Geopolitics and Russia-related disputes

The nature of disputes that have been and are being triggered by the geopolitical developments around Russia raise complex legal and practical issues in a number of interconnected areas including energy, public international law, sanctions, and cross border procedure.   

This article discusses commercial disputes arising after the start of the full-scale invasion of Ukraine, investment disputes against Russia, anti-suit Injunctions by the Russian courts and countermeasures taken by non-Russian courts.

The uncertainty surrounding energy supplies led to sharp increases in prices, with natural gas and oil prices reaching record highs. This price volatility has resulted in numerous disputes between energy suppliers and consumers over contract terms, pricing adjustments, and force majeure claims. Furthermore, extensive Western sanctions have been applied on the Russian energy companies, including major companies like Gazprom and Rosneft.

Some of these circumstances or a combination of them precipitated the termination of joint ventures, the cancellation of long-term supply contracts and other commercial disputes. Some examples of this type of disputes include the reported cases of PGNiG v. Gazprom, RWE v. Gazprom, CEZ v. Gazprom, Engie v. Gazprom, or Uniper v. Gazprom just to name a few. All of these cases are reported to concern international contracts, in which arbitration was commonly chosen as method for dispute resolution.

Commercial disputes triggered against this background, are likely to lead to an increase in authorities on force majeure, rebus sic stantibus (i.e. the legal doctrine that allows for suspension, amendment or termination of a contract due to a significant change in circumstances) and other possibly relevant questions, thereby potentially creating new angles to these issues in the business environment.

Investment disputes against Russia

Russia's invasion of Ukraine also led to a significant increase of investment arbitration cases lodged against Russia. Some cases primarily revolve around the expropriation of assets, often as a result of regulatory measures undertaken by the Russian State. Such regulatory measures have been frequently directed at significantly limiting the foreign investor's control and enjoyment of their investments, including instances of 'temporary' management. As a result, foreign investors have initiated claims because of violations of bilateral and multilateral investment treaties by Russia.

For example, the German company Wintershall Dea (Wintershall) has reportedly filed parallel investment arbitration proceedings against Russia under the Germany-USSR BIT and the Energy Charter Treaty (ECT). It is reported that Wintershall held participations in two Russian oil fields, Yuzhno-Russkoye and Urengoyskoye. Wintershall claims that following the invasion of Ukraine, Russia adopted several measures that adversely affected Wintershall’s Russian operations, including Decree 1554, which retroactively imposed a price cap on the gas traded from these fields.

Fortum, a majority state-owned Finnish energy company, has submitted two notices of disputes against Russia under the Netherlands-Russia BIT and the Sweden-Russia BIT.  This dispute is reported to be centred around Russia's Presidential Decree No. 302 of 25 April 2023, by which Fortum’s stake in the Russian energy company PAO Fortum was placed under the 'temporary' administration of the Federal Agency for State Property Management. 

The other cases, in the footsteps of the cases raised following the illegal annexation of the Crimea in 2014, pertain to the expropriation of assets owned by investors in Ukraine, particularly in the regions occupied by Russia. Companies have claimed that their properties and investments were unlawfully seized by Russian authorities or entities acting on their behalf. For instance, SCM, as well as its owner, Rinat Akhmetov, have lodged investment arbitration claims against Russia seeking damages for the losses incurred as a result of interference with their business and the expropriation of their assets and investments in the so-called ‘Donetsk People’s Republic’ and ‘Luhansk People’s Republic' in Ukraine.  The proceedings are reportedly pursued under the Russia-Ukraine BIT of 1998.

It is still premature to see how these disputes will progress and what outcomes they may bring for the investment arbitration sphere, but it can be assumed that they will contribute to the general development of international investment protection. 

Anti-suit injunctions by Russian courts (The Lugovoi Law)

Anti-suit injunctions are orders which restrain a party to pursue proceedings. These injunctions usually aim to prevent a party from initiating or continuing legal proceedings in breach of an exclusive jurisdiction or arbitration clause. However, in the context of Russia-related disputes and proceedings before Russian courts, the anti-suit injunctions (ASIs) have taken a rather different, and at times – political, spin.

The legal basis for anti-suit injunctions in Russia was introduced by the adoption of Russian Federal Law 171-FZ in June 2020, which made certain additions to Article 248 of the Russian Commercial (Arbitrazh) Procedure Code (APC).

Article 248.1 APC grants exclusive jurisdiction to Russian commercial courts (arbitrazh courts) for disputes involving sanctioned persons or those related to sanctions imposed by foreign entities. Article 248.2 APC further empowers these courts to issue anti-suit injunctions, prohibiting the initiation or continuation of foreign court or arbitral proceedings against sanctioned individuals. This provision was said to ensure that Russian entities affected by foreign sanctions could and would relocate their disputes to Russian courts, thereby attempting to override any existing jurisdiction or arbitration agreements.

The combined set of such Russian law measures that are said to address the impact of sanctions on Russian parties is, at times, called the "Lugovoi Law", being named after the Andrey Lugovoi, one of the initiators of the relevant bills in the Russian Duma. While many of these norms were introduced into the APC before the start of the full-scale invasion of Ukraine, they have caught particular traction and application after February 2022.

According to the publicly available Russian court register, the Russian courts have not refused (in a final and binding manner) any of the anti-suit applications under the Lugovoi Law that have been filed in the last few months.

Countermeasures by non-Russian courts 

Russian anti-suit injunctions have stirred significant reactions globally. The international community did not respond favourably to these measures. Indeed, some parties have requested anti-suit injunctions of their own to prevent the counterparty from pursuing legal action in Russia, or to request anti-anti-suit injunctions and anti-enforcement injunctions to thwart Russian anti-suit efforts.

English courts, due to the prominence of London as a seat of arbitration and in jurisdiction clauses, have already ruled on such requests on multiple occasions.

1. The Principle of an Anti-Anti-Suit Injunction

An anti-anti-suit injunction is a court order that prevents a party from seeking or enforcing an anti-suit injunction. Essentially, it is a legal measure used to counteract an anti-suit injunction, which itself is an order that stops a party from initiating or continuing legal proceedings.

This legal mechanism has gained particular prominence in the current political context where Russian entities as well as the Russian judiciary itself were seen to be weaponizing the use of anti-suit injunctions. Consequently, foreign companies may face possible risks of enforcement in Russia, as well as possible risks outside of Russia, despite valid arbitration or choice of court agreements between the parties.

2. Examples of Countermeasures by English Courts

Conclusion

The ongoing Russian aggression on Ukraine has significantly impacted the global economy, especially in the energy sector, leading to a high number of commercial and investment disputes. The disruption of energy supplies and price volatility have resulted in a surge of arbitration cases. The international legal community is yet to see what the combination of outcomes in such arbitration cases is to bring to the overall development of the law, in particular for the development of international investment protection principles. 

The world is also witnessing a tactical use of Russian court proceedings in general, and anti-suit injunctions in particular. In this context, the rise of countermeasures against Russian court proceedings and injunctions, such as anti-anti-suit injunctions, highlights the evolving nature of these international legal disputes. Courts in various jurisdictions have recognised the need for legal tools to protect their judicial sovereignty and to uphold the contractual choice of forum and arbitration agreements. As the legal landscape continues to evolve, these countermeasures will play a key role in resolving cross-border disputes and maintaining the integrity of international dispute resolution.