23.01.2023 — Courts Refuse to Enforce Arbitration Clauses Providing for Seat of Arbitration in Jurisdictions Imposed Sanctions against Russia
A Russian court of cassation reversed the decisions of lower courts which enforced an arbitration agreement providing that all disputes between the parties should be resolved by arbitration in France. According to the court, this arbitration agreement is incapable of being performed because it inhibits the claimant’s access to justice by requiring arbitration in a country that imposed sanctions against Russia. The court also noted that the contract itself has a close connection with Russia, which is its place of performance.
In a recent case a Russian claimant sued a Spanish respondent in a Russian court seeking a contractual payment and interest. The first instance court referred the dispute to arbitration based on the arbitration agreement that was incorporated into the parties’ contract. The appellate court agreed with this reasoning.
However, the cassation court reversed the judgment and remanded the case to the first instance court. The court invoked a recently adopted Article 248.1 of the Russian Commercial Procedure Code, which says that an arbitration agreement cannot be enforced if foreign sanctions that impair a party’s access to justice were imposed against one of the parties. Since France is among the countries that have imposed sanctions against the Russian Federation, the court found that the claimant can litigate its case in a Russian court and not at the contractually agreed forum.
According to the cassation court, the mere fact that sanctions were introduced against the claimant means that it would not have access to justice in France. The claimant, therefore, does not need to prove that sanctions in fact made it impossible to arbitrate its case as agreed in the arbitration clause. Instead, the claimant can proceed directly to a Russian state court, especially as the contract in this case had a close connection with Russia, which was its place of performance (see Decision of the Arbitrazh (Commercial) Court of the Far East District dated 26 December 2022 No. F03-6497/2022 on case No. А73-15265/2022).
