Published 5 February 2024
Starting in 2020, due to the introduction of the following two new provisions under Russian law related to disputes involving sanctioned parties, international arbitration in Russia is facing significant challenges which we will discuss in this paper. First, Russian courts received powers to establish jurisdiction over disputes involving sanctioned parties, where otherwise such disputes would have been considered by foreign courts or arbitral tribunals seated abroad (Article 248.1 of the Arbitrazh (Commercial) Procedure Code). Second, Russian courts obtained a new tool - an injunction prohibiting a party to commence or continue a foreign litigation or an arbitration seated abroad, when another party is under sanctions (Article 248.2 of the Arbitrazh (Commercial) Procedure Code).
The Supreme Court of the Russian Federation widely interpreted these provisions in the well-known Uralvagonzavod case. The court stated that the mere fact of imposition of sanctions on a Russian party to a dispute is enough to apply said provisions, rendering a dispute resolution clause incapable of being performed. Subsequently, a Russian first instance court tried to set forth an alternative interpretation in the BM-Bank case, indicating that one may preserve an international dispute resolution agreement by proving that the sanctioned party’s access to justice is not restricted and that the guarantees of fairness and independence will be provided within the international arbitration in question.
This article describes the latest developments in Russian courts’ practice applying Articles 248.1-248.2 of the Arbitrazh (Commercial) Procedure Code in 2022-2023. Having personally been engaged in the BM-Bank case, the authors have managed to track all of the cases considered by the Russian courts in applying these provisions. This article also discusses how these provisions may affect recognition and enforcement of foreign arbitral awards in Russia in the future.
Since the application of these provisions in Russian disputes is increasing, this article will be of interest for all international arbitration practitioners whose clients face Russia-related arbitrations.
This paper will be part of the TDM Special Issue on "Sanctions and International Arbitration: Impact on Substantive and Procedural Issues". More information here www.transnational-dispute-management.com/news.asp?key=1960