Prohibition of repayment of advance payments received prior to imposition of sanctions

If the advance payment was received before the sanctions were imposed, but the fulfilment of the contract is no longer possible due to relevant sanction prohibitions, the repayment of such advance payment violates the EU Sanctions Regulation, the German Federal Ministry of Economy and Climate Protection has clarified.

The ministry pointed to the prohibition on the fulfilment of all claims related to transactions that have since been sanctioned. Against this background, the repayment of an advance payment aimed at restoring a legal relationship to the state it was in before sanctions were imposed is legally impermissible. This also applies to payment claims arising from advance payment guarantees (or the counter-guarantees related thereto), which follows from the prohibition on the provision of financing or financial assistance in connection with sector-specific export and import bans.

Previously, the Ministry had allowed the refunding of advance payments, but after consultation with the relevant working unit of the EU Commission has changed its mind.

Source: BMWK - Fragen und Antworten zu Russland-Sanktionen