Altered States: Sanctions and International Arbitration

Chiraag Shah recently spoke with Financier Worldwide about the effect of global sanctions on arbitration. Chiraag, said: “The arbitration community has been operating in an environment of increasing numbers of economic sanctions and counter-sanctions regimes for a number of years. In response, most arbitral institutions and participants have taken steps to adapt to new regimes.”

Arbitration is often used as the preferred venue for neutral dispute resolution following global conflicts, for example following Russia’s invasion of Ukraine in 2022. This however does give rise to problems affecting the arbitration community, as Chiraag discusses:

“Russian courts have issued anti-suit injunctions against international arbitrations, which flows entirely contrary to the very tenets of arbitration – parties’ freedom to contract away from national courts. Some arbitral tribunals have nevertheless ignored such injunctions and proceeded to hear the arbitration. In other cases, national courts in other jurisdictions have in turn also issued anti-antisuit injunctions in favour of arbitration. Naturally, all of this leads to the risk of costly parallel proceedings and judgements. The interpretation of relevant sanctions legislation, and possible orders of Russian courts which are contrary to internationally accepted policy and arbitral practice, have added a further layer of complexity for arbitrators navigating this area.”

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