In a series of decisions (Court case no. А43-27728/2024) originating at the Arbitrazh Court in Nizhny Novgorod, a domestic Russian award in favour of a Swiss entity was first recognised and then this decision was lifted by the Court of Appeal and the matter referred back to the first instance court, which then refused enforcement by decision of 11 June 2025.
This case concerned the recognition and enforcement of an arbitral award issued by the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation (MKAS) on 3 July 2024 in Moscow.
A Swiss company obtained an arbitral award from MKAS in its favour against a Russian company for payment of approximately 350,000.00 € plus interests and costs of the arbitration proceedings.
The Arbitrazh court of first instance in Nizhny Novgorod granted the application for recognition without hesitation.
The second instance, however, overturned this decision (see here). In its reasoning, the court of second instance stated that the recognition and enforcement of the arbitral award could be contrary to the currently applicable public policy (ordre public). The decision is particularly interesting because the court emphasizes once again what a violation of public policy could be:
Unfortunately, the court did not specify exactly how these characteristics are affected. It has merely stated that due to the numerous decrees issued by the President of the Russian Federation, provisional public policy (ordre public) would apply with regard to the fulfilment of obligations towards foreign contractual partners based in so-called unfriendly states. Payments on such subjects are partially prohibited or restricted. Switzerland is on the list of such unfriendly states. Therefore, the court of first instance must examine whether the enforcement of an arbitral award in such situation constitutes a violation of this provisional public policy.
“Two characteristics must be present:
Firstly, the violation of fundamental principles of the economic, political and legal order of the Russian Federation, which secondly could lead to an impairment of the sovereignty or security of the state, affect the interests of large social groups or violate the constitutional rights and freedoms of natural or legal persons.”
In a subsequent judgment on 11 June 2025 (available here), the court of first instance now refused to recognize and enforce the arbitral award of MKAS. The court reiterated the reasoning of the second instance regarding the provisional public policy created by the presidential decrees, so that the restrictions introduced prohibit or significantly restrict payments to foreign legal entities from so-called unfriendly states. In addition, the creditor needs a domestic bank account, as otherwise enforcement is impossible.
As we see, the courts didn’t doubt the award of a national arbitration court itself. Questionable was only its enforcement. However, matters of enforcement should be dealt with at the enforcement stage by the competent organs, not by the court deciding about recognition and declaration of enforceability.
In practice, a solution for similiar situations could be that claims for which domestic arbitration is agreed are assigned to a party from a “friendly” state, ideally with a bank account in Russia. Such move would at least increase the likelyhood of enforcement, but it would of course create the further issue of how to pay for the assignement and whether it would be possible to transfer the money outside Russia in the end. In any case, domestic arbitration of foreign entities now faces similiar issues as the enforcement of foreign aribitral awards in Russia, on which we have commented previously.