Seminar: Sanctions and Arbitration


An eminent panel spoke before a room filled to capacity at an Arbitration Association 40 seminar on Sanctions and Arbitration. They discussed the effect US and EU sanctions may have both on organization and conduct of arbitration proceedings and substantive outcome of disputes. Given that substantive implications of sanction may depend on applicable law the seminar speakers looked at them from transnational, English and Russian law perspective.

Dr Mercédeh Azeredo da Silveria (Derains & Ghavari, Paris) introduced the topic and looked at the sanction-related issues of choice of law and as well effect sanctions may have under transnational law perspective. Restrictions arising from financial and trade sanctions may form part of applicable law. Alternatively, arbitrators may look at them as mandatory rules. Dr Azeredo da Silveira used the example of CISG to illustrate application of sanctions in transnational context. Party to a sales contract may argue that newly introduced sanctions constitute to a force-majeure event. However, in order to succeed with this argument the party will normally have to prove that the sanctions have not been foreseeable and that it may not overcome the impediment (e.g. by sourcing goods from another country).

Maria Gritsenko (Bryan Cave, London) discussed the effect of sanctions on contracts under English law. She noted that force-majeure is a not a statutory concept in English law and the consequences of force-majeure event would normally be dealt with in parties contract. In some cases the doctrine of frustration may become relevant and applicable. Ms Gritsenko then discussed decisions of English courts dealing with effect of sanctions on contracts particularly in the context of Iran- and Libya related sanctions. For example, in Libya Arab Foreign Bank v Bankers Trust the court found that the party will be excused due to the effect of sanctions if performance becomes illegal as a matter of law applicable to the contract or the excused party cannot perform the contract at the place of performance without violating the law. In Melli Bank plc v Holbud Limited the court refused to find the underlying facility agreement frustrated since the party failed to use available means to achieve performance.

Mr Alexei Panich (Herbert Smith Freehills) addressed the effect of sanctions on contracts under Russian law and certain procedural implications of sanctions for arbitral proceedings. He discussed various Russian law rules (such as force-majeure and impossibility of performance) parties may invoke due to imposition of sanctions. He also suggested certain contractual provisions Russian parties may use to preserve their interests. Mr Panich then turned to the procedural implications of sanctions. He noted that a sanctioned party may face considerable difficulties in participating in a foreign-based arbitration. He then discussed whether the sanctioned party may rely on these difficulties to argue that the arbitration clause became unenforceable.

Presentations by speakers were followed by a lively Q&A session.

Arbitration Association 40 is very grateful to the speakers (Dr Mercédeh Azeredo da Silveria Ms Maria Gritsenko and Mr Alexei Panich) for their very insighƞul presentations and to Herbert Smith Freehills for hosting the seminar.

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