In a March 8, 2022, article for Law360 discussing the implications for energy companies responding to new sanctions related to Russia’s invasion of Ukraine, Mike Burke provided insight on the key considerations for compliance and how to mitigate risk related to those global partnerships.
As oil and gas companies reduce or cease business activities in Russia, there are several legal questions to successfully divest from those interests or otherwise end those partnerships.
“In the best of times, you’re focusing on reps and warranties and the quality of the assets,” Burke said. “But in this circumstance, there’s a ton of questions: Who’s the ultimate beneficial owner of my partner? Who’s the ultimate beneficial owners of a potential purchaser? How am I going to get my money out?”
While pulling business out of Russia might be crucial for compliance and other business interests, these moves are likely without risk to the business, and disclosures to investors and other stakeholders are important. Burke notes that failing to properly disclose these strategic moves could open the door to investor suits, as well as pressure from activist shareholders.
“On the one hand, you can’t just go and file and say, ‘Everything we have in Russia is worth nothing and we’re writing the whole thing off,’ because that’s the other end of it,” he said. “But you’ve got to be on the conservative side of realistic.”
While the sanctions are relatively new and quickly evolving since the beginning of the war, all signs show that more and increasingly demanding sanctions are on the way.
“It’s only moving one way: to more isolate Russia from the world economy,” Burke said.
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