REUTERS | Ilya Naymushin

The RAA Survey shows that sanctions imposed on Russia have had a very limited impact on Russia-related arbitrations

Sanctions imposed against certain Russian persons in relation to the situation in Ukraine have been a hot topic for the Russian arbitration community over the past two years, triggering discussions at numerous seminars, conferences and symposia. However, a recent survey conducted by the Russian Arbitration Association (RAA) suggests that all of this may have been much ado about nothing.

The survey looked at three aspects:

  • To what extent sanctions affected contracts drafted in 2014-2015.
  • To what extent they were relevant to users who arbitrated in the years 2014-2015.
  • Separately, to what extent the sanctions have affected prospective arbitrators.

In terms of users’ choices, the sanctions appear to have had very limited impact. Over half of respondents claimed that sanctions had no impact on their choice of dispute resolution mechanisms (55%) or choice of applicable law (60%). An even greater percentage of users reported preference for the usual (that is, western) arbitral institutions (75%) and did not believe that having a seat of arbitration in one of the countries which imposed sanctions would have any impact on arbitrators’ impartiality (85%). Apparently, the only aspect where sanctions seem to have had some impact relate to the choice of currency in contracts, as 52.5% of users indicated that they were reviewing the currency provisions in their deals.

More specifically, the survey showed that the International Chamber of Commerce (ICC), Stockholm Chamber of Commerce (SCC), London Court of International Arbitration (LCIA) and Moscow-based MKAS, remained top choices for users (65%, 57.5%, 57.5% and 37.5%, respectively). Equally, users seem to have widened their choices. Reportedly, they started including clauses of the Singapore International Arbitration Centre (SIAC) and Hong Kong International Arbitration Centre (HKIAC), as well as certain other arbitration clauses, in their agreements. Arguably, however, this trend has not yet reached a level that significantly affects the numbers of Russian-related cases in traditional institutions.

In terms of arbitral seats, London, Stockholm and Moscow made the top three (52.5%, 50% and 47.5%, respectively). Moscow most likely featured due primarily to choices favouring Russian MKAS and the RAA. However, countries which did not implement sanctions, such as Singapore, Hong Kong and Dubai, were also chosen by users (22.5%, 22.5% and 7.5%, respectively). Apparently, the seat, rather than the arbitral rules and the administering institutions, was of somewhat greater concern to users.

Finally, users reported that the choice of English and Russian law were predominant in their contracts within the research window (67.5% each). The survey did not capture the nature of the transactions in question, so arguably choice of law was driven by the specific nature of the contracts. However, when drafting contracts, users seemed not to be overly concerned about sanctions.

While active users reported some issues in arbitrations conducted in 2014-2015, the majority of respondents did not face any problems. Most sanctions-related problems were of a practical nature (the need to obtain a licence or issues with payment of arbitration fees). However, two respondents said that the request for arbitration had been rejected by the arbitral institution due to sanctions. Unfortunately, the survey does not contain any information as to which institutions rejected the requests, but one cannot discount that sanctions may not have been the major reason for such a rejection. Finally, only in a very small number of cases were the sanctions said to have affected the outcome on the merits.

In terms of arbitrators, 60% of whom were from states which imposed sanctions against Russian persons, the vast majority would be happy to accept appointment in a case involving a sanctioned person (70 to 80%, depending on the specific question).

Overall, the survey shows that sanctions have had a very moderate, if any, impact on drafting arbitration clauses for contracts involving Russian parties and for conducting arbitral proceedings. As such, the survey is undoubtedly a useful exercise, which goes beyond purely anecdotal evidence. It shows the limited impact that sanctions have had on both the choices and day-to-day practice of international arbitration involving Russian parties, at least as far as the survey respondents were concerned.

However, due to the natural limitations of any survey, it cannot be said that the RAA survey represents a true picture of Russian users’ choices and issues faced. For example, in this survey, the number of respondents was fairly low (62 users and 99 arbitrators). Only one third of users (20 people) were in-house counsel, that is, those who could report on any change of attitude within their organisation. The remaining 42 people were private practitioners, who, unfortunately, may be biased in favour of arbitration. Likewise, only two thirds of respondents had been involved in arbitrations during the years 2014–2015, that is, only they could have reported on the actual problems (if any) which they experienced. Only 25 respondents were involved in more than three arbitrations during this period, so only these few could compare and contrast. Finally, 70% of users practised in Moscow, whereas only 10% represented Russian regions. Reference to Russian regions is of particular interest, as many large industrial companies and groups have head offices there, rather than in Moscow. Likewise, eastern regions have very different trade routes and, historically, the majority of their partners and customers were in Asia, rather than the EU. It would be of interest, therefore, to capture their preferences and attitudes.

What the survey failed to identify was how many users came from organisations affected by sanctions (and particularly state-owned companies). Therefore, it cannot be discounted that the results were affected by users who are not concerned with sanctions issues at all. Likewise, it is not clear to what extent the sanctions were at issue in the arbitrations which were conducted by users during the two year research window. If the majority of users did not work with sanctioned entities or individuals, the limited impact that sanctions reportedly had on their practices is explicable.

But even with all of these limitations in mind, the survey very usefully shows users’ perceived impact of sanctions on the choice of arbitration forum and the expectations of being able to obtain justice. From this perspective, the significance of sanctions seems to have been largely exaggerated.

Norton Rose Fulbright Andrey Panov

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