The recent imposition of unprecedented sanctions against Russia following its invasion of Ukraine has generated global economic tensions and poses substantial considerations for those multinationals and individuals who wish to avoid exposure to risk of consequent disputes.
The swathe of sanctions have included the US banning all imports of Russian oil and gas and the UK has pledged to phase out Russian oils imports by the end of 2022. Germany has placed on hold permission for the Nord Stream 2 gas pipeline from Russia to open and some Russian banks will also be removed from the international financial messaging system Swift. The effects of this complex web of restrictions will substantially affect the global economy.
It is a reality that the Kremlin will react to these impositions with retaliatory actions the extent of which remains to be seen. Companies that have investments in Russia must have a grip on these issues in order to protect themselves from costly disputes.
A primary consideration for any arrangement would be to secure a pathway to international arbitration. In the current climate, investors may be apprehensive of asserting contractual rights against the Russian state or emanation of the state in the Russian courts. To arbitrate internationally in this scenario companies will need to consider how they will demonstrate at a later stage Russia’s consent in order to pursue the matter in an international forum. A suitably drafted clause would address this.
Bilateral Investment Treaties (BITs) also offer recourse to resolution. Since 2015, such a treaty has been in force between Russia and Bahrain and since 2013 with the United Arab Emirates. The Energy Charter Treaty (ECT) is an international agreement that established a multilateral framework for cooperation in the energy industry. This too can be utilised to settle international arbitrations and member countries include Kuwait, Oman, the United Arab Emirates, Saudi Arabia, Qatar, Bahrain and Yemen.
However, even in matters which can technically engage dispute resolution methods including BITs and the ECT there is no better way of improving the prospects of a successful arbitration than by approaching contractual arrangements with a clear pathway to multijurisdictional dispute resolution in mind.
This article was written by Piers Desser, Partner, and published by Lexis Middle East at lexismiddleeast.com