Russia’s “Partial Mobilization” Order & Violations of International Law in Ukraine: Crossing the New Red Line in Corporate Complicity & Material Risk, 7 November 2022

Russia’s military invasion and occupation of Ukraine demonstrates the nexus of human rights and material risks faced by companies with operations or business relationships in conflict-affected areas. In response to the invasion, more than 1,000 companies have curtailed operations in Russia, but many remain – attempting to balance their continued operations with an expanding universe of legal, operational, and financial risks. However, on September 21, 2022, President Vladimir Putin announced a series of amendments to a longstanding federal law “on mobilization training and mobilization in the Russian Federation”, tipping the balance against multinationals’ continued operations and business relationships in Russia. The decree marks a new bright red line for potential corporate complicity in violations of international law and material risks for companies and their shareholders...

The impacts of the decree on companies are already evident: on October 21, Reuters reported that a Russian employee of Raiffeisen Bank was killed after being conscripted under the decree, despite the company seeking an exemption. Reports show that some companies are not seeking exemptions nor assisting employees, such as Schlumberger “not authorizing remote employment to escape mobilization,” casting doubt on corporate claims that they are remaining in Russia for the benefit of their employees.

Additionally, on July 14, 2022 Putin signed a new law allowing the government to impose special economic measures to support “counter-terrorism and other operations outside of Russia.” Once introduced, such measures would require companies to provide goods and services in support of these operations and impose significant penalties for failing to do so. Moreover, President Putin’s declaration of martial law and establishment of a Coordination Council in the four occupied Ukrainian regions, “could mean streamlining the federal and private sector resources towards the war efforts in Ukraine”...

Companies connected with armed conflicts are obligated to abide by the terms of international humanitarian law and can be found liable for war crimes. A company may be complicit in, and its executives prosecuted for, a war crime under Article 25 of the International Criminal Court’s Rome Statute as long as it had knowledge of the act, even if it did not intend for it to be carried out...

Companies remaining in the Russian market also face extensive regulatory risks due to an unprecedented array of economic sanctions, export controls, and import regimes imposed by numerous governments in response to Russia’s violations of international law. Prior to its invasion of Ukraine, companies that violated sanctions and export controls against Russia were steeply penalized...

Russia’s invasion of Ukraine has also created significant operational and financial risks for companies remaining in the market, including nationalization and seizure of assets, loss of suppliers, partnerships, and customers, inability to retain skilled employees, reputational harm, and difficulty delivering goods/services. For example, aluminum giant RUSAL stated that due to government bans on exports to Russia and sanctions against key Russian suppliers, the company will likely incur significant losses. Similarly, damage to the Caspian Pipeline and Nord Stream I pipeline, believed by many experts to be conflict-related, has caused disruptions in companies’ export of oil and natural gas out of Russia. Under the partial mobilization decree, companies could also lose access to employees or be forced to hand over buildings, production capacity, or transportation to the Russian state...