The Impact of Sanctions on NIS and Business Relationships: Considerations for Clients

As of 30 March 2025, the Serbian oil sector is set to face considerable challenges due to impending sanctions on Naftna Industrija Srbije (NIS). These sanctions are linked to NIS’s ownership ties with a Russian company currently under U.S. sanctions. Many domestic companies utilizing NIS fuel cards for their operational needs are now examining how these sanctions might affect their pre-existing contractual agreements.

According to the broad definition of force majeure outlined in the General Terms of existing contracts, the inability to fulfill obligations due to events like international sanctions could be classified as a force majeure circumstance. This implies that either NIS or the client could be regarded as the party affected by such circumstances, which makes the analysis of obligations critical.

When a force majeure event arises, the affected party is obligated to undertake essential measures to mitigate the consequences that prevent them from fulfilling their obligations. Importantly, they must notify the other party in writing within 24 hours about the occurrence of the force majeure event, including details about its expected duration. Should the force majeure persist for more than 30 days, both parties are expected to agree on further actions, such as amending the contract or possibly terminating it altogether.

In this specific context, if NIS encounters operational difficulties that hinder fuel delivery because of sanctions, such an occurrence would not be interpreted as a breach of contract. However, the more pressing concern for clients is whether they can continue to make payments. So far, NIS has asserted that it can continue operations and fulfill its commitments despite the expected sanctions, prompting questions about the clients’ ability to transfer payments under banking restrictions that might arise.

If NIS provides clients with the option to pay into a specified – alternative bank account, then the responsibility for payment rests with the client. The critical factor pivots on whether their banks would allow such transactions. If clients find themselves unable to process payments due to banking restrictions, they would need to promptly inform NIS about their situation.

This brings forth an important consideration: who qualifies as the “party affected by force majeure”? On the surface, one might assume that NIS holds this title. However, if NIS manages to deliver fuel as already announced and the challenge lies solely with payment processing, then it would be the clients who actually face the force majeure situation regarding their ability to fulfill payment obligations.

In such cases, should clients fail to make payments due to bank restrictions, they must proactively communicate with NIS about the inability to process payments. Following 30 days of the force majeure status, the contractual relationship must be reevaluated, potentially leading to contract amendments or the termination of agreements, depending on the situation at hand.

One of the dilemmas clients may face arises in a hypothetical (but realistic) scenario: If NIS offers clients a solution to overcome the payment issue that requires the client to open an account at the same bank where NIS has its account; could a clients’ refusal to do so (for any reason) be interpreted against them? Essentially, such a refusal might suggest that the client has not taken all necessary steps to resolve their inability to fulfill their obligations. This interpretation seems highly debatable, but in such a case, a detailed analysis of each specific situation would be essential, especially considering the potential consequences for the client.

Beyond the potential legal ramifications, businesses may also need to consider the strategic implications of continuing their relationship with NIS during this tumultuous period. Having an understanding of the existing contract terms and flexibility in modifying obligations could serve businesses well. Moreover, proactive communication with NIS regarding any complications can be an essential step in navigating this unsettled terrain while maintaining positive business relations.

In summary, this situation presents a complicated web of legal obligations and operational challenges for companies engaged with NIS. As the deadline approaches, companies in Serbia must remain vigilant, continuously analyze their contractual agreements, and stay informed about regulatory updates.