The impact of sanctions on the resolution of international business disputes: maintaining the status quo or looking for alternative jurisdictions?

Abstract

The negative impact of the economic sanctions is not limited to the sphere of substantive law; it also extends to issues related to dispute resolution. Trying to achieve a fair resolution of disputes sanctioned persons may face many obstacles literally at every stage of the proceedings, starting with problems related to payment of arbitration fees, searching for counsels and arbitrators who are often reluctant to taking corresponding sanctions risks, and ending with the stage of enforcement of a judgment or an arbitral award. Under these conditions, the conduct of court or arbitration proceedings, if theoretically possible, in practice will be associated with substantial organizational difficulties, delays in consideration of a case and significant additional costs. In this regard the authors, based on the foreign and Russian experience, analyze advantages and disadvantages of various options for resolving the disputes involving sanctioned persons, including maintaining the former procedure for resolving disputes, transferring disputes to a neutral or domestic jurisdictions, as well as the latest legislative amendments, namely provisions of the Russian Arbitrazh Procedure Code expanding the exclusive jurisdiction of Russian arbitrazh (commercial) courts which have entered into force in June 2020. Maintaining the status quo between parties to a dispute provides a high degree of legal certainty but does not take into account the potentially serious breach of sanctioned persons’ rights. While the transfer of dispute resolution to the domestic jurisdiction allows the latter to ensure the protection of their rights, but, in turn, carries the risks of violating the existing balance in relations between the parties, refusal to recognize and enforce a future judgement in foreign jurisdictions and etc. Given the impossibility to foresee in advance the extension of restrictive measures to parties of a contract and character of such measures, perhaps the optimal solution could be the so-called cascade arbitration clauses, providing for variability of actions in certain cases, in particular: 1) choice of alternative forum; 2) establishing additional requirements for the neutrality of arbitrators; 3) waiver of the parties to submit disputes to jurisdictions that cannot provide equal and impartial resolution of the dispute in new circumstances. In addition, the parties are strongly encouraged to carefully consider the choice of law provisions, including choice of law applicable to the arbitration agreement.