Introduction
On August 28, 2024, the Arbitrazh Court of Primorsky Kray in Russia issued a notable ruling in Case А51-7534/2024. The dispute involved a Russian plaintiff and an Irish defendant concerning the modification of a bareboat charter agreement for a vessel, as well as the recognition of ownership rights over that vessel.
Background facts
The case is based on the following facts in brief: the Russian company Moria filed a lawsuit against the Irish company “Stecker Limited” before the Russian Arbitrazh court in Vladivostok. The claimant wanted to achieve the amendment of a bareboat charter agreement for a vessel. In addition to that it was asked for the recognition of Moria´s ownerships rights over the vessel. The contract between the parties included an arbitration clause in favour of the Hong Kong Arbitration Centre (HKIAC). Due to the fact that “Stecker Limited” belonged to sanctioned Russian persons, its assets were frozen.
The issue
The court applied Article 248.1(4) APC to establish its own exclusive jurisdiction. According to this provision, the exclusive jurisdiction of Russian courts can be established even in the case of an arbitration clause if a party to the dispute has been sanctioned and these sanctions create obstacles to access to justice.
In the present case, the Russian Claimant “Moria” was not sanctioned. However, the court concluded that the sanctions apply to Moria as well, since the restrictions placed on the Respondent and the Russian Federation prevent the contract from being fulfilled as originally planned.
Having made such a finding, the court assumed that the sanctions are at least damaging to Moria’s reputation, so that there are doubts as to whether Moria can receive a fair trial in Hong Kong. The court came to such a conclusion even though Hong Kong, as part of China, does not support Western sanctions against Russia and China is not an “unfriendly” state.
Conclusion
There are numerous decisions in which Russian courts have disregarded arbitration clauses or refused recognition of awards rendered in “unfriendly” countries. See our reports on this issue in our previous articles (here and here).
In this decision, Art. 248.1 is interpreted even more extensively than before. The court assumes that even arbitration tribunals from “friendly” states cannot guarantee a fair trial if one of the parties to the dispute has been sanctioned or is at least indirectly exposed to sanctions, as in the present case. Therefore, the enforcement of arbitration clauses in favour of arbitration tribunals from “friendly” states cannot be guaranteed either. It remains to be seen whether this trend will continue in the future.