On September 9, Dentons, with support from the Russian National Committee of the International Chamber of Commerce — World Business Organization (ICC Russia), LF Academy and Legal Insight magazine, held an online conference about the impact of the new rules of the Russian Federation Commercial Procedure Code on international arbitration. The new rules concern the Russian courts having exclusive jurisdiction to hear disputes involving sanctioned persons.

Moderating the conference, partner Konstantin Kroll presented an overview of US and EU sanctions and the practical aspects of their impact on international arbitration. Konstantin then addressed the changes in Russia’s Commercial Procedure Code, highlighting that now commercial courts in Russia are getting exclusive jurisdiction over disputes involving sanctioned persons, even where a party has entered into an arbitration agreement, included an arbitration clause in its contract, or concluded a prorogation agreement to hear the dispute in a foreign court.

As noted in Mr. Kroll’s introductory presentation, where arbitral proceedings have been commenced outside Russia and a party to the proceedings believes its access to justice is limited due to sanctions, it can take advantage of the changes to the Commercial Procedure Code and ask the Russian court for an anti-suit injunction, so that the case is heard on the merits in Russia. If the arbitral proceedings abroad continue notwithstanding an injunction issued by a Russian court, the Russian court can render a decision fining the party to the proceedings that went against the Russian court’s order. The fine can be up to the entire amount of the claim and include the costs of the non-breaching party.

Leading international arbitration practitioners talked about what could happen to arbitration in their jurisdictions if a Russian court determines it has jurisdiction despite a contract’s arbitration clause. The conference’s line-up included Secretary-General of Hong Kong International Arbitration Centre Sarah Grimmer, Heger & Partner’s partner Susanne Heger (Vienna, Austria), as well as Dentons’ representatives: partners Lawrence Teh (Singapore and Hong Kong), Dominic Pellew (UK), Anna Crevon (France), Amy Klaesener (Germany), Barton Legum (France and US, Global Co-chair of the Litigation and Dispute Resolution practice), and senior managing associate Diora Ziyaeva (US).

Key conclusions from the panel:

• Sarah Grimmer (Secretary-General of Hong Kong International Arbitration Centre) noted that the HKIAC and Hong Kong-seated arbitral tribunals would not be bound by the Russian court decisions and would proceed in the presence of an arbitration agreement. Also, there is recent case law in Hong Kong in which the courts issued an anti-suit injunction against foreign court proceedings where the foreign court had ruled in favor of its own jurisdiction.
• Partner Lawrence Teh (Dentons), speaking about Singapore and Hong Kong international arbitration, said that how the arbitration agreement is drafted could determine whether the recent changes to the Russian Commercial Procedure Code are relevant or applicable to the arbitral proceedings. If, for example, the arbitration agreement is said expressly or impliedly to be governed by Russian law, then a party could argue that any agreement to arbitrate was subject to Russian law, including the recent changes to the Russian Commercial Procedure Code. If the arbitration agreement is said expressly or impliedly to be governed by a non-Russian law, then a party could argue that Russian law was not relevant or applicable to the agreement to arbitrate. These issues could affect matters such as the jurisdiction of the tribunal and the tribunal’s obligation to suspend or continue with arbitral proceedings, and any onward review by the court of the seat or place of arbitration of the arbitral proceedings.
• Partner Susanne Heger (Heger & Partner) presented an Austrian view on the topic of discussion. She emphasized that EU sanctions do not contain restrictions on arbitration. Accordingly, VIAC can administer proceedings involving sanctioned persons. However, practical problems may arise, such as the inability to pay an advance on costs or attend a hearing. Susanne explained that Austrian law does not provide a legal instrument such as an anti-suit injunction. She went on to look at the situation from the perspective of an arbitrator in a VIAC proceeding to whom a party has declared the exclusive competence of Russian courts or has submitted an injunction against a Russian court. She concluded that this would not affect arbitration in Austria for a number of reasons, including the generally accepted principle of competence-competence, the absence of extra-territorial effect of Russian law, and the absence of an agreement between Russia and Austria on the mutual recognition of court decisions. However, as an arbitrator Susanne did not rule out the possibility of terminating the arbitration in the event of an impasse in which a sanctioned party would be so limited in its rights that it would be impossible to complete the arbitration without infringing its rights.
• Partner Amy Klaesener pointed out that a Russian court’s injunction on commencing or continuing arbitral proceedings will not be accepted by the German courts as there is no general bilateral recognition of civil court judgements between Russia and Germany, and German courts will not enforce purely procedural orders.
• Partner Anna Crevon explained that while there is no treaty in force between France and Russia on the enforcement of court decisions, French courts can enforce any foreign judgment, including a Russian one, even in the absence of a treaty. Three criteria must be met for this: the foreign court’s indirect jurisdiction based on a connection between the dispute and that jurisdiction, compliance with international public policy, and lack of fraud. For instance, in 2013, the French Supreme Court confirmed enforcement in France of a Russian judgment issued in favor of Gazprombank.
• Partner Dominic Pellew explained that English arbitral tribunals and courts will not apply the new Russian rules unless (possibly) the arbitration clause is made subject to Russian law, and in most cases with a London arbitrations that do not happen. In addition, the English courts could issue anti-suit injunctions preventing parties affected by sanctions from making use of the new rules in the Russian courts.
• Partner Barton Legum described the US courts as unafraid to address overseas conduct and noted that those courts will not receive well an attempt by a Russian party to nullify sanctions imposed by the US Congress.
• Senior Managing Associate Diora Ziyaeva noted that although US policy favors arbitration, US courts can, in extraordinary circumstances, issue anti-suit injunctions. A party may seek an injunction to stay the arbitration proceedings, using the Russian court’s injunction as evidentiary support. A party opposing an anti-arbitration injunction may simultaneously seek an order compelling arbitration in the US and an anti-anti-suit injunction.

A recording of the conference is available at this link.

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