09.12.2021 — Russian Supreme Court: Foreign Sanctions against Russian Entity Are Sufficient to Move Disputes to Russian Court without Proving Denial of Justice Abroad

The Russian buyer subject to US and EU sanctions (Uraltransmash) petitioned the Russian courts to order its foreign supplier (Pesa) not to pursue its payment claims in a foreign-seated arbitration (anti-suit injunction). Lower courts dismissed the petition as Uraltransmash was actively participating in the foreign arbitration, meaning that the foreign sanctions did not lead to a diminished access to justice abroad. The Russian Supreme Court, however, found that the mere fact that the Russian party is subject to sanctions creates an inference that the Russian party will be denied justice abroad. As a result, the Russian party may terminate any previously agreed dispute resolution clauses and submit disputes directly to Russian courts, which may also issue anti-suit injunctions preventing the foreign party from pursuing its claims abroad.

Uraltransmash’s petition was based on the recent legislative amendments under which Russian parties subject to foreign sanctions may move all disputes to Russian courts if the contractually agreed dispute resolution clause became inoperable due to foreign sanctions, which lead to a restricted access to justice abroad (Arts. 248.1, 248.2 of the Russian Commercial Procedure Code). Lower courts interpreted the “access to justice” wording as imposing a separate requirement and therefore found that Uraltransmash needed to show not only that it was subject to foreign sanctions, but also that these sanctions had in fact made it impossible to arbitrate disputes with Uraltransmash’s involvement. As Uraltransmash was participating in the foreign-seated arbitration, the lower courts rejected its petition and found that the previously agreed dispute resolution clause did not become inoperable.

The Supreme Court reversed the rulings of the lower courts and found that the mere fact of sanctions was sufficient for Uraltransmash to move disputes to the Russian court, as the hostile nature of foreign sanctions creates an inference that Uraltransmash will be denied justice abroad. Therefore, Russian parties targeted by foreign sanctions are entitled to unilaterally withdraw from previously agreed dispute resolution clauses and also seek to compel the foreign party to move their claims to a Russian court by requesting anti-suit injunctions enforceable by judicial penalties (the Ruling of the Supreme Court of the Russian Federation dated 09 December 2021 No. 309-ЭС21-6955 (1-3) on case No. А60-36897/2020).

06.12.2021 — Building Commissioning Procedures for Russian Construction Projects are Simplified

At the beginning of December 2021, commissioning and title registration procedures with regard to newly constructed buildings were simplified through statutory amendments. Changes include the option to amend an issued building commissioning certificate if required due to difficulties with title registration. The changes also allow developers to undergo the title registration procedure concurrently with the building commissioning procedure.

The legislative amendments provide for the optimization and harmonization of commissioning and title registration procedures. First of all, the new statute addresses a recurring problem where registration of title to a newly constructed building is hindered due to inconsistencies in the documents issued after the building commissioning, such as the technical plan and the commissioning permit. To resolve this problem, the law will now require Russian state authorities to amend the commissioning documents within 5 business days upon the developer’s application.  

In addition, the legislative amendments will allow developers to simultaneously apply for building commissioning and title registration. However, to benefit from this option, the developer has to confirm that the relevant building was constructed without using third party financing or that the developer has fulfilled its contractual obligations before all relevant third parties and has obtained their consent to title registration. Furthermore, the statutory amendments will also not apply to a number of objects, including those constructed under agreements on share participation in housing construction. The statutory amendments will enter into force on 01 September 2022 (see the Federal Law dated 06 December 2021 No. 408-FZ).