Russia

Corporates who have operated in Russia, or who have contracted with Russian entities (including those who have exited from Russia as a result of the 2022 invasion of Ukraine) may remain exposed to litigation risk in that jurisdiction; for example, on the basis of Russian legislation allowing Russian courts to hear disputes despite forum selection clauses in favour of elsewhere. We briefly highlight below some of the bases upon which that may occur.

Russian arbitration law

Russia is a continental law system and legislation is the primary source of law. Russian arbitration law comprises:

  • Federal Law “On arbitration (arbitral proceedings) in the Russian Federation” (dated 29 December 2015, No.382-FZ), governing Russian domestic arbitration;
  • Federal Law “On international commercial arbitration" (dated 7 June 1993, No.5338-1), which is based on the UNCITRAL Model Arbitration Law and governs international commercial arbitration in Russia; and
  • The Russian Commercial (Arbitrazh) Procedure Code (the “CPC”), which regulates the procedure for the recognition and enforcement of arbitral awards (based on the New York Convention 1958, to which Russia is a party) and allocates competence (jurisdiction) between the Russian state courts and arbitral tribunals. As noted above, Russian law contains a number of bases upon which mandatory jurisdiction might be taken by the Russian courts over a dispute – despite the parties’ agreement providing differently.

Exclusive jurisdiction and restricted (sanctioned) parties

Pursuant to the CPC, sanctioned Russian individuals or Russian or foreign companies that have been impacted by “restrictive measures” (i.e., sanctions, for example) imposed by public authorities are entitled to:

  • submit their disputes to Russian arbitrazh (commercial) courts; and
  • request from such courts an anti-suit injunction in relation to foreign court or arbitral proceedings.

The CPC overrules any agreement by the parties providing for jurisdiction of foreign courts or foreign arbitration if the agreement has become inoperative due to the sanctions, or the sanctions have created obstacles for such party’s access to justice, in which case the Russian arbitrazh (commercial) courts may have exclusive jurisdiction and rule on a case that would otherwise be arbitrated or tried in a court outside of Russia.

The CPC provides that sanctioned parties may, where the Russian courts have exclusive jurisdiction over the dispute, apply to the Russian court for a prohibition on the commencement or continuance of proceedings before a foreign court or arbitration (an anti-suit injunction). If the anti-suit injunction is not complied with, the sanctioned party may obtain a judgment from the Russian court for the recovery from the non-complying party of compensation up to the amount of the claim brought in the foreign proceedings and legal costs.

Restrictions on arbitrability of corporate disputes

Russian law contains special rules concerned with the arbitrability of disputes involving the establishment or management of, or participation in a corporate entity (“Corporate Disputes”). Some Corporate Disputes, as defined by the law, are non-arbitrable. Others may only be arbitrated when seated in Russia and administered by a government-licensed institution (PAI). In situations where these rules are applicable it may be that the Russian courts would disregard an arbitration agreement falling outside those requirements (and accept jurisdiction), or refuse to enforce a resultant award.

The Linklaters Arbitration Group has managed a number of proceedings for multinationals involving attempts by counterparties to take advantage of the restricted parties rules to bring proceedings in Russia. The appropriate response requires careful and early consideration, and will depend on a range of factors such as the existence and location of assets within or outside Russia, the nature of the arbitration agreement that the counterparty is seeking to ignore, the total sums at stake, and wider business implications.

It will often be necessary to take strategic decisions at an early stage, such as whether to participate in any Russian proceedings, whether to bring substantive, defensive proceedings outside of Russia, whether to seek anti-suit injunctions from national courts or an arbitral tribunal, and whether to make use of any expedited or emergency arbitration mechanisms that may be available. If you are faced with such a claim, or threatened claim, please contact us.