Russian companies that worked with foreign counterparties used to copy well-known arbitration clauses into contracts, which assumed that disputes would be resolved according to the rules of the International Chamber of Commerce (ICC), the London Court of International Arbitration (LCIA) or the Arbitration Institute of the Stockholm Chamber of Commerce (SCC) – a classic forum chosen to resolve trade disputes between the West and the East.

Dispute resolution in international commercial arbitration ensured impartiality and objectivity. However, it has become a problem after an unprecedented number of sanctions were imposed by unfriendly countries: from problems with payment of arbitration charges and arbitrators' fees to biased arbitrators from unfriendly countries and their subjective perception of sanctions regulation.

What strategies can be used to resolve disputes from today's perspective?

If you already have a contract with a clause related to unfriendly countries

First of all, arbitration is an institution that provides support and helps administer disputes. The mere fact of choosing an arbitration institution in an unfriendly country does not directly affect the trial. However, there are some aspects to consider.

Problems with Payment

It is difficult for Russian businesses to pay registration fees to arbitration institutions and arbitrators' fees. Non-sanctioned currencies are also scrutinised as there is a risk of secondary sanctions. Banks threaten to ask for additional documents or freeze the payment, which can significantly delay the case hearing. It is important to be ready for lengthy negotiations with arbitration institutions and banks and make payments well in advance.

Seat of Arbitration

Pay attention to what seat of arbitration is specified in the contract. This term does not mean the venue where the hearings will physically take place, nor the country in which the arbitration institution is located. This is the jurisdiction to which the arbitration is legally bound. It is the national courts of the chosen country that the tribunal can refer to if assistance in the dispute consideration is needed. The jurisdiction must be friendly both to the arbitration and to you as a party, otherwise neutrality cannot be guaranteed. Unfortunately, it is highly unlikely that your seat of arbitration is the one – the classic pro-arbitration jurisdictions are mostly unfriendly countries now.

There is a way out: try to change the jurisdiction. Explain that, when you were choosing the arbitration jurisdiction, you reasonably expected that it would ensure neutrality in the trial, but the unprecedented sanctions that de jure and de facto limit the parties' access to justice indicate the opposite.

In choosing better jurisdiction, a lot depends on the circumstances of the dispute and the nationality of the parties. Consider Serbia (Belgrade) and the United Arab Emirates. In the latter case, choose a free economic zone – DIFC, which has its own court system, consisting half of judges from common law countries and half of local judges, or ADGM, where the panel consists of professionals from common law countries, and many English statutes are directly implemented.

Arbitrator Election

Choose an arbitrator who can meet impartiality and neutrality criteria. I would recommend Russian arbitrators, since their legal culture and background will match your vision. Also, there are many experts among them who have extensive experience and an excellent reputation in the international community. You can also consider arbitrators from friendly countries. As for arbitrators from unfriendly countries chosen by opponents, do not be afraid to file a motion for their disqualification. Better check the arbitrators' social networks to make sure that there are no negative political statements. Of course, if you propose a disqualification, the dispute resolution will be delayed, but the chances of getting an objective and impartial result will increase.

Dispute Transfer to Russian Court

If you are unable to effectively administer justice using existing instruments, consider applying Article 248.1 of the Arbitration Procedure Code of the Russian Federation, which allows you to transfer the proceedings to Russian courts of justice. This Article was originally used for sanctioned persons only, but recently the practice has changed. Russian courts have begun to take into account the obstacles created in unfriendly countries for access to justice and in relation to non-sanctioned persons.

20/06/2024

NRD in US sanctions: is there a chance to unblock assets?

As many different comments and market-exciting publications emerged during the last week in respect of suspended consideration of applications and issuance of a licence by the Belgian Ministry of Finance, as well as the fate of the received licences and submitted applications, Tatyana Neveeva (https://verba.legal/team/tatyana-neveeva), Senior Partner of VERBA LEGAL, shared the latest news and answers to the FAQ:

The Ministry of Finance has not suspended consideration of applications, today we obtained another licence. We also continue to regularly receive clarifying questions on pending applications. 

OFAC General License 99 is valid until 13 August 2024; it allows transactions aimed at terminating relations with the NSD. 

We still hope that Euroclear will find a way for individuals to use General License 50 (https://ofac.treasury.gov/media/925326/download?inline). We have successfully relied on it several times in cases where the applicant had a sanctioned broker. However, we understand that it applies only to cases where a non-sanctioned person has an account with a sanctioned financial institution. As far as the NSD is concerned, individuals do not have a direct account with the sanctioned NSD. Therefore, we will wait for Euroclear's reaction to attempted implementation of Belgian licences after 31 August 2024.  

If no additional clarifications are issued by OFAC, and Euroclear does not consider it possible to apply General Licenses, an application to OFAC must be submitted after a permit is obtained from the Belgian Ministry of Finance.