On 17 February 2023 the Russian Arbitration Association (RAA) held an arbitration seminar & networking in Dubai International Financial Center. It was an inaguaral event in Dubai and the Middle East of the RAA. The meeting focused on sharing the practitioners’ experience and was attended by 70 lawyers from Russia, the Middle East and North Africa on arbitrations affected by unilateral restrictive measures, including sanctions.
Roman Zykov, a Partner with Mansors and the Secretary General of the Russian Arbitration Association gave a key note speech, in which he discussed the impact of sanctions on international arbitration. He noted that international arbitration is facing considerable challenges, and therefore needs to adapt to the current environment and secure access to justice.
The first session was devoted to the impact of sanctions on drafting dispute resolution clauses and was moderated by Maxim Kulkov the Managing Partner of KK&P.
Prateek Jain, a Partner of Masin, discussed some issues that clients may face due to the anti-Russian sanctions. He noted that as a matter of practice, unilateral sanctions may have different meanings in different circumstances and that they are not always bring restrictions, they may also bring the way forward to avoid these restrictions.
Then the audience was asked to use their phones to answer the following question: “In an arbitration seated in Europe where one of the parties is a sanctioned entity. Did you experience any problems paying arbitration fees?”.
According to the results, the majority of the respondents (86%) have experienced such a challenge.
The results of the survey triggered a discussion.
Vladimir Khvalei, a Partner with Mansors and the Chairman of the Board of the Russian Arbitration Association explained the process of paying arbitration fees through a transit account of the ICC. He also suggested including UNCITRAL arbitration clauses with PCA administration, as PCA does not need to get approval from the EU and can make payments without considerable complications.
Roman Zykov discussed whether arbitral institutes may accept bank guarantees issued by non-sanctioned banks or escrow accounts to accept payments of the arbitration fees.
Khawar Qureshi KC, the Head of McNair International, spoke about the UK sanctions. He asserted that access to justice is a fundamental right which, by virtue of its exceptional nature, may not be diminished even as a result of sanctions. However, modern sanctions do affect access to legal services. For instance, the London Court of International Arbitration (LCIA) has obtained the General License for paying arbitration costs, which permits LCIA to receive payments from the parties that are subject to the UK sanctions against Russia. However, the General License does not cover costs for lawyers, expert witnesses and translators.
The audience was asked to answer the following question: “In an arbitration seated in Europe where one of the parties is a sanctioned entity. Did you experience any problems in hiring European legal counsel?”
The results were similar to the first question (87% of the respondents have encountered this problem).
Roman Zykov explained that regrettably, access justice, which is a basic human right, requires thinking out of the box. For example, there is a general problem with instructing a Swedish counsel. One of the ways of getting Swedish law advice is hiring a Finnish lawyer – due to similarities between Swedish and Finnish law, and the fact that some of the Finnish lawyers were trained in Sweden and speak Swedish as a native language, it could be an emergency solution to the problem. However, it demonstrates that some of the users of arbitration are deliberately cut off of the European legal system and encounter significant problems in accessing justice.
The audience was asked to respond to one more question: “In an arbitration seated in Europe where one of the parties is a sanctioned entity. Did you experience any problems in retaining European or US experts?”
The results were stunning – 88% of the respondents answered that the have had such problems.
Karim J. Nassif, the Principal of Nassif Arbitration, mentioned that clients deal in particular with challenges arising in the process of drafting arbitration clauses. According to him, the following factors should be taken into account: the arbitration institution and seat of arbitration shall be located outside of the states that have imposed sanctions, the arbitrators shall not be the nationals, residents or have other obligations to comply with foreign sanctions, and, finally, payments need to be made through non-sanctioned banks or/and not in the currency of the state imposing sanctions.
Hussein Khaddour, the Founder of KHADOORCO, described the scope of application of sanctions. Sanctions, firstly, specify the field they cover (oil, gas, etc.), secondly, contain a list of sanctioned entities and individuals. Then he emphasized that in practical life, because of over-compliance, there is no real differentiation between the list of sanctioned entities and just nationals of the sanctioned countries. Thus, sanctions effectively extend to the non-sanctioned persons.
The final speaker of the first panel, Valery Knyazev, FCCA, CFE, ACIArb, the Managing Director of Kroll Advisory, noticed that the issue of sanctions sometimes is ambiguous and raises concerns. For example, on 14 May 2022, the UK announced the imposition of sanctions against Russia, but the official document appeared only on July 22. In addition, the speaker emphasized that even if there is no official ban on services, experts may refuse to provide them due to reputational risks.
The second session of the Seminar was devoted to choosing a neutral forum for sanctions-related disputes. Vladimir Khvalei, the Chairman of the RAA Board and the Partner of Mansors, moderated it .
Dr. Habib Al Mulla, the Founder of Habib Al Mulla & Partners, gave a general overview of the Dubai International Arbitration Centre (DIAC). He mentioned the following benefits of of the DIAC: “in 2022 the DIAC issued a new edition of the arbitration rules which provisions are in line with the international arbitration practice”, “Dubai remains neutral in the Ukraine conflict” and “Dubai is a civil law jurisdiction”.
After Dr. Habib’s presentation, Vladimir Khvalei asked the audience the following question: “In an arbitration seated in Europe, did you experience logistical hurdles in arranging and attending a hearing in Europe?”.
The results demonstrated that more than a half of the audience have encountered some challenges.
Dr. Ismail Selim, the Director of the Cairo Regional Centre for International Commercial Arbitration, gave an overview of the CRCICA. He noted that the CRCICA has more than forty years experience in different kinds of disputes, the center has very effective case management according to the Global Arbitration Review and CRCICA Rules are based on UNCITRAL Model Arbitration Rules. Also he noted that CRCICA accepted payments in different currencies without restrictions.
Prof. Dr. H. Ercüment, the Founder and Senior partner of Erdem & Erdem, gave an overview of the arbitration in Turkey. He talked about the advantages of arbitration in Turkey. One of the main advantages is that Turkey is an arbitration friendly jurisdiction. There is a very limited intervention of local courts in arbitration. The speaker further described the leading arbitration centers in Turkey: Istanbul Arbitration Center (ISTAC), Istanbul Chamber of Commerce Arbitration and Mediation Center (ITOTAM), and the Union of Chambers and Commodity Exchanges (TOBB).
Dr. Pr. Benoit Le Bars, the Managing Partner of Avocat Associé Lazareff Le Bars SARL, summarized that sanctions may even demonstrate the good faith of the parties. This works for instance in cases when a person moves business to another country in order to work normally and respect a contract. On the basis of such actions, an arbitrator may conclude that the party is in good faith. The speaker also said that from his point of view there is no such thing as questioning about applicable law as in international arbitration the main guide for arbitrators is international practice.
Динара Юсупова, студентка 4 курса НИУ ВШЭ