NAVIGATING GEOPOLITICS: SANCTIONS AND INTERNATIONAL ARBITRATION
Since the start of the Ukraine war in February 2022, several countries including the UK, US and those within the European Union (EU) have imposed significant foreign policy-related economic sanctions on Russia. These sanctions have escalated since Russia annexed Crimea in 2014 and have disrupted global trade, with businesses reevaluating existing and future partnerships. In addition, recent events in the Middle East, including heightened tensions between the US and Iran, have contributed to a political ecosystem of escalating conflicts. These developments greatly impact international relations and dispute resolution mechanisms.
Economic sanctions do not target the arbitration process. Similarly, arbitral procedural rules do not directly mention economic sanctions. However, the use of sanctions can have a meaningful effect on the people and entities involved in an arbitral proceeding that extends to the overall process. There are many open issues regarding the interpretation of economic sanctions in global business where jurisdictions implement differing sanctions frameworks, in parallel raising thorny questions as to dispute settlement via international arbitration. This article explores the arbitrability of disputes impacted by economic sanctions.
Sanctions complicate international arbitral proceedings at various stages, including award enforcement under the 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). For example, where sanctions are aimed at a party specifically designated under one of the sanctions regimes, the country imposing sanctions may determine that an award conflicts with its public policy. This can occur whether the sanctioned party is owed or owing funds, particularly if the debtor cannot use its frozen funds to advance costs.
Jul-Sep 2024 issue
New York International Arbitration Center (NYIAC)