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Shenk, Olga, & Hryshyn-Hryshchuk, Roman. (2021). Implications of international
sanctions for enforcement of arbitral awards. recent experience of cis region.
Romanian Arbitration Journal Revista Romana de Arbitraj, 15(2), 38-47.

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Enforcement of Arbitral Awards. Recent Experience of CIS Region," Romanian
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Enforcement of Arbitral Awards. Recent Experience of CIS Region" (2021) 15:2 Rom Arb
J 38.

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Olga Shenk and Roman Hryshyn-Hryshchuk, 'Implications of International Sanctions for
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Romanian Arbitration Journal / Revista Romana de Arbitraj 38

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Shenk, Olga, and Roman Hryshyn-Hryshchuk. "Implications of International Sanctions
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Arbitration Journal / Revista Romana de Arbitraj, vol. 15, no. 2, April-June 2021,
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 IMPLICATIONS OF INTERNATIONAL SANCTIONS
FOR ENFORCEMENT OF ARBITRAL AWARDS.
RECENT EXPERIENCE OF CIS REGION

IMPLICATIILE SANCTIUNILOR INTERNATIONALE

ASUPRA EXECUTARII HOTARARILOR ARBITRALE.
EXPERIENTE RECENTE DIN STATELE CIS

Olga SHENK', Roman HRYSHYN-HRYSHCHUK 2

ABSTRACT

The growing significance of international sanctions regimes for world economy

attracted considerable interest of the dispute resolution community. One of
the implications of sanctions for arbitration parties, in particular, became a
new form of uncertainty during enforcement of the arbitral awards. The valid
award now may become unenforceable in some jurisdictions if enforcement of
such award is deemed to be in breach of sanctions regime and, therefore, public
order. As there is hardly any consensus among legal scholars and practitioners
on whether sanctions constitute a part of the public policy, study of case law
may reveal how sanctions are perceived by a designated legal system and what
outcome should be expected by the parties to arbitration in the enforcement
stage. Being guided by this approach, the authors analyse recent national court
practice in Ukraine and Russia and show the underlying effect of international
sanctions on the enforcement of foreign arbitral awards in these jurisdictions.
KEYWORDS: sanctions; recognition; enforcement; public order; arbitral award;
Ukraine; Russia.

1 Olga Shenk is a Counsel and Disputes Resolution practice Coordinator in the Commercial,
Regulatory and Disputes practice group in Kyiv office of CMS Cameron McKenna Nabarro Olswang
with more than 15 years' experience participating in highly complex litigation and arbitration
proceedings in Ukraine and abroad. She may be contacted at [email protected].
2 Roman Hryshyn-Hryshchuk is an Associate in the Commercial, Regulatory
and Disputes
practice group in Kyiv office of CMS Cameron McKenna Nabarro Olswang with 5 years' experience
participating in highly complex litigation and arbitration proceedings in Ukraine and abroad.
He may be contacted at [email protected].

38 REVISTA ROMANA DE ARBITRAJ 2/2021

 IMPLICATIONS OF INTERNATIONAL SANCTIONS FOR ENFORCEMENT OF ARBITRAL AWARDS.
RECENT EXPERIENCE OF CIS REGION

REZUMAT

O crestere semnificativa a importantei regimului juridic al sanctiunilor

internationale asupra economiei mondiale a atras si un interes considerabil
corespunzator din partea comunitatii juridice. Una dintre implicatiile sanctiunilor
asupra partilor in arbitraj priveste in particular un nou tip de nesiguranta in
ce priveste posibilitatea executarii hotararilor arbitrale. O hotarare arbitral
valida poate acum fi refuzata la executare in unele jurisdictii in masura in care
se considers ca respectiva hotarare incalca regimul sanctiunilor internationale
si, asadar, ordinea publics. Cum se poate identifica cu greu un consens la nivelul
comunitatii academice si doctrinare in ce priveste efectul sanctiunilor si in ce
masur fac parte din ordinea publics, studiul jurisprudentei poate revela cum
sunt percepute sanctiunile de catre un anume sistem juridic si ce rezultat poate
fi asteptat in stadiul executarii hotararii de catre partite la arbitraj. Urmand
aceasta abordare, autorii analizeaza exemple recente de practica din Ucraina
si Rusia si arata efectul indirect al sanctiunilor internationale asupra executarii
hotararilor arbitrale straine in aceste jurisdictii.
CUVINTE CHEIE: sanctiuni; recunoastere, executare; ordine publica; hotarare
arbitral; Ucraina; Rusia.

I. Introduction

Sanctions are not a novel phenomenon for international law After the end of the
Cold War, sanctions became increasingly popular instrument of foreign policy' The
United Nations Security Council, for instance, often attended to sanctions against
multiple states that did not respect international peace and security.' Since then,
sanctions have often been used against international organisations, political unions
and individual states as means for deployment of power in international relationships.5
Modern sanctions regimes vary greatly depending on the mandating authority,
their targets, objects or types of coercive measures. Sanctions can be adopted
by international organisations, political unions or individual countries. They can
apply within a single jurisdiction or extra-territorially. They can target states,
entities, business groups or individuals. They can entail trade, financial or other

3 Boris Kondoch, Sanctions in InternationalLaw, available at https://www.oxfordbibliographies.

com/view/document/obo-9780199743292/obo-9780199743292-0191.xml, last accessed on

22 June 2021.
4 For instance, Afghanistan, Cambodia, Haiti, Iran, Iraq, Liberia, Libya, North Korea, Rwanda,

Somalia, Sierra Leone, Angola, Sudan, and Yugoslavia. Source: Boris Kondoch, Sanctions in
InternationalLaw, available at https://www.oxfordbibliographies.com/view/document/
obo-9780199743292/obo-9780199743292-0191.xml, last accessed on 22 June 2021.
s Henry Farrell, Abraham L. Newman, Introducinga New Paperon 'Weaponized Interdependence,
available at: https://www.lawfareblog.com/introducing-new-paper-weaponized-interdependence,
last accessed on 22 June 2021.

ARTICOLE. STUDII/ARTICLES 39
 OLGA SHENK. ROMAN HRYSHYN-HRYSHCHUK

economic restrictions. They can relate to nuclear weapons non-proliferation,

telecommunications equipment or energy and gas products.6 The violation of
sanctions regimes may lead to reputational consequences, multimillion fines7 or
criminal liability.?
This growing significance of sanctions regimes and their importance for
world economy in recent years has started setting up new trends in arbitration
and, thus, attracted considerable interest of the dispute resolution community.
In particular, in an international arbitration proceeding, where different legal
norms are constantly in play, 9 diverse sanctions regimes accentuate this inherent
complexity and bring significant implications. Among others, sanctions may affect
arbitrability of the dispute, the jurisdiction of an arbitral tribunal, conduct of
arbitration proceedings and enforcement of arbitral awards. 0
In this paper we present our views with respect to enforcement of the arbitral
awards, since this is the area in which the sanctions' impact may be the biggest
(i.e. complications with enforcement and/or impossibility to enforce the award
upon completion of the complex, lengthy and in most cases expensive arbitration
proceedings may cast doubts as to the efficiency of the whole process).

II. Uncertainty of Enforcement

Arbitration proceedings are usually valuable for the parties to the extent they
allow to meet the parties' objectives. Perhaps, one of the key reasons why the
international commercial arbitration has become so popular in the first place
was the trust of businesses in their ability to enforce the arbitral awards in most

6 Nadia Zelyova, Restrictive measures - sanctionscompliance, implementation and judicialreview

challengesin the common foreign and security policy of the European Union, available at https://link.
springer.com/article/10.1007/s12027-021-00658-6#Sec1, last accessed on 22 June 2021.
7 For instance, Standard Chartered Bank was penalised by the Office of Financial Sanctions
Implementation in the amount of £20.4 million due to provision of loans to Denizbank AS, at the
relevant time a wholly owned by Sberbank, in breach of EU Russian sanctions. Source: Russian
Sanctions - a guidefor EU businesses, Out-Law Guide, available at: https://www.pinsentmasons.com/
out-law/guides/russian-sanctions-guide-eu-businesses, last accessed on 22 June 2021.
8 Netherlands imposed criminal penalties for violations of restrictive measures.
See Nadia
Zelyova, Restrictive measures - sanctionscompliance, implementation andjudicial review challenges
in the common foreign and security policy of the European Union, available at: https://link.springer.
com/article/10.1007/s12027-021-00658-6#Sec1, last accessed on 22 June 2021.
9 Overriding international law principles, lex arbitri, law governing arbitration agreement, law
of the contract, law of the enforcing jurisdiction.
1 De Brabandere, Eric, and David Holloway, Sanctions and internationalarbitration,
Research
Handbook on UN Sanctions and InternationalLaw, Edward Elgar Publishing, 2017, available at:
https://www.elgaronline.com/view/edcoll/9781784713027/9781784713027.00022.xml, last
accessed on 22 June 2021.

40 REVISTA ROMANA DE ARBITRAJ2/2021

 IMPLICATIONS OF INTERNATIONAL SANCTIONS FOR ENFORCEMENT OF ARBITRAL AWARDS.
RECENT EXPERIENCE OF CIS REGION

countries under straightforward and efficient procedure established in the

Convention on the Recognition and Enforcement of Foreign Arbitral Awards."
Accelerated development of sanctions regimes across the world, however,
added a significant weight of uncertainty to the enforcement proceedings. A valid
award may now become unenforceable in some jurisdictions if the enforcement
of such award is deemed to be in breach of sanctions regime and, therefore,
public order' 2 Unfortunately, there is hardly any consensus among legal scholars
and practitioners on whether sanctions constitute a part of the public policy.
The issue becomes even more complex in light of different sanctions regimes of
international organisations, political unions and individual states which exist in
parallel or, sometimes, in conflict, and have an extraterritorial reach.' 3
One of the sources for guidance under these circumstances is national
jurisprudence. The analysis of court practice may reveal how internal and external
sanctions are perceived by a designated legal system and what outcome should be
expected by the parties in the enforcement stage of an arbitration.
Based on this premise, the next part of this paper presents some of the
landmark cases that were rendered in Ukraine concerning the effect of sanctions
on the recognition and enforcement of arbitral awards in Ukraine, as well as recent
developments in Russia regarding the same issue.

III. Ukraine

Generally, the Ukrainian national courts follow a pro-arbitration approach

when it comes to invoking public policy as a ground to deny recognition and
enforcement of an arbitral award. There are only a few exceptions where the
Ukrainian courts tend to refuse enforcement of arbitral awards on the grounds that
they would violate Ukrainian public policy. One of those exceptions is sanctions.
For instance, a series of interrelated disputes between PJSC 'Avia-Fed-Service"
and State Joint-StockHolding Company 'Artem" ("Aviva Fed vs Artem") 4 fall under

" As of 2021, 168 countries adopted the Convention on the Recognition and Enforcement of
Foreign Arbitral Awards ("New York Convention") available at https://www.newyorkconvention.
org/list+of+contracting+states, last accessed on 22 June 2021.
11 According to Article V (2) of the New York Convention: "[r]ecognition and enforcement of an

arbitral award may also be refused if the competent authority in the country where recognition and
enforcement is sought finds that: (a) The subject matter of the difference is not capable of settlement
by arbitration under the law of that country. (b) The recognition or enforcement of the award would
be contrary to the public policy of that country."
" Nadia Zelyova, Restrictive measures- sanctions compliance, implementation andjudicialreview
challenges in the common foreign and security policy of the European Union, available at https://link.
springer.com/article/10.1007/s12027-021-00658-6#Sec1, last accessed on 22 June 2021.
" Case No. 761/46285/16-q available at: https://verdictum.ligazakon.net/document/94803432,
last accessed on 22 June 2021; Case No. 824/100/19; available at: https://verdictum.ligazakon.net/

ARTICOLE. STUDII/ARTICLES 41
 OLGA SHENK. ROMAN HRYSHYN-HRYSHCHUK

the category of landmark cases where the Ukrainian courts resolved issues of
sanctions in the context of recognition and enforcement of the arbitral awards in
Ukraine, by deciding to refuse enforcement on the basis of public policy concerns.
The disputes between Artem (Ukrainian entity) and Avia Fed (Russian
company) arose out of four supply contracts for military goods. As the
International Commercial Arbitration Court at the Chamber of Commerce and
Industry of the Russian Federation ("ICAC at the RF CCI") found, Artem did not
perform its obligations to deliver military items under those supply contracts
and Avia Feb was entitled to monetary compensation for its losses. As a result,
the arbitration tribunal rendered four awards the recognition and enforcement of
which Avia Fed subsequently sought in four different cases before the Ukrainian
courts.
Notably, at that time of commencement of the recognition and enforcement
proceedings, Avia Fed was subject to personal economic sanctions i.e., asset
freezing, trade restricting, prevention of outflow of capital outside Ukraine, and
suspension of economic and financial obligations imposed by the National Security
and Defence Council of Ukraine.
In the first case concerning enforcement of the award, the Ukrainian appellate
court held that the commercial relationship between Artem and Avia Fed were
independent from the political situation and, therefore, the enforcement of an
arbitral award in favour of Avia Fed did not violate Ukrainian public order. 5
However, when Avia Feb attempted to initiate enforcement proceedings, the
bailiff refused to enforce the decision due to the effective sanctions imposed on
Avia Fed in Ukraine. The latter challenged the decision of the bailiff in courts, but
the courts dismissed Avia Fed's arguments and concluded that the execution of
the arbitral award in favour of the sanctioned entity was not possible within a
sanctions effective period. 6
In the remaining three cases, the Ukrainian courts including the Supreme Court
rejected Avia Fed's applications and refused to enforce the awards against Artem
due to public policy concerns. In their analyses of the issue the courts arrived at
the following conclusions.

document/87760125, last accessed on 22 June 2021; case No. 824/101/2019; available at: https://
verdictum.ligazakon.net/document/90306230, last accessed on 22 June 2021; case No. 824/174/19
available at: https://verdictum.ligazakon.net/document/90143722, last accessed on 22 June 2021.
" Resolution of the Kyiv Appellate Court dated 12 June 2019 in case No. 761/46285/16-q.
16 Resolution of the Supreme Court dated 27 January 2021 in case No. 761/46285/16-q, available

at: https://verdictum.ligazakon.net/document/94803432, last accessed on 22 June 2021 available

at: https://reyestr.court.gov.ua/Review/82444874, last accessed on 22 June 2021.
17 Resolution of the Supreme Court dated 13 February 2020 in case No. 824/100/19; available at:

https://verdictum.ligazakon.net/document/87760125, last accessed on 22 June 2021; Resolution

of the Supreme Court dated 25 June 2020 in case No. 824/174/19 available at: https://verdictum.
ligazakon.net/document/90143722, last accessed on 22 June 2021; Resolution of the Supreme

42 REVISTA ROMANA DE ARBITRAJ2/2021

 IMPLICATIONS OF INTERNATIONAL SANCTIONS FOR ENFORCEMENT OF ARBITRAL AWARDS.
RECENT EXPERIENCE OF CIS REGION

Firstly, the Supreme Court specifically determined what constituted "public

order" for the purpose of recognition and enforcement of the arbitral awards.
According to the Supreme Court, the public order in Ukraine derives from
the international public order and encompasses a set of state-acknowledged
principles and rules which shall guarantee fundamental political, social and
economic interests of the state.
Secondly, the Supreme Court explicitly stated that sanctions regulation that
was enacted in Ukraine with the adoption of the Law of Ukraine On Sanctions
constituted one of the new aspects of Ukrainian public order.
Thirdly, in light of its findings on public policy, the Supreme Court then
analysed the nature of supply contracts (i.e., the sale of military items), status
of the applicant (i. e., the sanctioned entity incorporated in the aggressor's
state) and the debtor (i.e., Ukrainian strategical defence enterprise). Given these
circumstances, the Supreme Court concluded that enforcement of the arbitral
awards would constitute a violation of public order.
Finally, the Supreme Court addressed Avia Fed's objections acknowledging that
refusal to enforce the arbitral awards did constitute temporal interference with the
right of peaceful possession of property, but also found it proportional and having
a legitimate purpose. The Supreme Court emphasized the temporal nature of such
interference and concluded that the imposed sanctions did not terminate Artem's
obligations towards Avia Feb, nor did they make it impossible for the entity to
comply with the award - as soon as the sanctions would be lifted. Unfortunately,
neither the court, nor the law provide further guidance on whether resubmission
of application for the enforcement of the award under these circumstances would
be possible or how the re-enforcement of such award would technically need to
be arranged after sanctions are lifted.
These court conclusions bring significant implications for the parties involved
in arbitration disputes: (i) if the arbitral award requires the defaulting party to
make payments to a sanctioned entity in Ukraine, recognition and enforcement
of such award will likely be rejected; (ii) nature of the contract matters, especially
when the subject matter of the contract - supply of military goods and one of
the contracting parties - the strategic enterprise; (iii) sanctions do not terminate
obligations under the award but make them temporarily unenforceable.
Another case that touched on the issue of sanctions in the context of the
recognition and enforcement of the arbitral award and provided a useful insight
to understanding the sanctions regime in Ukraine is JSC Normetimpexv v. PJSC
Zaporizhtransformator("Normetimpex vs ZTR") case.' 8 This case concerned the
Court dated 02 July 2020 in case No. 824/101/2019; available at: https://verdictum.ligazakon.net/
document/90306230, last accessed on 22 June 2021.
1 Resolution of the Supreme Court dated 19 March 2020 in case No. 824/146/19,
available at:
https://verdictum.ligazakon.net/document/88749651, last accessed on 22 June 2021.

ARTICOLE. STUDII/ARTICLES 43
 OLGA SHENK. ROMAN HRYSHYN-HRYSHCHUK

recovery of penalties and arbitration costs of Normetimpex (Russian entity) from

ZTR (Ukrainian entity) pursuant to the award of the ICAC at the RF CCI.
When Normetimpex applied for the recognition and enforcement of this
arbitration award in Ukraine, ZTR objected on the public policy ground. The debtor
argued that two of the beneficiaries of Normetimpex were under personal sanctions
imposed by the National Security and Defense Council of Ukraine. Thus, enforcement
of the award in their favour would lead to violation of Ukrainian public order.
Analysing the raised issue of sanctions, the Supreme Court stated that the
sanctions had individual character and applied only to the specifically designated
list of persons. The applicable Ukrainian law did not provide for the possibility to
apply sanctions against individuals or entities that were somehow related to the
sanctioned persons. Furthermore, the beneficiaries of Normetimpex who were
targeted by the Ukrainian sanctions owned significantly less than 25% of the
shares of the entity and could not be regarded as its ultimate beneficiaries as a
matter of Ukrainian corporate law.
Given the above, the Supreme Court concluded that recognition and
enforcement of the award did not violate the public order and the award was
enforced.
The above conclusion can be useful for cases involving minority shareholders
and contractual parties of sanctioned entities that often operate in uncertain
environment and face risks of negative consequences merely due to their loose
ties to sanctions targets. The above decision of the Supreme Court provides clarity
and assurance for such persons of how the law would be interpreted and applied.

IV. Russia

Nowadays, Russia is a textbook example of the state where sanctions are in

full swing. After the Russian Federation annexed Crimea and deployed its military
forces to East Ukraine, the USA, the European Union and other allied countries
imposed wide-ranging sectorial sanctions focused on finance, defence and oil
industries as well as personal sanctions against Kremlin-related entities and
individuals.1 9 The implications of these sanctions for the economy were severe: it
has been reported that the inflows of foreign direct investments ("FDI") to Russia
steeply declined and resulted in missed potential FDI of $169 billion. 20
In order to somehow mitigate the risks for the persons who experienced
difficulties due to sanctions and were exposed to foreign institutions, the Russian
19 Anders Aslund, Maria Snegovaya, The impact of Western sanctions on Russia
and how they
can be made even more effective, available at: https://www.atlanticcouncil.org/in-depth-research-
reports/report/the-impact-of-western-sanctions-on-russia/, last accessed on 22 June 2021.
20
Ibid.

44 REVISTA ROMANA DE ARBITRAJ2/2021

 IMPLICATIONS OF INTERNATIONAL SANCTIONS FOR ENFORCEMENT OF ARBITRAL AWARDS.
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Federation enacted amendments to its Commercial Procedure Code on 19 June

2020 and established the exclusive jurisdiction of Russian courts to consider
disputes relating to foreign sanctions against Russian individuals and entities
(as well as their foreign affiliates). 2 1
Under these amendments, disputes involving sanctioned individuals and
entities fall within the exclusive jurisdiction of the Russian commercial courts,
unless otherwise provided for by an international treaty of the Russian Federation
or by an agreement of the parties to the dispute. However, if the parties to a
dispute have agreed to refer the dispute to a foreign court or international
arbitration tribunal, but - due to the introduction of restrictive measures - the
Russian individual or entity is not able to participate in the proceedings, the
agreement would be unenforceable because it would have created an obstacle to
access to justice, and in any event, the rules on the exclusive jurisdiction of the
Russian courts would apply.22
Adoption of these amendments could lead to a number of implications, the
most obvious being the increase in popularity of the Singapore International
Arbitration Centre (SIAC) and Hong Kong International Arbitration Centre
(HKIAC) among contractual parties as both institutions are accredited by the
Russian Ministry of Justice, and neither Singapore nor Hong Kong introduced
sanctions on Russia.23
Until recently, however, there was no relevant case law to illustrate the effect
of these amendments in practice. But on 20 April 2021, the Moscow Arbitration
Court issued a judgement in the case of TsargradMedia NJSC v. Google Ireland
Limited (Ireland), Google LLC (USA) and Google LLC ("Tsargrad v Google"),
applying the above-mentioned provisions and commented on the legality of the
USA and the EU sanctions in the territory of Russia.2 4

21 Federal Law dated 08 June 2020 No. 171-FZ. available at: http://publication.pravo.gov.ru/
Document/View/0001202006080017?index=0&rangeSize=1, last accessed on 22 June 2021.
22 Sergey Yuryev, Tatiana Sviridova, Sanctioned Russian CompaniesAnd Individuals Now
Protected
Against Lawsuits In Foreign Courts And Arbitral Tribunals, available at: https://cms.law/en/rus/
publication/sanctioned-russian-companies-and-individuals-now-protected-against-lawsuits-in-
foreign-courts-and-arbitral-tribunals, last accessed on 22 June 2021.
2 Konstantin Kroll, Impact of sanctions on internationalarbitrationinvolving Russian parties:
new developments, available at: http://arbitrationblog.practicallaw.com/impact-of-sanctions-
on-international-arbitration-involving-russian-parties-new-developments/, last accessed on
22 June 2021; Alexey Yadykin, ICC and SIAC become permitted to administerdisputes under Russia's
arbitrationlegislation, available at: https://www.lexology.com/library/detail.aspx?g=8b1751fb-
3116-4a92-bfdf-3c51964adf83, last accessed on 22 June 2021.
" Judgement of the Moscow Arbitration Court dated 20 April 2021 in case No. A40-
155367/20-12-1029, available at: https://kad.arbitr.ru/Document/Pdf/29ad7bf5-7c56-4145-
aff0-1f30d2856832/685313a9-ee30-489a-ae34-1eb6324aca45/A40-155367-2020_20210420_
Reshenijaipostanovlenija.pdf?isAddStamp=True, last accessed on 22 June 2021.

ARTICOLE. STUDII/ARTICLES 45
 OLGA SHENK. ROMAN HRYSHYN-HRYSHCHUK

The dispute was initiated by Tsargrad against Google based on the allegedly
unlawful blockage of YouTube account of Tsargrad and unilateral termination of
the account agreement with Tsargrad due to sanctions imposed by the USA and
the EU on the plaintiff's beneficiary, K.V. Malofeev.
The first critical issue decided by the court was the issue of jurisdiction. Google
claimed that the Russian court should not consider the claim given the parties'
agreement to resolve any disputes between them by English courts in accordance
with law of England. The Russian court, however, dismissed Google's motion.
According to the court, the mere fact that one of the parties to the dispute was
sanctioned was sufficient for the exclusive jurisdiction of the Russian commercial
courts to apply to such dispute.
Even though Google resubmitted another motion along with evidence
purportedly confirming lack of any obstacles to access to justice for Tsargrad in
the designated venue under the agreement (i.e. UK), the Russian court dismissed
that motion again and on grounds of insufficient evidence to prove lack of such
obstacles.
This conclusion is just one of the considerations of earlier concerns of the
arbitration community because even in the presence of an arbitration clause or
choice of exclusive foreign venue in the contract, there is still a high risk that
Russian court may decide on upholding exclusive jurisdiction over the dispute
based on the mere fact that one of the parties is subject to sanctions.
The second issue that the court decided was the extraterritorial application
of the foreign sanctions. As the court explained in its judgement, the sanctions
imposed on Mr Malofeev were pursuant to the US and EU legal norms and
represented foreign public order. At the same time, the extraterritorial application
of legal norms to Russian citizens and legal entities is prohibited under Russian
law and contradicts Russian public order. Thus, in the court's view, the US and EU
sanctions did not apply on the territory of Russia and did not trigger any rights
and obligations for the contractual parties. Accordingly, the court concluded that
Google had no lawful grounds to block the YouTube channel and terminate the
agreement with the claimant.
Google appealed this judgement of Moscow Arbitration Court and the case is
now pending appellate consideration.2
"

Even though the conclusion on prohibition of extraterritorial application of the

US and EU norms in the territory of Russia is not completely surprising, it may
still have a number of implications for the parties who were forced to unilaterally
terminate their contractual agreements with Russian counterparties directly or
indirectly targeted by international sanctions from 2014 onward.

" File cabinet of the Russian E-Justice System, available at: https://kad.arbitr.ru/Card/29ad7bf5-

7c56-4145-affO-1f30d2856832, last accessed on 22 June 2021.

46 REVISTA ROMANA DE ARBITRAJ2/2021

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RECENT EXPERIENCE OF CIS REGION

V. Conclusion

Sanctions have been used as coercive measures for decades. As a rule, usually
the subjects of sanctions were states and associated public entities which violated
established legal order. Now, however, the number and nature of persons and
entities who have the power to impose sanctions and who could become a target
of sanctions has dramatically extended. International organisations, political
unions and individuals states actively deploy sanctions in pursuit of their political
agenda. In one day, targets of sanctions can be private individuals, commercial and
non-commercial entities, groups or even part of the arbitration community itself26
whose reputation, business and freedom can be sufficiently affected.
These developments establish a new risk factor for the parties to arbitration
seeking enforcement of their arbitral awards. The problem is even more prescient
in light of the need of arbitration parties to seek/defend enforcement of their
award in multiple jurisdictions and to deal with different sanctions regimes
lawfully. All this requires from the arbitration lawyers a deep understanding of
the interaction between the diverse sanctions regimes. And where there is little
guidance on these matters other than jurisprudence, study of case law may be
useful exercise for better understanding of the underlying effect of sanctions on
the enforcement of arbitral awards.

26 In March 2021, China imposed sanctions against one of the leading London
commercial
barristers' set, Essex Court Chambers. The ground for sanctions was preparation by 4 barristers
of a legal opinion relating to alleged human rights violations by the Chinese authorities against
Uighur Muslims in the Xinjiang region of China. Some of the prominent arbitration practitioners
left the Chamber after that. Source: The Global Legal Post, China imposes sanctions on top barristers'
chambers after legal opinion on Uighurs, available at: https://www.globallegalpost.com/big-stories/
china-imposes-sanctions-on-top-barristers-chambers-after-legal-opinion-on-uighurs-37760469/,
last accessed on 22 June 2021.

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