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Disputes continue regarding the application of anti-suit injunctions and force majeure due to sanctions

legal updates
20 / 03 / 2024
Russian courts continue to consider disputes related to sanctions restrictions imposed by foreign states. In March 2024, further rulings were adopted which developed the existing practice of applying the provisions of article 248.1 of the Arbitrazh Procedure Code of the Russian Federation (exclusive jurisdiction of Russian courts), article 248.2 of the Arbitrazh Procedure Code of the Russian Federation (anti-suit injunction) and article 401 of the Civil Code of the Russian Federation (force majeure) in connection with the imposition of sanctions.

Order prohibiting a foreign company from going to foreign courts where there is an arbitration agreement

On 1 March 2024, the Moscow District Arbitrazh Court (“MDAC”) adoptedCase No. A40-166725/2023 yet another resolution in a series of cases of JSC Russian Railways (“RZD”) against Siemens Mobility GmbH (“Siemens”), in which it upheld the position of the Moscow Arbitrazh Court (“MAC”) prohibiting the foreign company from seeking to litigate in foreign courts where there is an arbitration agreement in place between the parties.

In 2014, RZD and Siemens concluded a maintenance and repairs contract (“Contract 1”).

In 2022, Siemens unilaterally terminated the contract because of sanctions imposed by the European Union (“EU”), including against RZD. Siemens declared that it was owed debt under Contract 1 and that it intended to collect such debt.

Contract 1 provides that all disputes shall be referred to arbitration at the Vienna International Arbitral Centre of the Austrian Federal Economic Chamber (“Arbitration Clause”).

RZD disagreed with the termination of the contract by Siemens and filed a claimCase No. A56-45455/2022 with the Arbitrazh Court of St Petersburg and the Leningrad Region (“SPLRAC”) seeking the invalidation of the unilateral termination of Contract 1 and an order that Siemens performs its obligations under the contract. The SPLRAC transferred the caseCase No. A40-258467/2022 venue to the MAC to cure the lack of venue. In its turn, the MAC considered the statement of claim on the merits and granted the relief sought by RZD. The courts of appeal and cassation instances upheld the MAC’s decision.

Siemens objected to the dispute being heard in a Russian court and initiated:

  • arbitration proceedings in Austria in accordance with the Arbitration Clause; and
  • litigation in German state courts on the admissibility of arbitration proceedings.
In its turn, RZD filed an application with the MAC seeking:

  • an injunctionCase No. A40-98865/2022 prohibiting arbitration under the Arbitration Clause; and
  • an injunctionCase No. A40-29793/2023 prohibiting the commencement of litigation in German state courts.
The MAC granted the first application in full, the second one in part and granted an injunction prohibiting the commencement of litigation only in the Kammergericht Berlin, Germany, as there was no evidence of possible litigation or arbitration proceedings in any other courts or arbitration panels. The MDAC upheld both of the MAC’s rulings.

However, at a later date, RZD became aware of proceedings commenced by Siemens before the Oberlandesgericht, Munich and Oberlandesgericht, Bavaria. Eventually the case was transferred to the Kammergericht Berlin. Despite that, RZD once again filed its application for an anti-suit injunction prohibiting the commencement of litigation in the abovementioned German state courts, as there is reason to believe that Siemens may commence litigation in such courts.

The MAC upheld RZD’s position and prohibited Siemens from commencing court proceedings before the Oberlandesgericht, Munich and Oberlandesgericht, Bavaria. The MAC’s ruling was upheld by the MDAC.

Sanctions do not constitute force majeure

On 11 March 2024, the MDAC upheldCase No. A40-96948/2023 the decisions of courts of first and appellate instances invalidating the termination of a contract due to sanctions restrictions. The Russian court rendered its decision on the basis of the exclusive jurisdiction rules (article 248.1 of the Arbitrazh Procedure Code of the Russian Federation).

In 2014, JSC FPC (RZD’s subsidiary) (“FPC”) and Patentes Talgo S.L. (“Patentes”) concluded a contract for the maintenance and repair of software, security systems, and train and intratrain radio communication systems (“Contract 2”).

Previously, FPC already filed two applications in relation to Patentes seeking:

  • an injunctionCase No. A40-51964/2022 prohibiting the commencement of arbitration proceedings before the International Court of Arbitration of the International Chamber of Commerce in Paris, France (“ICC”) pursuant to the arbitration clause in Contract 2; and
  • an orderCase No. A40-84297/2022 for performance of obligations under the contract under Contract 2, and for the recovery of damages, default charges and court penalties.

Both of FPC’s reliefs were granted. Despite that, Patentes initiated arbitration at the ICC.

In 2022, Patentes notified FPC of the termination of its obligations under Contract 2, citing the force majeure due to the imposition of economic sanctions, in particular the inability to take out insurance contracts required under Contract 2.

FPC therefore filed a claim to invalidate the unilateral withdrawal from Contract 2.

The MAC did not recognise this circumstance as force majeure due to the fact that Contract 2 and Russian laws do not provide for the right to refuse to perform obligations under the Contract due to the failure to take out insurance. In the court’s opinion, the lack of insurance did not prevent Patentes from performing the work. The only consequence of the failure to provide an insurance policy was that Patentes had to bear the risk of liability on its own.

The courts of appeal and cassation instances upheld the MAC’s decision.

Significance of the cases

The cases considered continue the trends of disputes arising from foreign counterparties’ unilateral withdrawal from contracts due to the imposition of sanctions restrictions. In the event of unfavorable decisions of foreign courts and commercial arbitrations, judicial protection in the Russian Federation of a Russian entity that has suffered from failure to fulfill contractual obligations by a foreign counterparty, is confirmed.