On 19 June 2020, a new Russian federal law will come into force which provides for the Russian state arbitrazh (commercial) courts to have exclusive jurisdiction over disputes involving Russian sanctioned individuals and entities as well as foreign entities controlled by them.

Even if the parties have agreed to the jurisdiction of a foreign court or an arbitral tribunal seated outside of Russia, sanctioned persons will be able to disregard the dispute resolution provisions if they cannot be enforced due to sanctions.

This means that businesses dealing with Russian counterparties will need to carefully monitor whether the counterparty is a sanctioned person and whether the sanctions could affect the enforceability of the dispute resolution clauses in their contracts or provided by international treaties.

If this is the case, their disputes may be forcibly referred to the Russian arbitrazh courts, even though the parties have agreed to, or an international treaty provides for, an arbitration with a non-Russian seat; or opted for the jurisdiction of a foreign court.

For more information see this post on our Arbitration Notes blog.