The European Council, as part of its 15th sanctions package, has introduced a ban on recognizing and enforcing decisions by Russian courts that affect European companies, referencing Article 248.1 of the Russian Arbitration Procedure Code.
This measure is aimed at shielding European businesses from legal obstacles arising from disputes with Russian counterparties. The EU justified this prohibition by noting that such decisions have previously constrained companies from pursuing claims in other jurisdictions and have led to substantial penalties for European entities.
It is noteworthy that Federal Law No. 171-FZ, commonly referred to as the “Lugovoy Law,” established exclusive jurisdiction for Russian arbitration courts over disputes involving sanctioned entities and matters related to sanctions under Article 248.1 of the Russian Arbitration Procedure Code. Moreover, this law introduced for the first time in Russian legal history the right for sanctioned individuals or entities to seek anti-suit injunctions – an institution traditionally associated with common law jurisdictions.
The EU’s ban on recognizing and enforcing Russian court decisions may accelerate a shift towards resolving disputes involving Russian businesses in neutral jurisdictions. To effectively manage conflicts with foreign counterparties, Russian companies are likely to increasingly turn to emerging centers for international commercial arbitration, such as Dubai and Hong Kong. Neutral jurisdictions and arbitration institutions remain accessible and could become pivotal tools in dispute resolution, ensuring fairness and independence in the process.