How disputes were transferred to Russia

In June 2020 Art. 248.1 and 248.2 of the Arbitration Procedure Code of the Russian Federation. They introduced the jurisdiction of the state courts of the Russian Federation in disputes with Russian citizens and companies against which “restrictive measures” were introduced, and also gave them the right to demand a ban on proceedings in foreign courts and arbitrations. If there was an arbitration clause in the contract with a foreign counterparty, it was recognized as unenforceable if the Russian person had “obstacles in access to justice”.

One of the brightest examples of the operation of the mechanism was the claim of OJSC Power Machines (controlled by Alexei Mordashov) for the recovery of 268 million rubles. with the Ukrainian DTEK Vostokenergo (manages the energy assets of the System Capital Management group of Rinat Akhmetov). Vostokenergo owed money under two contracts under which the plaintiff performed work at the Luhansk and Burshtyn TPPs. The Ukrainian company refused to pay after Power Machines first entered the American and then the Ukrainian sanctions lists in January 2018. The Arbitration Court of St. Petersburg and the Leningrad Region in April 2021 satisfied the lawsuit of Power Machines, the appeal and cassation supported its decision.

At first, the arbitration courts of the Russian Federation interpreted the new norm in different ways. Some believed that in order to transfer proceedings to Russia, a person needs to prove specific obstacles (in hiring foreign lawyers, paying for their services, arbitration fees, etc.). But in December 2021, the Supreme Court, within the framework of the dispute between Uraltransmash and the Polish Pesa Bydgoszcz, recognized the right of any Russian persons who fell under sanctions to transfer a dispute with a foreign counterparty to the court of the Russian Federation. The Economic Board decided that it was not necessary to prove the existence of restrictions in practice, it was enough to confirm the very fact of the imposition of sanctions. They, according to the Supreme Court, automatically interfere with the “impartial consideration” of the dispute abroad.

As a result, after some hesitation (BM-Bank was not immediately allowed to sue the Italian Rizzani de Eccher Societa per azioni in the Russian Federation), the practice came to uniformity – arbitration courts began to support the requests of sanctioned Russian persons who insisted on domestic justice in disputes with foreign counterparties.