What is the legal basis for terminating contracts with Russian residents?

Question

This question is not about politics, it's purely about law.

Recently, a number of companies announced that they will be terminating contracts with anyone who has Russian registration.

One example is IONOS web and domain hosting:

Ukraine Conflict – Cancellation of Your Account
Dear XXX,
As you may already be aware from IONOS's public statements, IONOS has made the difficult decision to no longer provide services to Russian and Belarusian customers. While we understand that you may not personally support the war in Ukraine or the policies which led up to the war, it's important that IONOS make clear our support for the people and country of Ukraine. With that in mind, your account will be terminated effective 16/03/22, so please transfer all of your data, domain names, and any related email addresses to another provider no later than the termination date. After the termination date, any domains which are not transferred will resolve to an error page until the domain expiry date, and any data associated with your account will be deleted.
If you believe your website provides information services that are critical to the defense of Ukraine or which assist in ensuring the safety and well-being of the Ukrainian people, please reach out to us directly and an IONOS representative will review your site as a possible exception to the company's general policy on terminations. Please note that IONOS will make any such determination in its sole and unfettered discretion, without any obligation to you.
In case you need support, please contact our Customer Service team at: 1-484-254-5555.
We stand with Ukraine!

Here's what seems to be their Terms&Conditions: https://www.ionos.com/terms-gtc/general-terms-and-conditions/

I read through it, and I find these clauses remotely relevant:

IONOS may terminate this Agreement at any time for any reason, with or without cause, upon thirty days' written notice

In my understanding, this doesn't apply, because they're giving only 8 days of prior notice.

You represent and warrant that you are not a national or resident of Burma/Myanmar, Cuba, Iran, Iraq, Libya, North Korea, Serbia, Sudan, and Syria or any other country subject to U.S. Treasury Department embargo restrictions

To my knowledge, Russia is not embargoed.

In the event of "force majeure" (as defined below), IONOS may terminate this Agreement without liability to you. For purposes of the Agreement, "force majeure" shall mean circumstances or occurrences beyond IONOS’s reasonable control, whether or not foreseeable at the time of entering into the Agreement, in consequence of which IONOS cannot reasonably be required to perform its obligations hereunder or otherwise perform its obligations under the Agreement.

IONOS is an internet service, which to my knowledge is rendered outside of Russian soil. Therefore I don't see a way to declare that IONOS is "cannot reasonably be required to perform its obligations" in such situation. Also, by the time of their decision, there is no war on Russian soil.

Answer 1

The "letter" you quote says more than what Ionos says publicly, the latter not mentioning any date. The most obvious possibility is Treasury Department sanctions against Russia: while the sanctions don't necessarily prohibit servicing and any all Russian nationals or residents, Russia is subject to sanctions and that's what the TOS says. A problem is that the TOS refers to a "country subject to U.S. Treasury Department embargo restrictions", which is not legally defined. Here is the Treasury Department's explanation of that point (which is that there are very many types of restrictions: there is no legal category of "embargo restrictions"). One could then argue, in one's breach of contract arbitration hearing, that the clause cannot reasonably be interpreted the way the company (possibly) intends it to be.

The force majeure clause does not seem relevant unless they see some way in which the invasion of Ukraine makes it impossible for the company to fulfill the contract with Russians.

Answer 2

IONOS terms and conditions are written in such a way that IONOS can terminate accounts for many different reasons. This is very common for many types of service industries; they want as many ways out their contracts with customers as possible to cover all possible contingencies. IONOS users agreed to the terms and conditions, even if the users didn't read it when opening an account.

Yes, IONOS may not be giving 30 days notice, but if you want to argue about that, you have agreed to binding arbitration in Pennsylvania, according to the terms and conditions.

But we may assume they are relying on the force majeure clause:

Such circumstances or occurrences include, but are not limited to: acts of God, war, civil war, insurrection, fires, floods, labor disputes, epidemics, governmental regulations and/or similar acts, embargoes, termination

"War" doesn't mean specifically war on Russian soil; the statement is purposefully vague so that it can mean a war anywhere. And "...civil war, insurrection..." covers the rest of the contingencies when it comes to armed conflict.

Russian citizens may have other rights under national and consumer laws, but again, users agreed to arbitration in Pennsylvania, not in Russian, and unless you're spending lots of money for IONOS services, it's probably not worth contesting the closure of an account.

Answer 3

"force majeure" and impractability/impossibility/illegality all seem plausible.

Keep in mind that most instruments of international finance no longer operate in Russia (many banks have been removed from the SWIFT system, and all of the major credit card companies and PayPal are no longer operating there). A big part of an ISP is its ability to get paid for its services.

Further, Internet access to Russia is impaired and there are serious discussions of terminating it permanently. This is the other thing an ISP does and shutting down to give customers time to find other arrangements before it is too late is just responsible.

The fact that the fighting of the war is taking place in Ukraine does not mean that war is not influencing the conduct of business in Russia dramatically.

Answer 4

Like @Polygnome said in a comment, this contract termination might not have solid legal grounds and could likely be challenged in court or with the arbitration body.

However, the risk for IONOS to get actual court cases is very slim - the termination presumably only affects customers in Russia, and with postage services being disrupted by the lack of air services, those customers are unlikely to even file the necessary paperwork in a timely manner. And even if such a case goes through and the customer wins it, the potential loss for IONOS will likely be insignificant compared to the publicity they get from joining the sanctions.

Especially in case of arbitration, there will be no court expenses to pay, and IONOS will likely be required to restore access to the customer site, or reimburse them the money for the service that was not provided.

Answer 5

In england-and-wales, aside from the contractual issues, this is also a potential breach of the Equality Act 2010, the Human Rights Act 1998, and/or the European Convention on Human Rights (on which the HRA is based and which the UK is still a signatory to i.e. not to be confused with the EU Charter of Fundamental Rights).

Discriminatory termination

Per section 4 and 9(1)(b) of the Equality Act 2010, being Russian is a protected characteristic. Sections 13(1) and 19(1) define direct discrimination as "A person (A) discriminates against another (B) if, because of a protected characteristic, A treats B less favourably than A treats or would treat others" and indirect discrimination as "A person (A) discriminates against another (B) if A applies to B a provision, criterion or practice which is discriminatory in relation to a relevant protected characteristic of B's."

Being discriminatory isn't by itself sufficient to break the law. For that the discrimination needs to be unlawful. Terminating a service based on nationality is unlawful discrimination pursuant to section 29(2) which provides; "A service-provider (A) must not, in providing the service, discriminate against a person (B) [...] by terminating the provision of the service to B [...]".

Any clause in a contract which purports to allow the service provider to terminate in a way which constitutes unlawful disrimination is unenforceable pursuant to Section 142(1) which provides; "A term of a contract is unenforceable against a person in so far as it constitutes, promotes or provides for treatment of that or another person that is of a description prohibited by this Act.". To reinforce this point, section 144(1) provides that you cannot contract out of the Equality Act 2020 (i.e. you cannot agree that the Act won't apply; such a clause is unenforceable).

Exceptions

The most relevant exception comes from Section 196 and paragraph 1 of Schedule 23 which has the effect that the service provider doesn't unlawfully discriminate if the terminatation is done in pursuance of legislation or arrangements made or conditions imposed by a government minister.

It's also hypothetically possible to find an exception based on national security based on section 192 which provides; "a person does not contravene this Act only by doing, for the purpose of safeguarding national security, anything it is proportionate to do for that purpose". It's hard to see how a blanket policy of terminating all Russian customers could be a proportionate response to an issue of national security. I could see this provision being useful if a specific customer was known to be a national security threat and only they were being terminated.

What this means in practice is that terminating based on Russian nationality is likely to be unlawful discrimination unless it is done to comply with the law or a government decision. Thus, terminating a contract with Roman Abramovich might be lawful if done in pursuance of government sanctions against him, but blindly terminating all Russian customers is probably unlawful unless sanctions are in force which cover the specific service or sector.

Human Rights Act 1998 (HRA) and European Convention on Human Rights (ECHR)

Finding a law which permits the discriminatory termination isn't necessarily the end of the story. The HRA is a "constitutional" Act which theoretically means that Parliament shouldn't pass any other Act which contravenes the HRA (albeit the principal of Parliamentary sovereignty means that in practice it can; this is because we don't have a separate category of Acts which can sit above other Acts).

The HRA has the effect of importing most of the ECHR into domestic law. Article 14 of the ECHR provides (emphasis added):

The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.

This means that if Parliament passes an Act which purports to permit discriminatory termination of a contract for a service which falls within scope for any of the Convention rights, the Act will breach the ECHR. An example of this might be terminating a contract for the provision of housing which could be within scope for Article 8 (right to family life and home). The courts have over the years been quite creative in making scenarios fit within the Convention rights, which were drafted in very broad and non-specific terms.

The HRA and ECHR also contain exceptions e.g. Article 15 of the ECHR which has the effect of allowing contraventions of Convention rights "in time of war or other public emergency threatening the life of the nation [...] to the extent strictly required by the exigencies of the situation".

If an Act contravenes the HRA in a way which is ambiguous enough to permit for different possible interpretations, then Section 3 provides that the courts must interpret in the way which is compatible with the ECHR.

Failing that, the High Court and upper courts can make a "declaration of incompatibility" under Section 4(2). Per Section 4(6), this does not carry any legal force, but in accordance with constitutional principles the government is then supposed to amend the law to be compatible. Ultimately, if a claimant has exhausted all legal remedies within the domestic jurisdiction, they can bring a claim to the European Court of Human Rights.

Conclusion

There have been many media articles recently describing all sorts of situations in which Russians are being penalised simply for being Russian. I do suspect that many of these will breach the Equality Act and that we will be seeing many cases being argued and possibly won in the courts. Perhaps more shockingly, the government recently hinted that it may even target law firms which represent Russian clients trying to launch legal challenges, which to me seems a clear breach of Article 6 of the ECHR (right to a fair trial). The correct approach in my view would be for the government to focus on making sure its sanctions are legally watertight rather than trying to prevent them being challenged.