Australian legal practitioners face massive fines for illegal trading with Russian assets

Lawyers Weekly Australia reports

The prospect of a protracted conflict in Ukraine has led to closer scrutiny of the role of legal practitioners undertaking business with Russia.

Australia has a history of utilising sanctions in relation to the Russian threat to Ukraine, imposed in 2014 and 2015 and 2017. Russian relations with Australia have also been particularly difficult given the downing of the MH17 Malaysia Airlines Flight in an attack that left 298 people dead in 2014, including Australians.

Professor Justine Nolan, from the University of NSW, stated that there were important implications for legal practitioners when dealing with Russian assets. She said that “lawyers should familiarize themselves with the UN Guiding Principles for Business and Human Rights and ensure the advice they provide is not contributing to violations of international law”.

“In particular, lawyers should outline the need for human rights due diligence to assist in identifying, tracking, assessing and communicating responses to prevent human rights abuses. Lawyers should acknowledge that companies have a responsibility to respect human rights and advice and be aware that company operations, supply chain relationships and financial flows can exacerbate conflict,” she said.

The United Nations Guiding Principles for Business and Human Rights were endorsed in 2011 by the United Nations Human Rights Council. The UN Guiding Principles are now the authoritative global standard for addressing and preventing human rights impacts associated with business activity. The UN Guiding Principles operate on a three-pillar framework, namely, the protect, respect and remedy framework.

Providing further guidance to legal practitioners, Professor Nolan stated that “risk assessments are part of the human rights due diligence process. Lawyers play a critical role here in providing guidance to companies to ensure due diligence is not a narrow based assessment that just focuses on risk to the company but also incorporates the perspective of what risk the company poses to others. Lawyers and the services they offer also fall within the UN Guiding Principles for Business and Human Rights and the services offered should be conducted with a human rights lens.”

In the context of Russia, Professor Nolan said that “a variety of sanctions have been imposed on Russia including sanctions against goods, services and finance in Russia and sanctions against individual companies operating in Russia, along with sanctions against specific individuals. The effect of these sanctions is widespread and has created legal and financial complexity for many companies and has highlighted the need for companies to better map their supply chains, to ensure they are not directly or indirectly caught up in the web of sanctions.”

The impact of such restrictions upon the economy is significant. Professor Nolan said, “companies supplying goods into Russia, particularly consumer goods, technology and financial services will be hit but the sanctions also impact the goods flowing out of Russia into the global economy, such as wheat, corn, metals, gas and oil. Firms providing advisory services – consulting, legal and accounting – should also be aware of their responsibilities flowing from the sanctions – both legal and reputational.”

Ultimately, Professor Nolan emphasised that sanctions were useful in relation to forcing change in the way that Russia operates. Nolan said “sanctions have a significant impact in raising awareness of foreign policy and human rights issues but have a mixed track record on effectiveness. Roughly about one third of the time have we seen serious change that has flowed via sanctions but it is difficult to pinpoint cause/effect with sanctions. In this case, there has been a strong and unified responses from a broad alliance of countries that has had an impact on Russia’s economy and forced change in the way the state and businesses within Russia operate.”

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