Exodus of companies from Russia seems to be legal battle

Social pressure plays a major role in the business exodus from Russia: Shell and Heineken, among others, decided after fierce criticism to leave Russia completely. But according to experts, it is still the question whether companies will actually stop.

The majority of companies that previously announced Turning their backs on Russia do not have to do so because of the sanctions. However, the consequences of the sanctions may play a role, because trade with Russia is made more difficult.

Like this writes Heineken brewery issued a statement today that their Russian properties are no longer viable in the current situation and that the company therefore decides to leave Russia. According to Cedric Ryngaert, professor of international law at Utrecht University, this can be a kind of cover.

Battery to lawyers

Because Russia previously threatened with expropriation of departing companies and even the prosecution of their directors if they speak out critically about the war. Ryngaert: “So companies cannot explicitly say that they are withdrawing because of the war. A battery of lawyers has probably been set up to map out the risks.”

Whether companies can actually stop their activities in Russia depends on what is in the contracts. For example, the fine print may state that companies may withdraw if circumstances have changed completely, such as a war situation, or were unforeseeable.

But it may also be the case that local companies carry out production in Russia, as is the case with Danone. Ryngaert: “Saying that they are leaving Russia doesn’t really mean much, because their production will continue or maybe even continue under a different name.”

hibernation

An alternative to leaving completely would be a kind of hibernation, says Jan Adriaanse, professor of Change Management at Leiden University. He conducts research into companies that have to restructure in times of crisis. “Then you stay active there for a bit and maintain the infrastructure for when the war is over.”

And that means you don’t get into the discussion of what to do with the obligations you have entered into and the loyalty to your local employees, Adriaanse explains. “I can imagine that it is a struggle how you deal with that. It is a consideration that you have to make, also for the situation after the war if the activities could be resumed.”

end of war

Departing companies also face the challenge of selling their Russian assets. It seems they take losses into account. Heineken says it will have to write off 400 million euros. But according to Adriaanse, many companies had in fact already lost the proceeds from the activities.

“Because if you decide not to sell hamburgers or to do accounting activities, you have already lost turnover and the business there. Many of the companies are probably thinking: hopefully the war will end soon and we can start with the reconstruction,” says Adriaanse.

The war in Ukraine is not over yet, but it looks like it will be a long legal battle for outgoing companies. For example, Ryngaert expects many lawsuits not only between departing companies and companies with whom they had contracts, but also between Russia and the companies whose properties may be nationalized.

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