Russia, Belarus Sanctions Hit State Contractors.

• Author: Debolt, Paul
• Position: VIEWPOINT

While many U.S. contractors have been dealing with federal restrictions in response to the Ukraine invasion, many are unaware that state governments have similar executive orders or laws aimed at severing business with contractors operating in or with Russia or Belarus.

These new state measures vary in scope and severity. Some impose reporting or certification burdens on state-level government contractors, particularly those with operations in Eastern Europe or Russia.

New Jersey, for example, recently banned its state agencies from doing business with companies closely linked to the governments of Russia or Belarus. Executive Order 291, issued March 2, called for a mandatory review of state contracts, including those with "businesses that invest directly in... companies [owned or controlled by the government of Russia, Belarus, or their instrumentalities], directly or as subcontractors."

While this executive order doesn't directly place an onus on the business community, a companion New Jersey state law, R.L.2022, C.3, does. Under this law, state agencies are generally prohibited from doing business with entities or persons determined by the state to be "engaged in prohibited activities" in Russia or Belarus, including those with close links to their governments or headquartered in Russia.

Importantly, an entity contracting with the state of New Jersey must certify that neither it, nor any of its subsidiaries or affiliates under common ownership, is "engaged in prohibited activities" in the two countries. Otherwise, it must accurately explain such activities. Moreover, if the contracting company is performing any "prohibited activities," it will be obliged to terminate such activities within go days and certify as such to the state.

Under this law, a false certification can result in civil penalties and suspension or termination of contracting rights.

State governments in California, Colorado, Indiana, Massachusetts, Minnesota, New York, North Carolina, Ohio, Washington and others have also recently taken various steps to disassociate from Russian companies, state-owned entities or their affiliates.

California Executive Order N-6-22, issued March 4, requires contractors with projects valued at more than $5 million to report to the state their compliance with federal economic sanctions, as well as any steps taken in response to Russia's actions in Ukraine.

In New York, Executive Order 16, issued March 17, directs state agencies to refrain...