Angelika Hellweger explains how Russia has given Russian parties the right to take sanctions-related disputes back there – and how this is challenged.
Article 248 of Russia’s Arbitrazh Procedure Code allows Russian parties affected by sanctions to apply to the Russian courts to relocate their disputes to that country. The introduction of this article was based on the argument that sanctioned Russians do not receive fair and impartial treatment in “unfriendly” jurisdictions.
It has led to Russian courts granting Russian parties the right to override previously signed jurisdiction clauses in commercial contracts - on the basis that, due to the imposition of sanctions, Russian persons are basically denied access to justice. This includes, inter alia, the ability to pay for and retain the services of chosen legal representatives; which limits a party’s access to justice.
Nullify
In cases where Russian parties have asked Russian courts to apply Article 248, the other party in the case has often sought an anti-suit injunction to nullify the effect of the article in English courts.
As a result, UK courts have routinely granted these anti suit injunctions. Examples of this include Airbus Canada Limited Partnership v Joint Stock Company Ilyushin Finance Co (No. 2) [2024] EWHC 790 (Comm), Barclays Bank PLC v PJSC Sovcombank & Anor [2024] EWHC 1338 (Comm), Barclays Bank PLC v VEB.RF [2024] EWHC 1074 (Comm), and UniCredit Bank GmbH v RusChemAlliance LLC [2024] UKSC 30.
Besides the English courts, Hong Kong courts are also routinely called upon by non-Russian parties. This was seen recently, when the Hong Kong Court of First Instance, in Bank A v Bank B [2024] HKCFI 2529, granted an anti-suit injunction against a Russian bank – showing that Hong Kong courts take a clear stance in protecting their role as a seat of arbitration.
In this case, the Russian bank had brought court proceedings in Russia over a payment owed by the other bank, which is German. The Russian bank took this action despite a settlement agreement between the parties containing an Hong Kong International Arbitration Centre clause governed by English law.
The German bank said European Union sanctions prevented payment being made to the Russian bank. It brought the proceedings in Hong Kong to prevent the Russian court proceedings being enforced and to stop any interference with the arbitration. In objecting to these proceedings, the Russian bank said that sanctions are an act of state. As a result, it argued, the dispute was not capable of undergoing arbitration and fell exclusively within the jurisdiction of the Russian court.
But the Hong Kong court held that it had jurisdiction and granted the anti-suit injunction against the Russian proceedings.
It granted the injunction on the basis that:
- the dispute related to a settlement agreement between two banks
- no claims by or against states were involved, and
- the court was being asked to determine the validity of an arbitration agreement, not the legality of sanctions
