International Disputes Involving Russian Companies: How the Choice of Jurisdiction is Changing

Russian companies continue to participate in international litigation and arbitration proceedings. However, in recent years, the approach to choosing a forum for dispute resolution has changed significantly.

While previously, when concluding international agreements, parties often relied on traditional European arbitration centers, practical factors are now increasingly important when choosing a jurisdiction: sanctions restrictions, the availability of settlements, the possibility of engaging arbitrators, and the subsequent enforcement of the decision.

Against this backdrop, Russian parties are increasingly considering arbitration centers in Asia and the Middle East, as well as certain alternative jurisdictions.

How the approach to choosing an arbitrator has changed

The choice of arbitration clause is no longer solely a matter of the institution’s reputation or the established practices of a particular industry. Parties now evaluate how convenient the chosen forum will be for them throughout the proceedings.

In particular, before concluding an agreement, the following is important:

• whether the party will be able to pay the arbitration costs without hindrance;
• Will there be any restrictions when transferring funds?
• will the parties be able to appoint the arbitrators they choose;
• How the Institute handles cases involving Russian companies;
• are interim measures available;
• where the decision can subsequently be recognized and enforced;
• How the procedure may be affected by current sanctions restrictions.

Thus, the place of dispute resolution becomes part of the company’s overall system of legal and commercial risks.

Towards Asia and the Middle East

One of the most noticeable trends has been the increasing interest in arbitration institutions located in Asian and Middle Eastern jurisdictions.

In particular, the Russian parties are increasingly considering:

• Hong Kong;
• Singapore;
• Dubai;
• other jurisdictions that can provide more predictable conditions for working with Russian participants.

This isn’t a complete rejection of European arbitration centers. Rather, companies have expanded their range of options, and their choices have become more situational.

For a new agreement, the parties may base their decisions not on which institution has traditionally been considered the most prestigious, but on how effectively it can administer a specific dispute, taking into account the circumstances of the business.

Why Hong Kong is attracting more attention

Hong Kong occupies a special place among alternative destinations. It is viewed as a venue that allows for the combination of the international nature of arbitration while eliminating certain restrictions that may arise in other jurisdictions.

For Russian participants, several circumstances are important:

• the opportunity to use the international arbitration infrastructure;
• the absence of its own sanctions restrictions against Russia;
• experience in handling international commercial disputes;
• availability of specialists familiar with Russian practice;
• the ability to choose the applicable law separately from the place of arbitration.

However, the mere attractiveness of a jurisdiction does not automatically mean it is suitable for every contract. The specific choice depends on the composition of the parties, their assets, the intended location of performance, and other circumstances.

European markets remain important

The changing geography of international arbitration does not mean that Russian companies have completely stopped using European courts and arbitration institutions.

Such proceedings are ongoing, including those related to previously concluded agreements. Furthermore, foreign counterparties may appeal to European courts on issues related to Russian legal proceedings, interim measures, and the enforcement of obligations.

Therefore, if an existing arbitration clause exists, the parties cannot always simply change their chosen jurisdiction. In practice, they must work within the terms agreed upon at the time of the contract, while also taking into account the restrictions that have arisen since then.

The applicable law is chosen separately

Changing the place of arbitration does not necessarily mean waiving foreign law.

The venue for arbitration and the law applicable to the contract serve different functions. Therefore, parties may choose, for example, an Asian arbitration forum while simultaneously stipulating the application of a specific foreign law to the contractual relationship.

This approach allows us to separate procedural and substantive legal issues and select the most appropriate conditions for each of them.

The choice of law also requires preliminary analysis. It is necessary to consider not only the content of the relevant legislation, but also its applicability to a specific contract, the specifics of interpretation, and the prospects for enforcement of the future decision.

What alternatives are businesses considering?

In addition to the most well-known international centers, companies are turning to jurisdictions that were previously less commonly used in international commercial disputes involving Russian participation.

Serbia is being considered as one option. Its legal system allows for international arbitration, and the absence of sanctions against Russia could have practical implications for certain transactions.

However, choosing a less traditional jurisdiction requires additional due diligence. It is important to assess in advance the reputation of the local institution, the qualifications of the arbitrators, the procedural rules, and the ability to enforce the award in countries where the potential defendant has assets.

What to check before concluding an international agreement

Changed practice shows that it is advisable to agree on an arbitration clause taking into account a possible dispute, rather than to perceive it as a standard term of the contract.

Before choosing a jurisdiction, it is worth determining:

• where the assets of potential parties to the dispute are located;
• in which countries is it intended to enforce the decision;
• what sanctions restrictions may affect the parties;
• How accessible is the chosen platform for Russian participants;
• how the costs of arbitration will be paid;
• what rules apply to the appointment of arbitrators;
• what law will govern the agreement;
• what interim measures are available to the parties;
• to what extent the chosen jurisdiction is suitable for a particular type of dispute.

It’s especially important to consider the prospects for enforcement of the judgment. Even a convenient arbitration process will not resolve the issue if the judgment cannot be effectively enforced where the debtor’s assets are located.

What’s changing for business?

Modern international dispute resolution is becoming more diverse. Russian companies continue to use international arbitration, but choosing a forum now requires considering significantly more factors than just a few years ago.

The main trend is as follows:

• traditional European platforms continue to be used, primarily under previously concluded agreements;
• when new treaties are concluded, interest in Asian and Middle Eastern institutions increases;
• special attention is paid to Hong Kong, Singapore and Dubai;
• sanctions and payment risks become part of the assessment of the arbitration clause;
• the place of arbitration and the applicable law are considered as independent elements of the contract;
• the possibility of subsequent enforcement of the decision is becoming increasingly important.

As a result, the choice of jurisdiction becomes not a formal contractual condition, but an independent risk management tool. The more complex the international structure of the transaction, the more important it is to determine in advance where and how the parties will resolve a potential dispute and enforce the decision made thereon.