Legal alerts / 9.06.2020

The Sanction-Related Amendments to the Russian Commecial Procedure Code

The Russian State Duma has adopted in the third and final reading a new bill No. 754380-7 (the “Bill”) to amend the Russian Commercial (Arbitrazh) Procedure Code. The amendments deal with the opportunity to resolve disputes between sanctioned Russian companies and foreign contractors in the Russian commercial courts. As stated in the explanatory note, currently Russian individuals and companies that are subject to sanctions cannot properly defend themselves in foreign state courts and foreign-seated arbitrations. For this reason, the Bill provides for two principal new measures.

Firstly, two types of disputes are subject to the exclusive jurisdiction of the Russian commercial courts:

  • disputes involving Russian companies and individuals that have been subjected to foreign restrictive measures;
  • disputes involving Russian companies and individuals, if the ground of the dispute is foreign restrictive measures against these persons.

Nevertheless, the exclusive jurisdiction of Russian commercial courts over such disputes may be excluded by the parties’ agreement or an international treaty.

The Bill gives to sanction-listed persons the right to submit a dispute to the commercial court of a constituent entity of the Russian Federation at the place of their location or residence provided that there is no dispute between the same persons, on the same subject matter and on the same grounds in a foreign court.

Secondly, related to this, the Bill sets out the opportunity of the Russian commercial courts to issue anti-suit injunctions with respect to any legal proceedings in foreign state courts and foreign-seated arbitrations at the request of a Russian sanctioned person.

Undoubtedly, the adoption of the Bill’s provisions may significantly affect many court proceedings with Russian sanctioned persons currently taking place in different states including the United States, United Kingdom and some European jurisdictions. The primary legal impact of the Bill is that non-compliance with the rules of exclusive jurisdiction leads to the inability to recognize or enforce foreign court or arbitration awards [1]. Therefore, if a foreign court has considered such dispute and issued a ruling on it in favor of a foreign counterparty, the latter will not be able to foreclose the property and funds of a sanctioned person in Russia.

At the same time, an anti-suit injunction issued by the Russian commercial court will not be binding on a foreign court or foreign-seated arbitration – they are also competent to resolve a dispute due to the applicable law and rules. However, it is necessary to keep in mind that enforcing a non-Russian court’s ruling in contradiction with an anti-suit injunction will likely be impossible in Russia.

 

[1] Article 244(1)(3) of the Russian Commercial (Arbitrazh) Procedure Code.

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