSI, OFSI, EU, and Office of Foreign Assets Control (OFAC) of the US Department of the Treasury.
- Before entering into an agreement, be alert to red flags such as unnecessarily complex trade routes, layered corporate ownership, or involvement of high-risk jurisdictions.
- If in doubt, seek legal advice or contact the OTSI.
- Maintain an audit trail of all checks and decisions to demonstrate compliance.
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Myth 4: “International sanctions campaigns are always coordinated”
Reality:
International sanctions regimes are often coordinated, but not universally so. Coordination depends on the political alignment and the strategic interests of the countries or blocs involved.
When sanctions are imposed through the United Nations Security Council they are — at least in principle — internationally coordinated. All UN member states are expected to implement such sanctions; however, some states may interpret or implement them differently.
Outside the UN, groups of states often act jointly but independently. For example, the EU, UK, US, Canada, Japan and Australia have launched coordinated sanctions against Russia. However, coordination mechanisms may be informal and non-binding. There are also many examples of divergence, even between countries who have historically cooperated closely: the US sanctions against Venezuela and export controls against China serve as prominent recent examples and show that complete coordination is rare, even among allies.
Action:
- Identify all sanctions regimes that may apply to your business and its supply chain, taking into account places of incorporation, places of business and trade routes.
- Engage local expertise and seek legal advice in relevant jurisdictions, particularly in areas where sanctions diverge.
Key Takeaways
Sanctions compliance is not just a box ticking exercise — it’s about building resilience and agility into your supply chain. Effective contractual drafting must include clear “sanctions event” mechanisms, account for divergent and rapidly evolving sanctions regimes and provide both parties with security and clarity, even when this may be lacking in the outside world.
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