One more dispute on the claim of a Russian company1, which had been subject to restrictive measures, including those of the European Union and the United States, has reached the Supreme Court. The Company claimed that the sanctions imposed on it significantly limited its right to protection and access to justice in arbitration proceedings at the Arbitration Institute of the Stockholm Chamber of Commerce (SCC).
In the trial court the applicant (Uraltransmash JSC) asked the сourt to prohibit the proceedings at the SCC, and in case the defendant (RTS PESA Bydgoszcz) fails to comply with the court’s ruling – to award monetary compensation.
The trial and cassation courts refused to satisfy the applicant’s claim, considering that there were no obstacles which prevented the applicant from access to justice. The courts also concluded that there were no grounds for recognizing the parties’ arbitration agreement as unenforceable.
Interestingly, the courts in details reviewed the factual circumstances of the case and found that the applicant had been participating in the arbitration proceedings for a long time through his authorized representatives, appointed an arbitrator, submitted several procedural documents, and referred to Polish experts for advice on the proceedings.
In its claim to the Supreme Court the applicant referred to the absence of a legally fixed obligation to prove the existence of actual obstacles in exercising its right to judicial protection in the foreign state that applies restrictive measures (paragraphs 2 (1) and 3 (2) of Article 248.1 of the Arbitrazh Procedural Code).
The Supreme Court agreed with the applicant’s position and pointed out that the application of restrictive measures itself already creates obstacles for the Russian party in access to justice. That is why unilateral will to transfer the dispute to the jurisdiction of Russian arbitration courts is sufficient. Proving the impossibility of executing the arbitration clause due to restrictive measures is optional.
Thus, the Supreme Court noted that the mere fact of introducing restrictive measures against a Russian person participating in a dispute in international commercial arbitration located outside the territory of the Russian Federation is assumed sufficient to conclude that its access to justice is restricted.
The Supreme Court also paid attention to the defendant’s argument that the satisfaction of the applicant’s claim would lead to the imposition of the obligation on the defendant to terminate the arbitration proceedings by rejecting the claim. This would lead to the impossibility of filing the same claim again. Therefore, such court order would significantly violate its right to defense. The Supreme Court agreed with the defendant’s argument but pointed out that withdrawing the claim caused by the court order does not deprive the party of the right to file a similar claim with the Russian state court.
Altering the judicial acts on the grounds that the lower courts breached Russian law provisions, the Supreme Court at the same time refused to satisfy the applicant’s claim on factual grounds – the SCC proceedings had already been closed and a final award was rendered. In such circumstances, the defendant would not be able to take measures to terminate the proceedings, and, as a result, the injunction would lose its meaning.
As we can see, the Supreme Court expressed an unambiguous position on how to apply the provisions of Article 248.1 of the Arbitrazh Procedural Code and confirmed that it is only necessary to prove the existence of restrictive measures against the applicant company. The proposed interpretation, if accepted by the lower courts, provides companies subject to sanctions and involved in foreign proceedings with an understandable toolkit for transferring such disputes to the Russian jurisdiction.
Obviously, such an approach also raises several open questions: will this be a turning point for foreign subcontractors to doubt in good faith of Russian companies or how the business practice and foreign public orders will react to “heal” the current situation.
1 The case: https://kad.arbitr.ru/Card/99ce7aa2-7f06-4615-baa5-94473b980771