German Companies Exiting Russia Face Legal Complications

In the days after Russia’s invasion of Ukraine, the German software giant SAP halted all its sales in Russia. But it provoked the ire of Ukrainian leaders by continuing to offer updates and cloud computing access to Russian customers not targeted by Western sanctions.

This week SAP, which makes business software to handle tasks like logistics and accounting, announced that it was taking the final steps toward an “orderly exit” from its operations in Russia, a process it said had been made more difficult by its concern for employees and Russian laws that prohibited unilaterally quitting contracts.

“We’re not in the consumer business — we sell very complex software solutions,” said Luka Mucic, SAP’s chief financial officer, explaining what he called the “significant complexity” of winding down three decades of business in the country.

SAP’s statement went further than its previous announcements since the invasion, noting its “intent” to stop supporting and maintaining its products. The pullout could erode back-office computer operations at many Russian companies, including state-owned Sberbank, Russia’s biggest financial institution. In 2018, SAP created what it called “Russia’s largest cloud project” to manage Sberbank’s 230,000 employees.

SAP’s planned exit follows that of other German companies like Henkel, maker of household cleaning and hair care products, the network provider Deutsche Telekom and the Obi home improvement chain. Still, others remain in Russia and face difficult decisions as the war stretches into its next phase.

Among them is the automotive supplier Continental, which said Wednesday that it was forced to temporarily restart production at its tire plant in Kaluga, outside Moscow.

Continental said it supported the economic sanctions against Russia. The company halted its production in the country in early March, days after the invasion.

But the company said it now faced increasingly punitive Russian laws regarding foreign companies and was required to restart the factory to produce car tires for the Russian market.

“We are only doing this temporarily because we want to protect our employees,” said Birgit Hiller, a spokeswoman for the company. “We will not be making a profit.”

Legal obligations also made it more difficult for SAP to quit its business in Russia, the company said. SAP stopped all sales in Russia and Belarus on March 2. Three weeks later, it began actively shutting down the company’s cloud operations in the country.

At that time, cloud services for customers who had been placed under sanctions were halted. Other customers were given the option to have their data returned to them, deleted or moved to a server outside the country. That offer was met with accusations that SAP was supporting companies that carried out the killing in Ukraine.

Last month, President Volodymyr Zelensky of Ukraine chastised SAP, Oracle and Microsoft in a Twitter message for supporting “the bloody Russian aggressor.” It was the first time that he had directly named multinational companies.

“Stop supporting your products in Russia, stop the war!” he said.

SAP said Tuesday that while it could not prevent any former customers from continuing to use its software, the company was legally obliged to provide nonsanctioned users with options for handling their data.

“The data in data centers belongs to customers, not to SAP,” it said.

If companies choose to have SAP move their data to a cloud server outside Russia, SAP said, it will not renew their contract.

Zubair Q Britania

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