In July 2024, the Supreme Court of Russia emphasized the need for Russian courts to consider the potential bias of foreign arbitrations when reviewing foreign arbitration awards (Ruling of the Board for Economic Disputes of the Supreme Court of the Russian Federation of 26 July 2024 No. 304-EС24- 2799 in case No. A45-19015/2023). This means that Russian courts will now take a more critical approach when reviewing foreign arbitration awards, considering whether the arbitration process was fair and impartial.
The court noted that Russian companies may face difficulties in finding representatives to participate in foreign legal proceedings, which violates their right to defense. According to its position, introduction of politically motivated restrictive measures by foreign states against the Russian Federation raises doubts about the fairness of legal proceedings in foreign jurisdictions.
The case involved Novosibirskhleboprodukt, a Russian company that was sought to be forced to fulfil a foreign arbitration award by С. Thywissen GmbH, a German company that sells vegetable oils. The value of dispute was over USD 600,000, and the arbitrators in the dispute were citizens of Ukraine, the UK, and Denmark.
Earlier, lower courts had supported the foreign arbitration award in favor of the German company, but the Supreme Court overturned the decision, finding that the lower courts had failed to properly assess the real objectivity and impartiality of the arbitrators.
Another recent case also illustrates the challenges faced by foreign companies in enforcing foreign arbitration awards. In August 2024, the Arbitrazh Court of Sverdlovsk Region considered an application by PESA Bydgoszcz, a Polish company, to recognize and enforce a decision of the Arbitration Institute of the Stockholm Chamber of Commerce dated May 12, 2021, against Ural Plant of Transport Machine-Building, a Russian company (Ruling of the Arbitrazh Court of the Sverdlovsk Region of 16 August 2024 in case No. A60-24839/2024).
In the ruling, the judge refused to enforce the foreign arbitration award, citing concerns about the potential harm to a large Russian industrial enterprise and the interests of the Russian side “in the context of legal aggression by a number of unfriendly countries”, both from a private and public interest perspective.
This shift in approach may have significant implications for foreign companies doing business in Russia, as they may face greater challenges in enforcing contracts or resolving disputes.