Russian Constitutional Court Was Asked to Clarify Anti-Suit Injunctions From the APC (Arbitrazh Procedure Code)
German company OWH (formerly VTB’s European subsidiary, now under external administration by German regulators due to EU sanctions against VTB) has filed a complaint with Russia’s Constitutional Court regarding the application of Articles 248.1 and 248.2 of the Arbitrazh Procedure Code. These articles establish Russian abitrazh [commercial] courts’ exclusive jurisdiction in disputes involving sanctioned entities and permit Russian courts to prohibit foreign court or arbitral proceedings against such entities. The Constitutional Court is currently conducting a preliminary review of the complaint, according to the court’s electronic database.
According to Pravo.ru, OWH (formerly VTB Europe) argues these articles should not be applied to issue prohibitions on proceedings in jurisdictions friendly to Russia, such as Hong Kong.
The reason for filing the complaint with the Constitutional Court of the Russian Federation was the ongoing dispute between VTB and OWH: according to an agreement between VTB and VTB Europe, the latter was supposed to transfer approximately €113 million to the parent structure, but due to EU sanctions against the Russian bank, the payment was not made, and soon after, VTB Europe was effectively seized by German authorities. In 2023, VTB filed a lawsuit with the Arbitrazh Court of St Petersburg and the Leningrad Region to recover a debt of €112.6 million from OWH. However, since the agreement between VTB and VTB Europe contained an arbitration clause for the resolution of disputes in Hong Kong, OWH initiated such proceedings in that jurisdiction.
Following this, in December 2023, the Arbitrazh Court of St Petersburg and the Leningrad Region – based on Article 248.2 of the APC – prohibited OWH from initiating or continuing proceedings in the court of Hong Kong or the Hong Kong International Arbitration Centre (HKIAC). Despite this, in September 2024, the Hong Kong court issued its own anti-suit injunction, that is, a prohibition for VTB to proceed with the dispute in the Russian arbitrazh court, RBC wrote.
According to the text of Article 248.1, the compulsory transfer of a dispute to Russia is justified if sanctions are in effect against the Russian party to the dispute, creating “obstacles to access to justice”. However, OWH argues that when considering the dispute in Hong Kong, as required by the initial agreement between the parties, there are no real obstacles to access to justice, as Hong Kong is not included in the Russian list of unfriendly jurisdictions. In arguing for Hong Kong’s friendly status (as a special administrative region of the PRC), OWH also pointed out that China has not imposed sanctions against Russia and does not support unilateral restrictions.
Experts interviewed by Pravo.ru do not expect the Constitutional Court of the Russian Federation to recognise the norms of Articles 248.1 and 248.2 of the APC as unconstitutional, but believe that it would be useful if the court formulated the limits of the application of the disputed articles. At the same time, practice shows that sanctions can create difficulties even in friendly jurisdictions – for example, with the payment of legal services, lawyers state.