EXCLUSIVE: Ads for global snack giant appeared on UK-sanctioned Georgian TV months after designation

Pepsico, which has a large subsidiary in the UK, said the ads do not breach the sanctions rules, as lawyers warned of potential risks to the firm.

CITY OF LONDON—The UK sanctioned a pro-Russian Georgian TV channel in February this year but ads for products owned by global snack and fizzy drink giant Pepsico, which has a large presence in Britain, were still being broadcast in August. The case points to the details of how sanctions rules work, rather than a violation, experts said.

The scene is of a sunny green field tended by a farmer with his trusty red tractor, picking round, plump potatoes from the fertile ground, which are then turned to crisps, the world’s favourite snack on the go. In this instance, the product are of a brand owned by global corporation Pepsico. Nothing could be more wholesome in terms of TV advertising.

But in the increasingly fraught geopolitical environment these adverts are triggering calls from activists in the Republic of Georgia for US-headquartered Pepsico to stop dealing with the TV channel because it is said to support an increasingly authoritarian Russia-allied government against a population that wants a more open society along the European model. The US and EU have not sanctioned Imedi TV.

The activists, requesting anonymity from reporter.london for fear of retaliation by the Georgian authorities, also called on the UK government to investigate the ads.

They also condemned Pepsico’s continuing relationship with the channel, which they said pushed Russian propaganda in the country amid longstanding public protests that have been brutally repressed by the Moscow-friendly government.

reporter.london reviewed video and photo evidence that ads for Pepsico products were running on Imedi TV as recently as August 18, despite other large international companies cutting ties with the channel.

Parts of Georgia have been occupied by the Russian army for years and the country has struggled to achieve independence from Moscow’s sphere of influence in spite of periodic social unrest calling for closer relations with Western democracies.

When the UK put Imedi TV under sanctions, it cited the channel’s pro-Russian stance on the invasion of Ukraine. “It spreads and has spread deliberately misleading information concerning Russia’s full-scale invasion of Ukraine to its audiences, which are predominately located in Georgia, which provides support for or promotes a policy or action which destabilises Ukraine or undermines or threatens the territorial integrity, sovereignty or independence of Ukraine,” the official designation said.

Pepsico owns 21 household-name consumer brands in the UK, while employing some 4,500 people across 10 locations, according to its official website.

A Pepsico spokesperson said: “Pepsico takes compliance with laws and regulations seriously. These advertising activities do not breach any applicable sanctions regime, however we review all our media investments regularly and will continue to do so.”

Imedi TV did not reply to requests for comment. This article will be updated if a reply is given after publication.

A spokesman for the Office of Financial Sanctions Implementation at the British Government said that “OFSI does not generally comment on individual cases, reports concerning specific designated persons, or potential enforcement activity.”

Law and politics

Due to Pepsico being a US company and the UK subsidiary being separate from the Georgian business, no sanctions violation is alleged – however, prominent lawyers said that risks could emerge in the future.

So long as the precise subsidiary taking out the advertising contract is outside the UK, in practice British sanctions have not been violated, said Anna Bradshaw, a specialist sanctions lawyer with Peters&Peters, the prestigious British law firm.

“It won’t be a problem for Pepsico unless it’s the UK subsidiary doing the advertising, but there is a theoretical risk of them ending up on a list because of the association to someone who is sanctioned,” she said. “In this case I doubt Pepsico will be targeted because there would be political ramifications given the size of the company.”

A second legal expert said the company could find itself investigated for potential UK links to the entity taking out the advertising, also known as a “UK nexus.”

This could mean as little as payments being routed through UK banks, the executive decision to advertise being made either by a UK national or inside the UK, or UK nationals working on the management of the Georgian firm, said Nigel Kushner, chief executive of W Legal, a British law firm.

“If, for example, marketing decisions such as advertising are subject to authorization or agreement by a UK company then this creates exposures,” Kushner said. “If everything goes up from the local company to a US or non UK company, and no UK personnel are involved  in this contract, its approval, or payments, then I see no UK nexus and therefore no risk. The sanctions apply to UK persons wherever in the world they are and to business conducted in whole or part in the UK.”

The case is also an example of the limitations of sanctions designations.

Another well-known lawyer focused on sanctions, John Binns of BCL Solicitors, noted that “if you are advertising what is in effect a US brand on Georgian television I don’t see how you can argue that it’s a sanctions breach in the UK,” despite the company in question running a big business in Great Britain. “It shows that the coalition of Ukraine allies has multiple sanctions regimes with a lot of gaps between them. It’s a question of whether we are doing sanctions the right way.”

Ilya Roubanis, an expert in the geopolitics of the Caucasus region, did not wish to address the Imedi-Pepsico question in particular, but speaking about the way sanctions work generally, said: “Sanctions are less effective in the services industry. It has become similar to tax, a legalistic question between evasion and avoidance, and it is less political than it should be.” Evasion is an offence while avoidance typically is not.

“The British government is taking a keen interest in services that are facilitating sanctions avoidance and evasion,” Roubanis said. “And I am assured there is every intention of doing something about it.”

(The article was updated August 20 to include a comment from the UK Treasury. As always, big thanks to B.M., who has helped edit this article.)