Sanctions Compliance as a Ground for Finding an Arbitration Clause Incapable of Being Performed
Year: 2026
Type: article
Abstract: Sanctions restrictions imposed after 2022 and the compliance procedures accompanying them on the side of infrastructure participants in the arbitral process have confronted Russian and international scholarship with the task of revising the content of the category "incapable of being performed" within the meaning of Article II(3) of the 1958 New York Convention. Without such revision, the Russian party is deprived of procedural protection while formally possessing a valid arbitration clause. In development of the author's concept of "factual enforceability", previously substantiated on the material of Russian-Chinese trade turnover, this article scales this legal approach to the general system of cross-border procedural agreements. The subject of a comprehensive analysis is the destabilization of the arbitration infrastructure and the mass refusal of third parties to service disputes arising from foreign trade contracts. The aim of the work is to provide a theoretical substantiation of the concept of compliance-induced inoperability of an arbitration agreement and its integration into the system of procedural law of the Russian Federation under sanctions pressure.The methodological basis of the study consists of the formal-legal method, the method of systemic analysis of legal institutions, as well as the comparative-legal method applied when comparing the approaches of law enforcement authorities of the Russian Federation, courts of the United Kingdom, the USA, Germany, and the regulations of new arbitration centers in the Middle East and Eurasia.The novelty of the study lies in the development of the concept of "compliance-induced inoperability of an arbitration clause", which describes the state of an agreement whereby it, while remaining formally valid, loses its capacity for functional implementation due to the sanctions-related refusal of third parties to service the process. The main conclusions of the study are the evidence that the single-criterion approach of Russian case law requires complexification. The author developed and implemented a three-step test consisting of six criteria of functional inoperability to operationalize Part 4 of Article 248.1 of the APC RF. The special contribution of the author to the study of the topic is the adaptation of the doctrine of "overlaid legal orders" and the principle of "factual enforceability", previously tested on the material of Russian-Chinese contracts, to the procedural dimension of arbitration agreements. An algorithm for risk allocation through the transfer of disputes to neutral arbitration centers of Eurasia and the Middle East is substantiated.
Source: Право и политика
Author: Denis Al'bertovich Chugunov
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W7168107176