As the court of cassation pointed out in Resolution of the Commercial Court of the Far Eastern District dated December  26, 2022 in case No. A73-15265/2022 , a judicial dispute is subject to consideration in a Russian court if there are grounds to believe that the foreign court referred to in the contract will be unable to ensure a fair trial.

Such grounds include the EU sanctions imposed on the Russian Federation, since they restrict access of Russian legal entities to justice. The court also drew attention to the place where the contract is performed, which is the territory of the Russian Federation. In this case, the dispute can be considered according to the general rules of jurisdiction.

What is an arbitration clause?

The essence of the arbitration clause is that it is an agreement between the parties to refer to arbitration all or certain disputes that have arisen or may arise between them in connection with any particular legal relationship, regardless of whether such a legal relationship was contractual or not. An arbitration agreement may be entered into in the form of an arbitration clause in a contract or in the form of a separate agreement (Art. 7 of the Federal Law dated 29.12.2015 No. 382- ФЗ (as amended on 27.12.2018) “On Arbitration (Arbitral Proceedings) in the Russian Federation”). In simple terms, an arbitration clause allows to determine in advance that a potential future dispute will mandatorily be considered by a specific court, including a foreign one.

When is it permissible not to comply with the arbitration clause?

In its rationale, the court stated the following:

  • According to Part 4, Article 248.1 of the Code of Commercial Procedure of the Russian Federation, court cases are referred to exclusive competence of commercial courts in the Russian Federation if the arbitration agreement is unenforceable as a result of application of restrictive measures against one of the persons involved in the dispute by a foreign public-law entity that creates obstacles to such person’s access to justice. Within the meaning of the said rule, application of restrictive measures in itself creates obstacles for a Russian party in its access to justice, which is why its unilateral expression of will, expressed in procedural form, is sufficient to transfer the dispute to the jurisdiction of Russian commercial courts.
  • The procedural law is supplemented by Articles 248.1 and 248.2 of Federal Law No. 171- ФЗ dated 08.06.2020 “On Amendments to the Code of Commercial Procedure of the Russian Federation in Order to Protect the Rights of Individuals and Legal Entities in Connection with Restrictive Measures Introduced by a Foreign State, State Association and (or) Union and (or) State (Interstate) Institution of a Foreign State or State Association, and (or) Union”. As follows from the explanatory note to the draft of this federal law, the purpose of adoption of these rules was to establish guarantees for the enforcement of rights and legitimate interests of certain categories of citizens of the Russian Federation and Russian legal entities against whom restrictive measures were introduced by unfriendly foreign states, since  such measures actually deprive them of an opportunity to defend their rights in courts of foreign states, international organizations or arbitral tribunals located outside of the territory of the Russian Federation.
  • Thus, it follows from overall interpretation of the above legal rules, taking into account the purposes of legislative regulation, that the plain fact of introducing restrictive measures against a Russian person involved in a dispute in international commercial arbitration outside the territory of the Russian Federation is assumed to be sufficient to draw a conclusion that such a person’s access to justice is restricted.
  • In view of the well-known fact, which requires no proof, of introduction of restrictive sanctioning measures against the Russian Federation by foreign states, including members of the European Union (including France), which directly impedes access to justice for its residents, a commercial dispute filed by a legal entity falling under the sanctions was to be referred to the jurisdiction of Russian commercial courts.
  • At the same time, the district court points out that when resolving the issue of competence of commercial courts of the Russian Federation in respect of commercial disputes complicated by a foreign element, following the principle of having a close connection of the disputed legal relationship with the territory of the Russian Federation (paragraph 12 of resolution of the Plenum of the Supreme Court of the Russian Federation dated 27.06.2016 No. 23 “On Consideration by Commercial Courts of Cases on Commercial Disputes Arising from Relations Complicated by a Foreign Element”), the court had to take into account the actual place of contract performance – the subject of delivery (a plant for production of wooden pallets with an integrated thermal power station) was to be installed at the customer’s (claimant’s) enterprise for the purpose of operation on its territory.

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