Ukraine imposed sanctions on Subway and recognized the American chain as a sponsor of terrorism

National Agency for the Prevention of Corruption of Ukraine (NAPC) has added the American multinational fast food restaurant franchise Subway to its list of international war sponsors.

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More than 500 of the company’s restaurants continue to operate in the Russian market, paying hundreds of thousands of dollars in taxes to the budget of the country, which unleashed a full-scale war in Ukraine.

Subway actively advertises its activities through Russian social networks sanctioned in Ukraine and delivers food through Yandex services that cooperate with Russian government and law enforcement agencies.

Subway is a war sponsor

Subway is one of the largest chains in the world in terms of the number of catering establishments. It is known for its sandwiches, salads and wraps. The company positions itself as a “healthy alternative to traditional fast food.” The company says it cares about the health of consumers, but according to Ukrainian authorities, it continues to operate in Russia by financing the murders of Ukrainians. The Russian Subway chain is now the third largest in the number of outlets in Europe after the UK and Germany.

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The company has been operating in Russia for more than 20 years, has created about 6000 jobs, and has 550 restaurants in 122 cities. Since the start of the full-scale invasion, it has not reported any reduction in its activities in Russia. As a result, in addition to paying taxes to the state budget of the terrorist state, the company provides jobs to Russians, which supports the Russian economy and the level of employment of the population.

A special feature of Subway's business is that they operate under a franchisee system, that is, there is a large network of legally separate entities operating under the Subway brand.

They generate income and pay taxes. In Russia, the Subway franchise is owned by Subway Russia Service Company, headquartered in St. Petersburg.

Subway said all restaurants in the country are independently owned and operated by local and master franchisees, so restaurants remain open in Russia. The Ukrainian authorities believe that this statement regarding the inability to influence its own franchisees is untrue and in fact misleading.

Thus, in May 2022, Russian banks began to block royalties (payments for using a franchise) because they were not ready to take responsibility for processing payments to a franchisor from the “unfriendly” United States. Clients could not obtain ownership from Russian franchisees and send payments to the United States.

In this regard, at the request of Subway, the Russian law firm Nevsky IP LAW carried out the necessary analyzes of contracts, as well as the sanctions legislation of the Russian Federation, and found the appropriate legal mechanisms to legally collect royalties from franchisees and send them to the holding company. As a result, the company helped Subway once again collect royalties from Russian franchisees. Banks have resumed processing payments, and franchisees have returned to their royalty obligations.

Subway in Russia is actively conducting advertising campaigns through the social networks “VK” and “Odnoklassniki”, which belong to the legal entity of the sanctioned LLC “Company VK”. In addition, Subway uses food delivery services through the Yandex.Eda service. According to Ukrainian representatives, this service is controlled by the Yandex group of companies, which cooperate with Russian government and law enforcement agencies, including the FSB.

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Yandex services have previously been included in the list of candidates for sanctions by the National Anti-Corruption Commission of Ukraine.

According to the Ukrainian authorities, there were no attempts to condemn Russia’s war against Ukraine from the company’s management.

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