The Arbitration Labyrinth: Sanctions quest by Russian companies in the European Financial Labyrinth.
On May 30, 2024, C Cases Senior Partner Alina Kalanda took part in a round table on the topic: International Arbitration: Current Status and Development Prospects”, held under the auspices of the Russian Bar Association.
Under the guidance of the Chairman of the Commission of the Russian Bar Association on International Affairs
collaboration with Evgeny Olegovich
Budyakov and the Chairman of the Association Commission
Russian arbitration lawyers Pyotr Andreevich Ilyichev discussed pressing arbitration issues for Russian participants
international business in modern conditions, protection of rights and legal
interests of persons subject to sanctions, arbitration in the BRICS and EAEU countries, and many others.
The attention of the participants was drawn to Vladislav Petrovich Sorokin's speech on the enforcement of court decisions at various levels and, in particular, the problem of paying fees to representatives who defend the interests of Russian individuals in courts abroad, as well as the problem of paying arbitration fees in European banks.
Payment issues
The problems of payment of arbitration fees by Russian companies in European banks and arbitration courts arise for a number of reasons:
1. Sanctions and restrictions
Many European banks are refusing to conduct transactions with Russian companies due to the sanctions imposed on Russia. This creates difficulties for Russian companies when trying to transfer funds to arbitration courts in Europe.
2. Stricter financial controls
European financial institutions have increased their control over transactions related to Russia. This leads to delays and refusals to process payments, as transactions may be considered suspicious.
3. Freezing accounts
The accounts of Russian companies or even funds held in arbitration courts may be frozen in European banks as part of the sanctions policy. This complicates the process of fulfilling financial obligations to arbitration courts.
4. Reputation risks
European banks may avoid conducting transactions with Russian companies due to the risk of reputational losses, for fear of possible consequences from regulators and the public.
5. Currency conversion issues
Currency restrictions and difficulties in converting Russian rubles into euros also create additional obstacles to paying arbitration fees. In particular, after the restrictions imposed on MICEX, it became more difficult to determine the exchange rate of the ruble against the dollar and the euro.
6. Legal challenges
Some European arbitration courts may not accept payments from Russian companies due to legal restrictions or concerns about violating sanctions regimes.
These problems require Russian companies to find alternative ways to meet their financial obligations, including using intermediaries, cryptocurrencies, or creating special schemes to bypass sanctions and financial restrictions.
Possible solutions
There are several examples of using alternative ways for Russian companies to pay arbitration fees under sanctions and financial restrictions:
1. Intermediaries and agencies
Russian companies use the services of international intermediaries or agencies that can make payments on their behalf. These intermediaries may be located in countries that are not subject to sanctions, which facilitates transactions.
2. Correspondent accounts
Some companies use correspondent accounts with banks located in countries that have less stringent sanctions regimes. This allows transactions to be carried out through more friendly financial systems.
3. Cryptocurrencies
With limited access to traditional financial services, some companies are turning to the use of cryptocurrencies for international payments. Cryptocurrency transactions can be carried out without the participation of banks, which helps to bypass sanctions barriers.
4. SWIFT system and alternative systems
In some cases, alternative financial systems are used, such as the Chinese CIPS (Cross-Border Interbank Payment System) or the Russian SPFS (Financial Messaging System), which operate in parallel with the international SWIFT system.
5. Payments via third countries
Payments can be made through third countries that are not subject to sanctions, which allows you to bypass direct restrictions on transactions between Russia and European countries.
6. Barter deals and offsets
In some cases, companies may use barter deals or offsets to minimize the need for international financial transfers. For example, a Russian company may agree with a European partner to supply goods or services in exchange for reimbursement of costs.
7. Legal advice and optimization
Companies seek legal advice from international lawyers to develop schemes for optimizing financial flows to ensure compliance with legislation and avoid sanctions risks.
These alternative methods require thorough legal consideration and may be associated with additional costs and risks, but they provide opportunities for fulfilling financial obligations in European arbitration courts and beyond.
Cases recommends seeking qualified legal assistance to determine and implement the most appropriate approach to making payments to Europe
Instead of post scriptum.
It should be noted that similar payment problems also occur when it is necessary to involve foreign lawyers in defending the interests of Russian companies in courts.
The sanctions measures that lead to these problems should be considered as an obstacle to the exercise of the right to a fair trial.