Russia’s Constitutional Court refused to hear a complaint over a law allowing courts to assert exclusive jurisdiction over disputes involving sanctioned Russian parties.
Mikhail Samoylov, June 2, 2025
On April 8, 2022, VTB Bank and VTB Bank (Europe) SE (now OWH SE i.L.) entered into an agreement for the settlement of debts, the agreement provided for arbitration under the HKIAC to resolve disputes. Despite the arbitration agreement, VTB Bank, the claimant, initiated legal proceedings to recover debts before a Russian court. In parallel proceedings, the claimant also requested the court to grant anti-arbitration and anti-suit injunctions.
VTB Bank relied on Article 248.1 of the Russian Arbitrazh Procedural Code ("APC"), which provides for the exclusive jurisdiction of Russian courts over disputes involving sanctioned Russian parties, and on Article 248.2 of the APC, which empowers courts to grant anti-arbitration and anti-suit injunctions.
The Russian courts
First, granted anti-arbitration and anti-suit injunctions, restraining VTB Bank (Europe) SE from initiating both the HKIAC proceedings and proceedings before the High Court of the Hong Kong Special Administrative Region (see the court ruling dated December 11, 2023, in Case А56-103943/2023);
Second, rejected VTB Bank (Europe) SE's motion to refer the parties to arbitration and ordered VTB Bank (Europe) SE to pay its debts to VTB Bank (see the court decision dated December 7, 2023, in Case А56-84760/2023).
VTB Bank relied on Article 248.1 of the Russian Arbitrazh Procedural Code ("APC"), which provides for the exclusive jurisdiction of Russian courts over disputes involving sanctioned Russian parties, and on Article 248.2 of the APC, which empowers courts to grant anti-arbitration and anti-suit injunctions.
The Russian courts
First, granted anti-arbitration and anti-suit injunctions, restraining VTB Bank (Europe) SE from initiating both the HKIAC proceedings and proceedings before the High Court of the Hong Kong Special Administrative Region (see the court ruling dated December 11, 2023, in Case А56-103943/2023);
Second, rejected VTB Bank (Europe) SE's motion to refer the parties to arbitration and ordered VTB Bank (Europe) SE to pay its debts to VTB Bank (see the court decision dated December 7, 2023, in Case А56-84760/2023).
VTB Bank (Europe) SE filed a complaint with Russia’s Constitutional Court over Articles 248.1 and 248.2 of the APC. The applicant was of the view that these provisions contradict the Russian Constitution and should not apply if the seat of arbitration is in a "friendly" jurisdiction.
The Constitutional Court refused to hear the complaint. In its Ruling No. 999-O dated April 29, 2025, the Constitutional Court noted the following:
The Constitutional Court refused to hear the complaint. In its Ruling No. 999-O dated April 29, 2025, the Constitutional Court noted the following:
First, Article 248.1 provides for exclusive jurisdiction. Russian courts have exclusive jurisdiction over disputes involving sanctioned Russian parties if there are obstacles to access to justice. Whether these factors exist is for a court to determine at its discretion.
In the case at hand, as found by the courts (first-instance and on appeal), the claimant was subject to unilateral sanctions—a fact that was well known—and submitted evidence, including letters from lawyers refusing to provide legal assistance. Thus, in the view of the courts, the claimant faced obstacles to accessing justice. The Constitutional Court is not in a position to review these conclusions.
Second, a sanctioned Russian party might choose not to rely on Article 248.1; therefore, the arbitration/litigation clause should be respected. In other words, it is at the discretion of the sanctioned Russian party whether to invoke Article 248.1 or not.
Third, if a court establishes legal grounds for the exclusive jurisdiction of Russian courts over disputes involving sanctioned Russian parties (under Article 248.1), the court is empowered to apply Article 248.2.
Finally, the Constitutional Court made no reference to either “friendly” or “unfriendly” jurisdictions. This is likely because such terms do not exist under Russian procedural law.
See Constitutional Court Ruling No. 999-O of April 29, 2025, in Russian.
P.S. The Ruling does not preclude the possibility of other applications to the Constitutional Court concerning Articles 248.1 and 248.2. of the APC.
In the case at hand, as found by the courts (first-instance and on appeal), the claimant was subject to unilateral sanctions—a fact that was well known—and submitted evidence, including letters from lawyers refusing to provide legal assistance. Thus, in the view of the courts, the claimant faced obstacles to accessing justice. The Constitutional Court is not in a position to review these conclusions.
Second, a sanctioned Russian party might choose not to rely on Article 248.1; therefore, the arbitration/litigation clause should be respected. In other words, it is at the discretion of the sanctioned Russian party whether to invoke Article 248.1 or not.
Third, if a court establishes legal grounds for the exclusive jurisdiction of Russian courts over disputes involving sanctioned Russian parties (under Article 248.1), the court is empowered to apply Article 248.2.
Finally, the Constitutional Court made no reference to either “friendly” or “unfriendly” jurisdictions. This is likely because such terms do not exist under Russian procedural law.
See Constitutional Court Ruling No. 999-O of April 29, 2025, in Russian.
P.S. The Ruling does not preclude the possibility of other applications to the Constitutional Court concerning Articles 248.1 and 248.2. of the APC.
(с) Mikhail Samoylov. 2025.
