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SMB News: Guidance Note on Article 11 of Council Regulation (EU) No. 833/2014 relating to refund of advance payments

8 Feb 2024 14:37 | Malta Institute of Accountants (Administrator)

Refence is being made to the scope of the provision under Article 11 of Council Regulation (EU) No. 833/2014, on the basis of which no claims in connection with any contract or transaction, the performance of which has been affected by the sectorial measures imposed under the aforementioned Regulation, shall be satisfied, if they are made by Russian person, entity or body (article 11, point b).

Specifically, the issue being discussed in this Guidance concerns a specific scenario hereunder where:

An EU economic operator (hereafter, supplier) signed a supply agreement with a Russian counterpart (hereafter, buyer) prior to the entry into force of the sectorial measures, with the delivery of goods to be executed at a later stage. At the time of the conclusion of the contract, the buyer made an advance payment to the supplier. However, before the goods could be delivered, they were included in Annex XXIII, and therefore the transfer of the goods became prohibited, based on Article 3k of Regulation (EU) No. 833/2014. Here, given the entry into force of this prohibition, the supplier could not fulfil the obligations under the contract and hence, the buyer terminates the same contract and asks for the reimbursement of the above-mentioned advance payment.

It is the opinion of the Sanctions Monitoring Board that the repayment of advance payments in this case would constitute a violation of the “no claims” clause as envisaged in Article 11 of Council Regulation (EU) No 833/2014, even if that advance payment concerned goods whose export was not restricted at the time when such advanced payment was made.

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