A law amending the Russian Arbitration Procedure Code passed on June 8, 2020 (“APC Amendments”) has granted local commercial courts exclusive jurisdiction over disputes involving Russian individuals and entities subject to international sanctions. The new law applies to two categories of situations.
The parties have not agreed on forum and Russia has no international treaty that addresses this.
In such a scenario under the new rules, persons affected by sanctions against Russia may, by passing the normal rules of international jurisdiction, commence proceedings in a Russian court at their location.
For example, if a Russian company has a claim against its European partner, but finds itself on the sanctions list, it will not have to spend money on European justice and it would suffice that it files a lawsuit in a Russian court, which is incidentally less expensive.
If, on the contrary, an opponent has begun a dispute abroad against a sanctioned entity, then such an entity may apply to a Russian court with a request for an injunction to prohibit the initiation or continuation of proceedings based on the APC Amendments.
Such an application may also be filed if the dispute abroad has not yet begun, but there are already suspicions that it will begin soon (for example, after receipt of a pre-trial complaint).
If the Russian court agrees with the applicant, and the foreign partner disobeys and continues the proceedings abroad, the Russian court may impose a fine on the foreign partner for the full amount of the claims plus the legal expenses of the sanctioned entity (the decision is usually unenforceable abroad unless the foreign partner has assets in Russia).
In addition, if the sanctioned entity objects the jurisdiction of the foreign forum based on the new law, but the proceedings nevertheless continue, the judgment/award subsequently rendered will be impossible to enforce in Russia.