Commercial Court of Moscow accepts jurisdiction over dispute on a contract containing arbitration agreement due to sanctions against one party

Maxim Kulkov (Managing Partner) and Sergey Lysov (Senior Associate), KK&P

In Case No А40-264063/22, the Commercial Court of Moscow considered a claim relating to the termination of a contract containing an arbitration agreement. The court established that it had exclusive jurisdiction, despite the arbitration agreement, due to the existence of sanctions imposed against a Russian party to the dispute.

The Commercial Court of Moscow has determined a claim concerning the termination of a contract containing an arbitration agreement. The court found that it had exclusive jurisdiction despite the arbitration agreement, due to the sanctions imposed against one of the parties. Having established jurisdiction, the court went on to find that a unilateral termination of the contract
was illegal.

In 2019, Russian Railways and Siemens executed a contract for the delivery of 13 high-speed electric trains, which included an arbitration agreement providing for arbitration at the Vienna International Arbitration Centre (VIAC). German law governed the contract.

In October 2022, Siemens served Russian Railways with a notice of termination of the contract due to the sanctions imposed against Russian companies.

Despite the arbitration agreement, Russian Railways filed a claim with the Moscow state court, referring to article 248.1 of the Commercial Procedure Code (CPC), which allows Russian courts to establish exclusive jurisdiction over a dispute involving Russian sanctioned entities.

Siemens contested the jurisdiction of the state court and raised a motion to leave the claim without consideration due to the arbitration agreement.

The Commercial Court of Moscow determined that it had jurisdiction under article 248.1 of the CPC. The court referred to EU sanctions against Russian Railways and applied the approach formulated by the Russian Supreme Court in JSC Uraltransmash v PESA (Case No #60-36897/2020), in which it was held that the mere fact of sanctions against a Russian party is sufficient basis
to conclude that the foreign forum could not objectively determine a dispute involving that party.

Having established its jurisdiction, the court considered the case on the merits. Notably, the court analysed relevant provisionsvof German law and found the unilateral termination of the contact to be invalid. According to articles 313-314 of the German Civil Code (Bürgerliches Gesetzbuch) termination is only allowed if adaptation or modification of the contract is not possible or is inacceptable. The court also indicated that the EU sanctions against Russian Railways are temporary and should continue only for six months.

The court also ordered Siemens to deliver the trains specified in the contract.

You can find the link to the full text of the article here or download the pdf of the article here (reproduced from Practical Law with the permission of the publishers).