Mike Ackerman via Unsplash
- Introduction
In another case of “jurisdictional ping-pong” (see other cases discussed by us here and here), the Arbitrazh Court of the Sverdlovsk Region rendered a judgment on 16 August 2024 (case no. A60-24839/2024) in a legal dispute between a Polish claimant and a Russian defendant regarding the recognition and enforcement of an arbitral award of the SCC dated 8 June 2021 in Russia.
- Overview
The underlying contractual relationship between the claimant and the defendant relates to a contract concluded on 22 May 2013 for the supply of tram cars. The claimant delivered the contractually agreed wagons to the defendant but was not paid the full amount owed for them.
Consequently, the claimant initiated arbitration proceedings in Stockholm at the SCC in 2018 (case no. V2018/114), where he was successful. Since the defendant is a Russian legal entity, the claimant turned to the Arbitrazh Court of the Sverdlovsk Region with the request to recognise and enforce the foreign arbitral award of the SCC. This application, however, was rejected.
- The issue
The reasons given for the rejection of the application were similar to all the other cases before.
In addition to referring to various sources of law, the Arbitrazh Court refers to section 241 (1) Russian Arbitration Code (APK) and sec. 243 (3) and 244 APK.
Via sec. 241 APK, which states that Russian Arbitrazh Courts have jurisdiction to recognise and enforce foreign arbitral awards in the Russian Federation, the court moves on to sec. 243 and 244 APK. With the latter, the court examines whether there is a basis for recognition and enforcement, in particular whether recognition of the request would be contrary to the public order of the Russian Federation, see sec. 244 (1) no. 7 APK.
The Arbitrazh Court argues that the fundamental principles of Russian law include the principles of objectivity and public order, which also include the principles of objectivity and independence of the court. Citing the implementation of restrictive measures (sanctions), the court criticises that this meant that objectivity could not be guaranteed when the arbitration award was made and that the fair trial principle could therefore no longer be complied with. As a result, it found that Russian legal entities suffer disadvantages due to sanctions that prevent access to justice.
The court also criticised the fact that the sanctions against Russian individuals not only harmed their reputation but also their position in comparison to others. Consequently, the court expressed doubts as to whether the fair-trial principle and the impartiality of the court can be upheld in a legal dispute – especially if it takes place in a foreign state that has issued restrictive measures involving persons whose states have also issued restrictive measures against Russia. This was compounded by the participation of two arbitrators from countries that imposed sanctions on Russia, so the court also had doubts about their impartiality.
In the end, the court referenced previous decisions by the Russian Supreme Court that supported the non-enforcement of foreign judgments and awards under such circumstances.
- Conclusion
This decision is one of many Russian court rulings that follow the same pattern.
It concerns the recognition and enforcement of foreign arbitration awards on the territory of the Russian Federation that were issued abroad. Citing public order and the detrimental consequences of granting the application, the claim is rejected. This decision highlights the increasing complexity of international arbitration enforcement in the context of geopolitical tensions and sanctions.
It remains to be seen whether the claimant will go further and appeal the decision.
So, another one bites the unyielding non-recognition and non-enforcement of arbitral awards in Russia.