Lawyer Monthly - May 2022

30 WWW.LAWYER-MONTHLY.COM | MAY 2022 The Russian response and potential claims against Russia and Russian state entities A number of countermeasures are being developed in Russia in response to the business withdrawals noted above. Draft legislation has been introduced before the Russian Duma on the external management of foreign subsidiaries intending to leave the Russian market (a de facto nationalisation), with the possible sale of such assets at public auction and the state acting as the buyer if there are no applicants. The draft law also provides for a company’s forced liquidation or bankruptcy. Other recent developments in Russia include a presidential decree imposing restrictive currency controls, such that payments for gas deliveries to “unfriendly” countries must be made in Russian roubles and buyers must set up multiple currency accounts: Gazprombank receives the payment in the foreign currency, buys roubles on the Moscow exchange and deposits these funds into the buyer’s roubles account in order to pay Gazprom in roubles. This sets the stage for potential disputes (such as gas price review arbitrations) as these requirements, including the foreign buyer being unilaterally subject to potentially unfavourable exchange rates, are unlikely to be consistent with existing gas supply contracts. Of particular interest in relation to contractual claims arising from newly imposed currency requirements is the March 2022 decision by the English Commercial Court in RTI Ltd v MUR Shipping BV. In response to 2018 sanctions imposed on RTI Ltd’s parent company (in relation to OFAC’s 2018 sanctions against Mr Oleg Deripaska, Rusal and others), MUR Shipping BV invoked a force majeure clause on the basis that it would be a breach of sanctions to continue with performance, including in respect of RTI’s payment of US dollars to MUR as required under the contract. RTI argued that sanctions would not interfere with cargo operations and euros instead of US dollars. Moreover, in the realm of public international law, Russia has bilateral investment treaties with over 60 states (including BITs with Sweden, Netherlands, the UK, Italy and Ukraine), which may give rise to arbitrations against Russia for breach of these BITs, including in relation to expropriation via forced asset sales, liquidation or bankruptcy. Investors have had success in bringing such claims against states, even on behalf of companies already in liquidation. Compounding these potential claims is the risk of another set of claims arising from the spectre of a Russian sovereign default, and the potential for investor-state that as a Dutch entity, MUR was not a “US person” caught by the sanctions. RTI also proposed to effect payment in euros rather than US dollars. The contract specified that a force majeure event required that “it cannot be overcome by reasonable endeavours from the Party affected”. The arbitral tribunal found that while sanctions had an impact on RTI’s ability to pay MUR in US dollars, MUR’s case on force majeure failed as it could have accepted RTI’s proposal to accept payment in euros. The Court upheld MUR’s appeal and set aside the arbitral award, holding that the reasonable endeavours provision did not require MUR to accept non-contractual performance or to accept payment in ARBITRATION, RUSSIAN SANCTIONS AND THE SPECTRE OF SOVEREIGN DEFAULT

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