Published 6 February 2024
Sanctions have increasingly been deployed in the past two decades by the U.S. government (as well as other governments around the world) against individuals, entities and other states. These sanctions seek to compel or deter behavior in a variety of areas, ranging from the waging of war to illicit activities such as money laundering, narcotics and weapon trafficking, terrorism financing and forced child labor.
In this piece, we examine the main ways in which the U.S. sanctions regime intersects with and impacts international arbitration, and how sanctions-related risks can potentially be mitigated or addressed. First, at the initial contracting and pre-dispute phase, we consider the tailored use of force majeure clauses, and in the absence of an express force majeure clause covering sanctions-related risks, we examine the limited avenues through which New York law might excuse contractual performance or allow contractual termination on the grounds of frustration, impossibility or illegality. We also highlight how sanctions-related risks may inform early case strategy in other ways, such as necessitating targeted counterparty due diligence or preliminary asset mapping exercises. Second, we highlight the circumstances in which a regulatory license may be needed under certain U.S. sanctions regimes in order for certain counsel, arbitrators and/or arbitral institutions to be involved in an arbitral proceeding involving a U.S.-sanctioned entity, and the related risks that ought to be considered in the event such license is not granted. Third, we consider key issues that may arise at the point of enforcing an award in the U.S. either against, or by, a sanctioned entity.
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