On 30 May 2024, C Cases Senior Partner Alina Kalanda took part in a round table on "International arbitration: current state and development prospects" held under the auspices of the Association of Lawyers of Russia.

Chaired by Evgeny Olegovich Budyakov, Chair of the Association of Lawyers of Russia's commission on international cooperation, and Pyotr Andreevich Ilyichev, Chair of the Association's commission on arbitration, participants discussed pressing arbitration issues for Russian participants in international business in today's conditions, the protection of the rights and legitimate interests of sanctioned persons, arbitration in the BRICS and EAEU countries, and much more.

The talk by Vladislav Petrovich Sorokin attracted particular attention. It covered the enforcement of decisions of courts at various levels and, in particular, the problem of paying representatives who defend Russian parties in courts abroad, as well as the problem of paying arbitration fees through European banks.

Payment problems

Russian companies face problems paying arbitration fees through European banks and to arbitral institutions for a number of reasons:

1. Sanctions and restrictions

Many European banks refuse to process transactions with Russian companies because of the sanctions imposed on Russia. This makes it difficult for Russian companies to transfer funds to the accounts of arbitral institutions in Europe.

2. Tighter financial control

European financial institutions have tightened control over Russia-related transactions. This leads to delays and refusals of payments, as transactions may be considered suspicious.

3. Frozen accounts

Accounts of Russian companies, or even funds held in the accounts of arbitral institutions, may be frozen by European banks as part of sanctions policy. This complicates meeting financial obligations to arbitral institutions.

4. Reputational risks

European banks may avoid transactions with Russian companies because of the risk of reputational damage, fearing possible consequences from regulators and the public.

5. Currency conversion problems

Currency restrictions and difficulties converting roubles into euros also create additional obstacles to paying arbitration fees. In particular, after the restrictions imposed on the Moscow Exchange, it has become harder to determine the rouble's exchange rate against the dollar and the euro.

6. Legal difficulties

Some European arbitral institutions may not accept payment from Russian companies because of legal restrictions or fears of breaching sanctions regimes.

These problems require Russian companies to look for alternative ways to meet their financial obligations, including the use of intermediaries, cryptocurrencies or special arrangements to get around sanctions and financial restrictions.

Possible solutions

There are several examples of alternative ways Russian companies can pay arbitration fees under sanctions and financial restrictions:

1. Intermediaries and agencies

Russian companies use international intermediaries or agencies that can make payments on their behalf. These intermediaries may be located in countries not subject to sanctions, which makes transactions easier.

2. Correspondent accounts

Some companies use correspondent accounts with banks in countries with less strict sanctions regimes. This allows transactions to go through friendlier financial systems.

3. Cryptocurrencies

With limited access to traditional financial services, some companies turn to cryptocurrencies for international payments. Cryptocurrency transactions can be made without banks, which helps get around sanctions barriers.

4. SWIFT and alternative systems

In some cases, alternative financial systems are used, such as China's CIPS (Cross-Border Interbank Payment System) or Russia's SPFS (Financial Messaging System), which operate in parallel with the international SWIFT system.

5. Payments through third countries

Payment can be made through third countries not subject to sanctions, which makes it possible to avoid direct restrictions on transactions between Russia and European countries.

6. Barter and set-off

In some cases, companies may use barter or set-off to minimise the need for international financial transfers. For example, a Russian company may agree with a European partner to supply goods or services in exchange for covering costs.

7. Legal advice and optimisation

Companies seek legal advice from international lawyers to design schemes for optimising financial flows so as to ensure compliance with the law and avoid sanctions risks.

These alternative methods require careful legal work and may involve additional costs and risks, but they make it possible to meet financial obligations to European arbitral institutions and beyond.

C Cases recommends seeking qualified legal assistance to identify and implement the most suitable approach to making payments to Europe.

In lieu of a postscript

Similar payment problems arise when foreign lawyers need to be engaged to defend the interests of Russian companies in court.

The sanctions measures that lead to these problems should be regarded as an obstacle to exercising the right to a fair trial.