⚖️ At the will of the Russian party, arbitration shall proceed – Russian Court held that a dispute between a Cypriot and a Russian company must be resolved under LMAA Rules

LLC "D.N.K." (the Claimant, shipowner) and LLC "Nizhegorodskaya Logisticheskaya Kompaniya" (the Respondent, charterer) entered into 15 standard bareboat charter agreements.

The agreements contained arbitration clauses in favor of arbitration under the rules of the London Maritime Arbitrators Association (LMAA).

Notwithstanding the arbitration clauses provided for in the agreements, the Claimant filed a claim with the Commercial Court of the Nizhny Novgorod Region against the Respondent for recovery of arrears in the amount of RUB 409 million under the charter agreements.

Subsequently, the Claimant assigned its rights under the charter agreements to a Cypriot company – AAS Amur Assets Shipping Company Limited, on the basis of which the court effected a procedural substitution of the Claimant.

The Respondent filed a motion to dismiss the claim without consideration, citing the parties' agreement to refer disputes to arbitration under the rules of the London Maritime Arbitrators Association (LMAA).

In response, the Claimant argued that the arbitration clauses had not been concluded. In support thereof, the Claimant referred to the fact that the parties had used the BARECON‑2001 form for bareboat charters but had not specified in Box 35 (dispute resolution) which option they had chosen. Box 35 provides for the following options:

🔘 Option (a) – dispute resolution in accordance with the rules of the London Maritime Arbitrators Association (LMAA);

🔘 Option (b) – dispute resolution in accordance with the rules of the Society of Maritime Arbitrators (SMA);

🔘 Option (c) – dispute resolution in arbitration at a place agreed by the parties and in accordance with the procedures applicable at that place.

In addition, in the Claimant's view, the dispute could not be referred to arbitration due to the imposition of restrictive measures against Russia, which, as the Claimant alleged, restrict its access to justice in proceedings under LMAA rules in London.

The court rejected the Claimant's objections, relying on the following circumstances:

👀 In violation of the principle of interpretation in favor of the validity of arbitration agreements (ad favorem validitatis), the Claimant failed to provide evidence that any interpretation of the arbitration clause would render it invalid and/or unenforceable (para. 26 of the Plenum of the Supreme Court of the Russian Federation Resolution No. 53 of 10 December 2019);

👀 The parties waived options (b) and (c) in Box 35 of the BARECON‑2001 form on dispute resolution, since in the text of the agreements themselves they elected option (a) at the time of signing, i.e., they agreed to arbitration under LMAA rules. Moreover, the parties did not specify in the agreements any "other arbitration institutions or courts" other than LMAA, so their choice is unambiguous;

👀 The Claimant is registered in Cyprus. At the same time, it did not provide evidence that the restrictive measures impede its access to justice or the consideration of the dispute in the arbitration agreed upon by the parties under LMAA rules. Nor is there evidence that restrictive measures have been imposed on the parties to the dispute.

Thus, the court dismissed the Cypriot company's claim against the Russian Respondent without consideration, based on the Respondent's reliance on the arbitration clauses in the agreements.

📎 The ruling can be found here.

According to the case file, today the ruling was upheld by the court of appeal. At the time of publication of this post, the decision had not yet been published.

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⚖️ St. Petersburg and Leningrad Region Arbitrazh (Commercial) Court stresses that the Lugovoy Law cannot be applied automatically or expansively, leaving Finnish company’s claim against Russian entity without consideration

Finnish company TM System Finland Oy (claimant), as supplier, and Russian JSC ILIM Group (respondent), as purchaser, entered into a supply and services agreement as part of a project to construct a pulp and paper mill in Ust-Ilimsk. The agreement contained an arbitration clause providing for arbitration under the ICC Rules, with Geneva as the seat of arbitration.

Despite the arbitration clause, the claimant brought an action before the St Petersburg Commercial Court and Leningrad Region Arbitrazh (Commercial) Court. In support of the Russian state court’s jurisdiction, the claimant argued the following:

👀The arbitration clause was unenforceable because a dispute involving Russian parties could not be heard fairly and impartially in a foreign state that had imposed restrictive measures;

👀The parties’ contractual relationship had a close connection with Russia, and therefore the Russian courts had jurisdiction to hear the dispute.

The court rejected the claimant’s arguments, relying on the following considerations:

🔘Exclusive jurisdiction of a Russian court may arise where “the legal fact of the imposition of restrictive measures against Russian citizens and Russian legal entities is the direct cause of the dispute” and the Russian party is prevented from accessing justice in the foreign state”;

🔘In light of the Constitutional Court of the Russian Federation’s guidance in Rulings No. 999-O of 29 April 2025 and No. 2615-O of 14 October 2025, Article 248.1 of the Commercial Procedure Code of the Russian Federation “does not provide for the automatic establishment of exclusive jurisdiction of Russian arbitrazh (commercial) courts”. The court must establish not only the subject matter and parties to the dispute, but also comprehensively examine the circumstances and identify other criteria necessary to ensure that all parties’ right to judicial protection is properly exercised;

🔘The claimant failed to provide evidence of any impediment to access to justice in proceedings conducted pursuant to the arbitration clause;

🔘“Essentially, in its statement of claim, the claimant seeks to establish on behalf of the respondent that the forum selection agreement cannot be performed, relying on restrictive measures imposed by foreign states against Russian companies.” At the same time, Switzerland, the seat of arbitration, had not imposed sanctions on the claimant. The claimant was also not a Russian legal entity, and no other evidence was provided that the restrictive measures directly affected the claimant or its ability to commence arbitration.

Accordingly, the court held that the parties’ arbitration agreement was enforceable and that there were no grounds for establishing exclusive jurisdiction over the dispute. The St Petersburg Commercial Court and Leningrad Region Commercial Court therefore left the Finnish claimant’s action without consideration.

📎The judicial act is available at the link.

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⚖️ An arbitral tribunal’s failure to take into account a set-off claim does not constitute grounds for setting aside the award where the applicable rules require a set-off to be asserted only by way of a counterclaim

LLC “GAMMA” (the Applicant), as the supplier, and JSC “NIKIMT-Atomstroy” (the Interested Party), as the purchaser, entered into a contract for the supply of generator units to the construction site of the El Dabaa Nuclear Power Plant in the Arab Republic of Egypt (the Contract). The Contract contained an arbitration clause providing for arbitration by the Arbitration Center at the Russian Union of Industrialists and Entrepreneurs (RSPP).

Due to the delayed payment for the goods, the Applicant commenced arbitration pursuant to the arbitration clause, seeking payment from the Interested Party of approximately RUB 20 million in outstanding amounts for the goods supplied, contractual penalties, and arbitration costs.

In the course of the arbitration, the Interested Party asserted a set-off of mutual claims arising from the Applicant’s failure to deliver the full quantity of goods and its delivery of incomplete equipment.

Under the Contract, the Applicant was required to pay the Interested Party a contractual penalty equal to 10% of the value of the incomplete goods.

The Interested Party stated that it had previously sent the Applicant a claim demanding payment of the contractual penalty, but the Applicant had failed to satisfy the claim.

The arbitral tribunal granted the Applicant’s claims in full. At the same time, the arbitrators rejected the Interested Party’s set-off argument, stating that under the applicable arbitration rules, a set-off had to be asserted in the form of a counterclaim, whereas the Interested Party had not filed a counterclaim.

As the Interested Party failed to comply with the arbitral award voluntarily, the Applicant applied to the Arbitrazh Court of the Republic of Bashkortostan for the issuance of a writ of execution for the compulsory enforcement of the arbitral award.

The Interested Party filed a counter-application seeking partial setting aside of the arbitral award on the grounds that the arbitral tribunal had refused to consider its set-off claim. According to the Interested Party, enforcement of an arbitral award rendered without taking into account the set-off/netting of mutual obligations would violate the public policy of the Russian Federation, the principles of proportionality of civil liability, and the Interested Party’s right to a comprehensive and objective consideration of the case.

The Arbitrazh Court of the Republic of Bashkortostan rejected the Interested Party’s arguments.

🔘The court held that the Interested Party’s arguments were aimed at having the arbitral award reviewed on the merits, which is impermissible.

🔘The Interested Party had failed to provide evidence of the exceptional statutory grounds required for setting aside an arbitral award.

Accordingly, the court issued a writ of execution for the compulsory enforcement of the arbitral award.

📎The full text of the ruling is available here.

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Recipe for Failure When Seeking to Set Aside an Arbitral Award:
1️⃣ Hope that the arbitrators will figure out on their own to request evidence;
2️⃣ File to set aside the award;
3️⃣ Voluntarily comply with the award on your own while the set-aside proceedings are ongoing

LLC "Sfera" (the applicant) filed a petition with the Commercial Court of the city of Moscow to set aside an award rendered by the Arbitral Institution at the Russian Union of Mechanical Engineers. The award had recovered from JSC "Tupolev" (the interested party) in favor of the applicant: RUB 20,000 in damages, RUB 1,613.25 in arbitration fees, and RUB 20,000 in legal representative costs — with the remainder of the claim dismissed.

Among other things, the applicant argued that it had been deprived of the right to a fair hearing because the arbitral tribunal had not requested necessary evidence on its own.

After examining the applicant's arguments, the Commercial Court of the city of Moscow denied the petition and upheld the arbitral award.

Referring to the arbitral institution's rules, the court stated that the arbitral tribunal has the right, but not the obligation, to invite the parties to submit additional evidence; nor is it required to obtain evidence on its own initiative if the parties themselves have not shown due diligence. The arbitral case file contained no evidence that the applicant had requested the tribunal to obtain evidence or to hold an oral hearing for that purpose.

On the contrary, the applicant neither claimed that it was unable to obtain the additional materials independently nor asked the arbitral tribunal for assistance in securing them.

The Commercial Court of the city of Moscow noted that denying a claim for lack of proof does not violate the right to judicial protection — it is simply the result of the allocation of the burden of proof, which is consistent with the principles of adversarial proceedings and party autonomy.

The court specifically emphasized that the arbitral tribunal had examined the submitted documents, assessed them, and provided specific reasons why they were deemed insufficient.

The court also took into account that the interested party had voluntarily complied with the award during the set-aside proceedings. Therefore, the court concluded that the applicant's rights in the satisfied portion had already been restored, and challenging the award as to the remainder effectively sought a substantive review of the tribunal's findings — which is impermissible.

📎 The full text of the judicial act is available here.

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☝️International Bar Association Publishes Recommendations on Third-Party Participation in Investment Arbitration

The Investment Arbitration Subcommittee of the International Bar Association (IBA) has published a report and recommendations on the participation of third parties (i.e., persons who are not direct parties to the dispute) in investment arbitration.

The report's findings are based on a study of 135 investment arbitrations conducted up to December 11, 2024.

🔘 A key trend is the significant increase in third-party participation applications over the past two decades, particularly between 2015 and 2019.

The report notes that third-party involvement can enhance the legitimacy and transparency of the process, as well as assist the arbitral tribunal in addressing issues affecting the public interest.

The report outlines two main areas for further work:

1️⃣ Developing clearer procedural requirements for third-party participation in the process – possibly including guidance on the limits of the arbitral tribunal's authority to invite third parties on its own initiative to submit applications to join the proceedings;

2️⃣ Developing provisions on procedural safeguards (in particular, confidentiality measures) to prevent third parties from disrupting the course of the proceedings.

Based on the study's findings, the IBA concluded that arbitrators generally have the authority to accept third-party applications, even if the relevant investment treaty or rules do not expressly provide for such a possibility. However, there is no uniform approach to how this authority is exercised, particularly with regard to disclosure of information and whether arbitrators may invite third parties to submit applications ex officio.

The IBA does not provide clear recommendations on the allocation of costs when a third party participates in the proceedings, acknowledging that arbitral practice remains inconsistent.

At the same time, the IBA considers that the approach to this issue may vary depending on whether the third party joined the proceedings voluntarily or was invited to participate by the arbitral tribunal or a party.

📎 The full press release is available here.

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⚖️ The Commercial Court of the Moscow Region overturned a ruling terminating proceedings on enforcement of an ICAC at the RF CCI award against a Ukrainian debtor, relying on Article 248.1 of the Russian Commercial Procedure Code

Earlier, we reported that the Commercial Court of the city of Moscow had terminated proceedings on the issuance of a writ of execution for enforcement of an award rendered by the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation (ICAC at the RF CCI) in favor of JSC "NORMETIMPEX" (the applicant) against JSC "Zaporozhtransformator" (the interested party). The court terminated the proceedings on the grounds that the claims under the ICAC award had already been included in the register of creditors' claims of Ukraine on the basis of a judicial act of the Kyiv Court of Appeal. The court held that, under such circumstances, the applicant was not entitled to initiate a separate enforcement proceeding.

The applicant filed a cassation appeal with the Commercial Court of the Moscow District.

The cassation court disagreed with the court of first instance and upheld the applicant's arguments. The court noted that the ICAC award cannot be enforced in Ukraine by virtue of paragraph 5 of Article 4 of Ukrainian Law No. 2116-IX of March 3, 2022 "On the Basic Principles of Compulsory Seizure in Ukraine of Property Objects Owned by the Russian Federation." This act established the compulsory seizure of Russian property in Ukraine and declared the debts of Ukrainian organizations (both state and private) to be extinguished.

The court also recognized the exclusive jurisdiction of Russian courts, citing Article 248.1 of the Russian Commercial Procedure Code, since the basis for this dispute is the restrictive measures imposed by a foreign state (Ukraine) against Russian persons.

📎 The full text of the judgment is available here.

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⚖️ Hong Kong Court of First Instance Set Aside an Arbitral Award Ordering the Termination of Court Proceedings, Finding That the Counterparty Had Not Exercised Due Diligence When Signing the Settlement Agreement

A Hong Kong-based developer (the "Developer") and a mainland Chinese holding company (the "Holding Company") entered into a cooperation agreement in 2012 for the development of land in the Fuzhou district (the "Agreement").

In 2021, the Holding Company filed a claim in the Hong Kong Court of First Instance against the Developer, alleging breach of the Agreement. The parties subsequently entered into a settlement agreement, which provided for a repayment schedule to the Holding Company, in exchange for which the Holding Company undertook to discontinue the court proceedings. The settlement agreement also contained an arbitration clause in favor of the Beijing Arbitration Commission and provided for the application of PRC law. On the Holding Company's side, the settlement agreement was signed by a person "having the ability to effectively direct the company's activities," as the Developer later stated.

Despite the settlement agreement, the Holding Company did not withdraw its claim in the Hong Kong court. In view of this, the Developer initiated arbitration and obtained an award requiring the Holding Company to terminate the Hong Kong proceedings and pay the Developer RMB 15 million in damages. In reaching this decision, the arbitral tribunal concluded that the settlement agreement had been signed on behalf of the Holding Company by an unauthorized person. Nevertheless, the agreement was binding on the Holding Company because the Developer had relied on the apparent authority of that person.

The Developer applied to the Hong Kong court for recognition and enforcement of the arbitral award. The respondent objected, arguing that the arbitration agreement was invalid due to collusion between the Developer and the signatory on the respondent's side, and that recognition of the award in Hong Kong would be contrary to public policy.

The Hong Kong Court of First Instance upheld the Holding Company's position, basing its decision on the following grounds:

🔘 Since the respondent had not challenged the tribunal's jurisdiction during the arbitration proceedings, it had lost the right to object to the validity of the arbitration clause on which the award was based;

🔘 At the same time, even if the settlement agreement were invalid, the arbitration agreement would still survive by virtue of the principle of separability, and therefore, contrary to the respondent's argument, the arbitration agreement was valid;

🔘 However, enforcement of the arbitral award would be contrary to Hong Kong public policy if the claimant knew, or ought to have known, that the settlement agreement containing the arbitration clause had been signed by an unauthorized representative of the Holding Company;

🔘 A reasonable person in the Developer's position would have at least conducted a basic check of the signatory's authority on the respondent's side — especially since the Developer's representative who signed the settlement agreement was a lawyer by training and held the position of Risk Management Director. Consequently, the Developer had no reasonable basis to rely on the apparent authority of the Holding Company's representative;

🔘 For this reason, recognition and enforcement of the arbitral award, which was based on a settlement agreement signed in the absence of the Holding Company's genuine consent, would be contrary to Hong Kong public policy — notwithstanding the arbitral tribunal's finding that under PRC law the Developer could rely on the signatory's apparent authority.

In the end, the Hong Kong Court of First Instance refused the claimant's application for recognition and enforcement of the arbitral award.

📎 The full text of the judgment is available here. An analysis of the judgment is available here.

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⚖️ Another indicator of a permanent arbitral institution without the status of a PAI – a "turnkey" enforcer of arbitral awards

LLC "Bizaps" (the applicant), as the service provider, and LLC "Aller Group" (the interested party), as the customer, entered into a service agreement containing an alternative dispute resolution clause (the contract). Under the clause, the claimant could choose between a state court and an ad hoc arbitral tribunal with the well‑known arbitrator A.V. Kravtsov 👀

Relying on an alleged debt under the contract, the applicant initiated arbitration. A.V. Kravtsov granted the claims in full ☕ The applicant then applied to the Commercial Court of the City of the city of Moscow for a writ of execution on Kravtsov's award.

The Commercial Court of the City of the city of Moscow refused to issue the writ – a frequent outcome with Kravtsov's awards.

The court established, as a matter of course, that the arbitral tribunal exhibited objective characteristics of a permanent arbitral institution without the status of a Permanent Arbitration Institution (PAI).

The court relied, as usual, on the fact that signs of a permanent arbitral tribunal are evident from the website of the tribunal, established in 2010, with sections such as "Chairman of the Court", "Presidium", "Expert Council", and "Fees". Notably, the website offers, on a fee‑based basis, services for facilitating the enforcement of awards, including those rendered by Kravtsov himself – effectively a "turnkey" arbitration award.

Furthermore, during the arbitral proceedings, the interested party acknowledged the claims in full without any substantive objections. The court noted that this fact, in itself, does not disprove the existence of a debt, but neither does it allow the court to compensate for the lack of substantive scrutiny of the issue by the arbitral tribunal.

The Commercial Court of the City of the city of Moscow also took into account that the applicant in this case was represented by an individual who serially represents various unrelated applicants in proceedings for enforcement of Kravtsov's awards.

Thus, the court held that enforcement of the arbitral award would contravene the Russian public policy and dismissed the application for a writ of execution.

📎 The ruling is available here.

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⚖️ The Moscow Circuit Arbitrazh (Commercial) Court confirms the jurisdiction of Russian commercial courts to hear an application to set aside an arbitral award against an individual guarantor of a German bankrupt company

German clothing manufacturer Ahlers AG (the Company) and its affiliated German entities had for many years supplied goods to Russian retailer Jeans Symphony LLC under import and supply agreements entered into in 2015.

In 2018, the parties recorded the Russian retailer’s outstanding debt in an Acknowledgment of Debt and Deferral Agreement. Performance of the contractual obligations was secured by guarantees provided by the beneficial owners of the German manufacturer’s business. One of the guarantors was a Russian citizen permanently residing in the United States (the applicant). The applicant also held a 10% interest in the Company’s Russian subsidiary, Ahlers Rus LLC. The guarantee issued by the applicant contained an arbitration clause in favor of the ICAC at the Chamber of Commerce and Industry of the Russian Federation.

In 2023, the Company was declared bankrupt in Germany due to adverse market conditions and the COVID-19 pandemic. The Bielefeld Local Court appointed Dr. Biner Bähr, a partner at the German office of White & Case, as insolvency administrator.

Following the failure to pay the debt under the guarantee, the insolvency administrator commenced arbitration before the ICAC at the Chamber of Commerce and Industry of the Russian Federation. In February 2026, the arbitral tribunal rendered an award in favor of the foreign creditor, ordering the applicant to pay more than EUR 500,000 in principal, interest at 7.5% per annum, as well as arbitration fees and legal costs exceeding EUR 83,000. Notably, two of the three arbitrators were nationals of “unfriendly” states.

The applicant applied to the Moscow Commercial Court to set aside the ICAC award. However, the court returned the application, finding that a dispute involving an individual who was not registered as an individual entrepreneur did not fall within the jurisdiction of Russian commercial courts.

The applicant appealed the first-instance ruling to the Moscow District Commercial Court. The insolvency administrator of the Company also supported the cassation appeal.

The Moscow Circuit Arbitrazh (Commercial) Court disagreed with the first-instance court and adopted the following legal position:

🔘Russian commercial courts have jurisdiction over disputes arising from business activities;

🔘Since the parties’ disputed relationship is commercial in nature and involves a foreign element, an application to set aside the arbitral award falls within the jurisdiction of the commercial courts. The applicant’s lack of individual entrepreneur status and permanent residence in the United States should not prevent the case from being heard by such courts.

🔘At the same time, proceedings concerning issuance of a writ of execution for enforcement of the ICAC award were pending before the Moscow Arbitrazh (Commercial) Court (Case No. A40-171524/2026), having been initiated by the insolvency administrator. The district court recommended that the first-instance court consider consolidating the two cases.

The courts did not examine the fact that the arbitration had been commenced by the insolvency administrator of a foreign company or that the dispute was connected with its insolvency proceedings.

Ultimately, the circuit court remitted the case to the first-instance court for reconsideration.

📎The judicial act is available at the link.

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☝️ SIAC and FGV Chamber of Mediation and Arbitration sign Memorandum of Understanding

The Memorandum aims to strengthen the position of international arbitration as the preferred method for resolving cross‑border disputes.

Under the Memorandum, the parties agreed to jointly organise events on international arbitration – by offline, hybrid, and online formats – to be held in Singapore and Brazil. Leading representatives of the arbitration community from both countries will be invited to participate.

The signing ceremony took place on 3 September 2026 in Rio de Janeiro. SIAC was represented by Ms. Adriana Uson, Director and Head of the North and South America division, and the FGV Chamber was represented by Ms. Juliana Loss, Executive Director.

📎 The press release is available here.

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⚖️ Scottish court held that adjudication is a procedure with strict time limits, and therefore the adjudicator is not obliged to give the parties additional time to make submissions on individual issues

Entexol (the claimant), as subcontractor, and Sked (the respondent), as main contractor, entered into a contract for works on a Scottish power grid project (the contract).

The contract provided for the resolution of disputes arising thereunder by way of adjudication. During the performance of the contract, a dispute arose between the parties.

The claimant claimed the respondent to pay for the works carried out. In turn, the respondent filed a counterclaim for compensation of costs, on the ground that the claimant had missed the deadlines for completing the works. According to the respondent, the claimant failed to complete the works by a specific contractual completion date, which was set out in a direction sent to the claimant by email.

The adjudicator rejected the respondent's arguments, holding that time was not of the essence for the performance of the contract ("time was at large").

According to the adjudicator, there was no evidence that the claimant had agreed to any completion date. In particular, the email relied upon by the respondent could not be regarded as a binding direction on the completion date in the absence of the claimant's consent. A binding agreement on the completion date could not be imposed unilaterally by the respondent's direction.

As a result, under the adjudicator's decision, the respondent was ordered to pay the claimant approximately £114,000.

The claimant applied to the Court of Session in Scotland for enforcement of the adjudicator's decision. The respondent opposed enforcement, relying on breaches of the principles of natural justice. According to the respondent, the adjudicator had made a finding that time was at large when the parties had not raised that issue before him. As a result, the respondent was deprived of the opportunity to explain what it considered to be a "reasonable time" in the absence of a fixed date, while the adjudicator had acted "on a frolic of his own".

The judge held that the adjudicator's decision had been made without any breach, noting the following circumstances:

🔘 The adjudicator did not go beyond the issues submitted to him. He merely examined the respondent's argument about a fixed date and, with reasons, rejected it. The adjudicator's statement that time was not of the essence was a logical consequence of the respondent's failure to prove the existence of a fixed date;

🔘 Contrary to the respondent's position, the adjudicator was not obliged to invite the parties to make submissions on the completion date. The judge recalled that adjudication is an accelerated dispute resolution procedure with strict time limits and does not impose an obligation on the adjudicator to give the parties an opportunity to comment further on individual issues. Otherwise, the respondent could have abused its procedural rights.

The judge thus granted the application for enforcement of the adjudicator's decision.

📎 The Scottish court's judgment in English is available here.

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⚖️ The Hague Court declined to set aside the NAI award, although it found that the arbitrator should have disclosed his business relationship with a party to the dispute

The employee held the position of Chief Executive Officer at MetaCorp and held shares in the claimant pursuant to a share valuation agreement (the “Agreement”). Following his retirement, the employee was required to transfer the shares to MetaCorp, while MetaCorp was required to pay the employee compensation in return.

A dispute arose over the date for valuing the shares for the purposes of calculating the employee’s compensation. The employee argued that the relevant date was the end of the financial year preceding the termination of his employment, while MetaCorp maintained that it should be the end of the year in which the employment actually terminated.

The employee commenced arbitration under the Netherlands Arbitration Institute (NAI) Rules pursuant to the Agreement’s arbitration clause. The three-member tribunal comprised an arbitrator appointed by the employee from Curaçao, an arbitrator appointed by MetaCorp from the Netherlands, and a Dutch chair. The tribunal ultimately upheld the employee’s claims.

MetaCorp applied to the Hague Court of Appeal, as the court at the seat of arbitration, seeking to set aside the arbitral award on the following grounds:

👀Since 2001, the arbitrator from Curaçao had maintained business relationships with the employee who had appointed him. The employee had regularly retained the arbitrator to provide advice on matters, including matters relating to MetaCorp;

👀The arbitral tribunal awarded interest from a date that had not been pleaded by either party. Consequently, the award came as a “surprise” to the parties.

The Court agreed with MetaCorp and noted that the arbitrator should have disclosed his business relationship with the employee and should have understood that MetaCorp could have had legitimate doubts as to his impartiality and independence. However, the Court did not consider this sufficient grounds for setting aside the award for the following reasons:

🔘An arbitral award may be set aside on grounds of an arbitrator’s lack of impartiality only where the arbitrator was in fact biased, or where the doubts as to his impartiality are so serious that it would be unreasonable to require the unsuccessful party to accept the award;

🔘The contacts between MetaCorp and the arbitrator from Curaçao were not close. First, the arbitrator had participated in the employee’s advisory matters only occasionally and had not devoted significant time to them. Second, most of the advice had been provided a long time ago and was not relevant. Third, the employee had merely acted as the contact person in those matters, whereas MetaCorp itself was the actual client;

🔘The award was rendered unanimously by all three arbitrators, meaning that no particular influence of the arbitrator from Curaçao on the outcome of the dispute could be established;

🔘MetaCorp had not challenged the arbitrator during the arbitration proceedings, although it had had the opportunity to do so, and had therefore lost its right to object;

🔘In light of the above, in the present case the doubts as to the arbitrator’s impartiality and independence were not sufficiently serious to warrant setting aside the award.

As regards MetaCorp’s arguments concerning interest, the Court held that the arbitral award had not come as a “surprise” to the parties. During the arbitration, the parties and the arbitral tribunal had discussed the issue. Accordingly, the parties could have expected that the arbitral tribunal might determine the commencement date for the accrual of interest in accordance with the applicable law. In line with established practice, the arbitral tribunal determined the commencement date for the accrual of interest as the date on which the arbitration was commenced.

Accordingly, the Hague Court of Appeal refused to set aside the NAI arbitral award.

📎The court decision is available here.

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⚖️ Hong Kong Court of Appeal orders VTB to provide security for costs in dispute with German OWH

PJSC VTB (VTB) is the majority shareholder of German bank OWH SE i.L. (OWH), holding 99.39% of its shares. For many years, the parties entered into numerous foreign exchange and derivatives transactions. Following the events of February 2022 and the imposition of EU sanctions, the German financial regulator prohibited OWH from making any payments to, or disposing of assets in favor of, VTB Group entities in preparation for the bank’s subsequent liquidation.

In April 2022, the parties entered into a termination and settlement agreement (the Agreement), under which OWH undertook to pay VTB more than EUR 112 million. The parties agreed that their relationship would be governed by English law and that all disputes would be resolved by arbitration under the HKIAC Rules.

Despite the arbitration clause, VTB obtained a judgment in Russia in its favor pursuant to Article 248.1 of the Commercial Procedure Code of the Russian Federation and recovered more than EUR 19 million by enforcing against OWH’s assets in Russia. VTB also obtained an anti-suit injunction under Article 248.2 of the Commercial Procedure Code. As it is known, the dispute between VTB and OWH even reached the Constitutional Court of the Russian Federation, which, in a refusal decision, emphasized that Articles 248.1 and 248.2 of the Commercial Procedure Code should not be interpreted expansively.

In response to the breach of the arbitration agreement, OWH applied to the Hong Kong Court of First Instance seeking an anti-suit injunction. VTB opposed OWH’s application, relying on Article 19 of the Basic Law of Hong Kong, which excludes disputes concerning international relations and foreign policy from the jurisdiction of Hong Kong courts. Nevertheless, the court ruled in favor of OWH and granted the anti-suit injunction (the Judgment).

VTB appealed the Judgment to the Hong Kong Court of Appeal. In the appellate proceedings, OWH applied for security for costs in the amount of HKD 1.3 million, relying on the following circumstances:

👀Recovering costs from a Russian party would involve various difficulties, as there is no reciprocal arrangement between Russia and Hong Kong for the recognition of judicial decisions concerning costs;

👀VTB had previously failed to comply with orders of the Hong Kong courts.

VTB opposed OWH’s application on the following grounds:

🔘EU sanctions and VTB’s status created insurmountable legal and practical barriers to depositing funds with the Hong Kong court;

🔘OWH could use VTB assets held by OWH and frozen as a result of sanctions as security for costs by way of set-off;

🔘The appeal has strong prospects of success because the interpretation of Article 19 of the Basic Law, on which VTB had relied before the court of first instance, substantially engaged matters of public interest.

The Hong Kong Court of Appeal upheld OWH’s position, reaching the following conclusions:

👀Although sanctioned persons face difficulties in making payments (“there are difficulties to overcome in doing so”), payment remains possible: VTB had already made substantial payments to Hong Kong to cover arbitration costs at the HKIAC, so this argument was unfounded;

👀As the parties are separate legal entities, OWH’s assets belong to OWH itself, not to VTB, notwithstanding VTB’s status as OWH’s majority shareholder;

👀OWH is in liquidation, and the liquidation is governed by German law, under which set-off of a claim against a sanctioned person is prohibited;

👀VTB’s appeal is “arguable at best” but the prospects of success on appeal could not justify refusing OWH’s application.

The Hong Kong Court of Appeal ordered VTB to provide security for costs in the amount of HKD 1.3 million.

📎The judgment is available at the link.

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