The law enabling sanctioned persons to move litigations to Russia: background and reasons

On 8th June 2020 Vladimir Putin signed into law a new bill amending Russian Commercial Code (RCC) introducing provisions that enable sanctioned persons to sue in Russian commercial courts their foreign counterparts irrespective of jurisdiction clause within the contract signed or international treaty. The main sponsor has given his name to the new Law, which is already known as Lugovoy Law. The sense of the Parliament was that to provide Russian sanctioned persons and their affiliates (both domestic and foreign) with extra support vis-à-vis ongoing and forthcoming litigations abroad. As of now, the RCC is supplemented by sections 248.1 and 248.2 and the commercial courts shall have exclusive jurisdiction over disputes involving persons that are subject to restrictive measures. The Law neither list countries and jurisdictions that shall impose sanctions on the Russian plaintiffs, nor specify type of restrictive measures. For instance, the Russian company sanctioned solely by Ukraine may prevent LCIA arbitration or High Court proceedings in England at the suit of its British opponent. In doing so, the Russian sanctioned Plaintiff is required adducing evidence to show deprivation from right to an effective remedy and to a fair trial abroad. Pursuant to the Lugovoy Law, the Plaintiff could be either an individual or a legal entity including foreign ones and be subject of restrictive measures imposed by any foreign country, union of states or by a body of certain interstate community. The Plaintiff’s home commercial court shall have inherent jurisdiction to entertain cases arising out of the new Lugovoy Law. Meanwhile section 248.2 of RCC enables sanctioned persons to seek injunctive relief precluding foreign opponents either commencing or continuing court proceedings in foreign fora. It is a kind of ex parte anti-suit injunction previously unknown to the Russian legal order. The sanctioned person may invoke 248.2 relief once mailed by opponent’s pre-trial letter. In support of the anti-suit injunction the Lugovoy Law allows sanctioned persons asking the court to order for security for costs. However, the amount sought shall not exceed the sum at stake in the main proceedings. Both orders made under the Lugovoy Law may be challenged on appeal at the Circuit Commercial court within one month. At the outcome, the protectionist logic of the legislature made foreign non-residents extraterritorially amenable to the jurisdiction of Russian commercial courts irrespective their personal law. This might provoke competition between jurisdictions and the emergence of two judicial acts on a dispute between the same persons on the same subject and grounds. If the major actors of the Russian economy decide to recourse to the provisions of the new law in disputes that have nothing to do with sanctions that may entail international tensions. The real purpose of the Lugovoy law is to create an extra tool to protect sanctioned persons and their interests. The opponents of those persons designated under some sanctions program shall not be able to recognise and enforce on the territory of Russia a judgment or arbitral award that in some extent appears to disadvantage Russian sanctioned persons. The author was followed by the objective to discover background and reasons behind the Lugovoy Law, as well as to attempt establishing its beneficiaries. Examining court proceedings versus Russian sanctioned persons abroad that have been commenced or disposed of within a month prior Andrei Lugovoy introduced his bill, it were found situations the Lugovoy Law would like to prevent and persons it tries to protect beforehand. In addition to this, the research focused on cases in Russian commercial courts wherein the Plaintiffs were trying to persuade the Commercial courts to apply the principles of Lugovoy bill before it has become law.

About the author: Sergey Glandin – Candidate of Sciences (Ph.D.) in Law, Teaching Fellow, Department of International Law, Law School, Lomonosov Moscow State University, Moscow, Russia.

Citation: Glandin S. (2021) Zakon o prave podsanktsionnykh lits perenosit' sudebnye spory v Rossiyu: prichiny i predposylki [The law enabling sanctioned persons to move litigations to Russia: background and reasons]. Mezhdunarodnoe pravosudie, vol.11, no.1, pp.131–152. (In Russian).

References

Bakhin S.V., Eryomenko I.Yu. (2017) Odnostoronnie ekonomicheskie “sanktsii” i mezhdunarodnoe pravo [Unilateral economic “sanctions” and international law]. Zakon, no.11, pp.162–175. (In Russian).

Gevorgyan K.G. (2012) “Odnostoronnie sanktsii” i mezhdunarodnoe pravo [Unilateral sanctions and international law]. Mezhdunarodnaya zhizn', no.8, pp.91–106. (In Russian).

Glandin S.V. (2015) Vozmozhen li angliyskiy World Freezing Injunction v Rossii? [Is it open for Russian courts to grant interim remedy like the English World Freezing Injunction?]. Zakon, no.4, pp.107–120. (In Russian).

Glandin S.V. (2020) Primenenie ukrainskikh sanktsiy ukrainskimi sudami v delakh s rossiyskimi litsami [Application of Ukrainian sanctions by Ukrainian courts in cases with Russian persons]. Kommercheskiy arbitrazh, no.1, pp.110–115. (In Russian).

Kalinin A.V. (2005) Ekonomicheskie sanktsii OON i odnostoronnie ekstraterritorial'nye mery ekonomicheskogo prinuzhdeniya: sravnitel'nyy analiz [UN economic sanctions and unilateral extraterritorial measures of economic coercion: a comparative analysis]. Yurist-mezhdunarodnik, no.4, pp.30–37. (In Russian).

Karabel'nikov B.R. (2020) Rossiyskoe pravosudie zashchitit obizhennykh rossiyan [Russian justice will protect disgruntled Russians]. Zakon, no.7, pp.109–121. (In Russian).

Keshner M.V. (2013) Legitimnost' odnostoronnikh sanktsiy v sovremennom mezhdunarodnom prave [The legitimacy of unilateral sanctions in modern international law]. In: Vylegzhanin A.N. (ed.) Mezhdunarodnoe pravo i sovremennye teorii mezhdunarodnykh otnosheniy: aspekty sochetaemosti: Materialy VII Konventa RAMI [International law and modern theories of international relations: aspects of compatibility. Materials of VII RAMI Convent.], Moscow: Aspekt Press, pp.71–83. (In Russian).

Khodykin R.M. (2013) Antiiskovye obespechitel'nye mery v tsivilisticheskom protsesse i mezhdunarodnom arbitrazhe [Anti-suit interim measures in civil procedure and in international arbitration]. In: Voprosy mezhdunarodnogo chastnogo, sravnitel'nogo i grazhdanskogo prava, mezhduna­rodnogo kommercheskogo arbitrazha: Liber Amicorum v chest' A.A.Kostina, O.N.Zimenkovoy, N.G.Eliseeva [Issues of international private, comparative and civil law, international commercial arbitration: Liber Amicorum in honour of A.A.Kostin, O.N.Zimenkova, N.G.Eliseeva], Moscow: Statut, pp.274–296. (In Russian).

Kurdyukov G.I., Keshner M.V. (2014) Sootnoshenie otvetstvennosti i sanktsiy v mezhdunarodnom prave: doktrinal'nye podkhody [Correlation of responsibility and sanctions in international law: doctrinal approaches]. Zhurnal rossiyskogo prava, no.9, pp.103–115. (In Russian).

Voronov A.F. (2020) Izmeneniya v APK RF dlya zashchity prav lits, popavshikh pod sanktsii [Amendments to the Commercial Procedure Code of the Russian Federation to protect the rights of sanctioned persons]. Oboronno-promyshlennyy kompleks: voprosy prava, no.5, pp.13–20. (In Russian).

Witzleb N. (2010) “Equity Does Not Act in Vain”: An Analysis of Futility Arguments in Claims for Injunctions. Sydney Law Review, vol.32, no.3, pp.503–531.