On 27 January 2026, the Arbitrazh Court of the Republic of Buryatia ordered U.S.-based VTS Aviation LLC to refund USD 81,200 paid as an advance under a 2020 supply contract to JSC Ulan-Ude Aviation Plant, a subsidiary of the sanctioned Russian Helicopters holding – despite the contract containing an ICC arbitration clause providing for dispute resolution before the International Court of Arbitration of the ICC. The Russian state court nevertheless assumed jurisdiction, holding that international sanctions rendered the arbitration agreement unenforceable pursuant to Article 248.1 (4) of the Russian Arbitration Procedure Code (APC RF).
Background of the Dispute
The claim was filed in April 2025. Under Contract No. 1/2020 dated 10 February 2020, VTS Aviation undertook to supply aviation equipment for civilian Mi-8 and Mi-171 helicopters. The Russian buyer paid USD 81,200 as a contractual advance, but the goods were never delivered. The claimant argued that the defendant failed to perform its obligations and did not return the advance payment, resulting in an outstanding debt, and that no evidence of force majeure had been provided.
Sanctions and Jurisdiction under Article 248.1 APC RF
Russian Helicopters and its subsidiaries, including Ulan-Ude Aviation Plant, are subject to sanctions imposed by the EU, the United States, the United Kingdom, Switzerland, Canada and other jurisdictions. These include blocking sanctions and prohibitions on financial transactions. The court held that the claimant’s designation under U.S. and Swiss sanctions created obstacles to access to justice in a foreign jurisdiction, including ICC arbitration.
Relying on Article 248.1(4) APC RF, the court found that:
- If an arbitration agreement becomes unenforceable due to foreign restrictive measures against one of the parties,
- and those measures impede access to justice,
- Russian arbitrazh courts acquire exclusive jurisdiction.
Decision
The court ordered VTS Aviation LLC to:
- Refund the USD 81,200 advance payment, and
- Reimburse state duty in the amount of RUB 223,441.
This decision is another example of the developing Lugovoy Law jurisprudence on Article 248.1 APC RF and the override of foreign arbitration agreements in the sanctions context. For earlier analysis, see: