The Advocate General of the Court of Justice of the European Union, Andrea Biondi, presented an opinion on how to interpret Article 11 of EU Regulation 833/201. This provision prohibits the satisfaction of any claims by Russian parties arising from the performance of contracts for the supply of dual-use goods and technologies. Many have interpreted this provision differently. A restrictive interpretation is based on the assumption that Article 11 of the Regulation applies only to proceedings in state courts and to claims for damages. A broad interpretation prohibits the filing of any claims, including claims for reimbursement of advance payments, and extends the effect of Article 11 to arbitration.

The question of how to interpret this rule came up in a case between Russia's Stankoimport and Belgium's NV Reibel Global Solutions Building (case No. T 15558-21), where Stankoimport paid Reibel in advance for equipment that was never delivered because of sanctions. Reibel refused to return the prepayment, citing the EU sanctions regulations prohibiting the satisfaction of claims by Russian companies. The arbitral tribunal ordered Reibel to return the prepayment, but the Swedish courts refused to enforce this decision, requesting clarification from the EU Court of Justice. The question is whether the return of the prepayment constitutes a violation of sanctions, as it could be regarded as satisfying the claims of a Russian company.

The EU Advocate General's opinion calls into question compliance with the fundamental principles of equality of arms and access to justice for Russian companies. Experts believe that arbitration in the EU jurisdiction is losing its practical significance: the Russian side risks either having its claim dismissed at the initial stage or having the arbitral award subsequently set aside by national courts.

If the EU Court of Justice supports the Advocate General's position, any attempt to enforce an arbitration award in favor of a party subject to sanctions will be classified as a violation of EU public policy. The national courts of EU member states will be obliged to set aside such arbitral awards or refuse to recognize and enforce them. For Russian parties, this will mean that it will be futile to apply to arbitration tribunals with the EU as the place of arbitration, which will result in the unenforceability of the arbitration agreement, comments KKMP partner Stanislav Dobshevich.

In addition, Stanislav draws attention to the Advocate General's conclusion on circumventing sanctions. Thus, if the parties have chosen a place of arbitration outside the EU in order to circumvent sanctions and there are signs of a violation of Article 11 of the Regulation, this carries the risk of penalties for the EU counterparty for circumventing the sanctions regime. This approach may complicate the agreement with European counterparties on neutral dispute resolution forums, in particular DIAC and HKIAC.