SECURITY FOR COSTS IN ARBITRATION PROCEEDINGS WITH RUSSIAN PARTIES
Parties to arbitration proceedings are generally not entitled to demand security from the opposing party for the costs of the proceedings. However, if a party can demonstrate that there is a substantial risk it will not be able to enforce a favourable cost award against the opposing party, an arbitral tribunal may grant that party’s request to order the opposing party to provide security for the expected costs of the proceedings.
The facts and circumstances the requesting party must demonstrate in order to obtain an order for security for costs will typically relate to the opposing party’s conduct – such as attempts by the opposing party to hide its assets to protect them from enforcement. A sudden and unexpected deterioration of the opposing party’s financial situation may also justify an order for security for costs, provided that the deterioration was not caused by the requesting party’s conduct at issue in the arbitration.
Similarly, an order for security for costs may be appropriate where the requesting party can demonstrate that it will not be able to enforce a favourable cost award against the opposing party. In this context, it is important to note that recent developments in Russia have shown that the once relatively arbitration-friendly approach of Russian courts has shifted to be the exact opposite. Russian countersanctions, amendments to the Procedure Code of the Russian Arbitrazh (Commercial) Courts (the Arbitrazh Procedure Code), and the interpretation of these rules by the Russian courts have created serious impediments to the enforceability of arbitral awards against Russian parties in Russia.
Oct-Dec 2023 issue
Hengeler Mueller Partnerschaft von Rechtsanwälten mbB