Sanctions: The Fracture in International Arbitration

This article is part of the "International Arbitration Perspectives" series. 

In the last decade, sanctions have made arbitrations messy and unpredictable. More recent measures in response to the Russia-Ukraine conflict have been increasingly consequential in dividing states and blocs. Now, there are challenges at every stage of the arbitral process, from the inception of a claim to post-award, indefinitely stalling or altogether breaking the arbitration¹–with jurisdictions across the world taking divergent stances.

While seat considerations historically focused on neutrality, quality of the host state’s judiciary, and the state’s track-record in enforcing awards, sanctions are reshaping the geopolitics of seat selection, with the availability of anti-suit relief, sanctions regimes, and licensing attitudes now being key – a pattern likely to persist through 2026.

Ever Growing Wave of Sanctions-Related Arbitrations

There has been no slowdown in the number of sanctions-related arbitrations in 2025, with further investment treaty claims brought or threatened by sanctioned persons, against Canada,² Switzerland,³ and Ukraine,⁴ amongst others. Other Russian nationals, who were not themselves sanctioned, have threatened proceedings against Belgium in response to a freezing of their assets by the Euroclear central securities depositary.⁵

In response, in 2025, the EU and Switzerland have introduced in their sanctions regimes a so-called “no claims” clause, which specifically prohibits the satisfaction of Investor-State Dispute Settlement (“ISDS”) claim brought by a Russian party under a contract or transaction affected by sanctions – effectively barring the enforcement of awards on public policy grounds and enabling states to bring court proceedings to recover damages from parties that pursue such claims.⁶ Russian investors challenged the new regime before the European Court of Justice (“ECJ”), notably alleging breaches of the New York Convention, ICSID Convention and good faith principles under the Vienna Convention on the Law of Treaties.⁷ The ECJ decision will be critical in shaping the future of sanctioned-related ISDS arbitrations in Europe.  

Commercial arbitration also has seen a proliferation of sanctions-related claims, as sanctions affect contractual performance worldwide⁸ - a trend that is set to continue in 2026, including as a result of the adoption of the EU’s 16^thsanctions package against Russia in February 2025, targeting energy, trade, transport, and infrastructure (all sectors traditionally reliant on arbitration), and the UK’s Russia (Sanctions) (EU Exit) (Amendment) Regulations 2025.

Yet, within the EU, it remains to be seen whether contractual claims arising from EU sanctions are arbitrable – a question that the Court of Justice of the European Union (“CJEU”) is presently deliberating on in the Reibel case. Importantly, on 26 February 2026, Advocate General Biondi delivered his opinion and indicated, amongst other things, that parties to an arbitration agreement should not be precluded from submitting these contractual claims to arbitration but (1) the resulting award is open to judicial review to guarantee compliance with EU public policy and (2) the claims, even if successful, cannot effectively be satisfied within the EU.⁹ Whilst not binding on the CJEU, the Opinion provides an important indication of the possible outcome of the case.

Anti-Suit Lawfare

Juridical disputes have also featured prominently. Russia’s Lugovy Law, which allows its domestic courts to take exclusive jurisdiction over disputes involving sanctioned Russian parties, irrespective of agreed arbitration clauses, has been frequently relied upon since 2020.  In 2025, the law survived several challenges before the Russian Constitutional Court.¹⁰Interestingly, the Russian Constitutional Court ruled in April 2025 that Russian courts must assess, case-by-case, whether real impediments to the access to justice make a jurisdiction agreement unenforceable¹¹–a decision that was seen as a welcome signal of a more fact-sensitive approach that would lead Russian courts to calibrate application of the Lugovy law. Yet Russian courts do not appear to have softened their stance, and reports suggest that over 250 Lugovy injunctions were issued in 2025, even more than in 2024.

Courts elsewhere have continued to issue anti-suit injunctions against Russian parties, upholding arbitration agreements that would otherwise apply. While Russian parties are unlikely to abandon anti-arbitration proceedings in Russia as a result, anti-suit injunctions act as a strategic tool to confirm the jurisdiction of the tribunal and ensure the enforcement of the award later down the line. Given the reluctance of courts in civil law jurisdictions to issue anti-suit injunctions, parties have turned to common law jurisdictions for relief instead,¹² in particular, England & Wales, where courts can grant anti-suit injunctions regardless of the seat of the arbitration.¹³

In parallel, the EU (in December 2024)¹⁴ and Switzerland (in February 2025)¹⁵ passed legislation prohibiting the recognition or enforcement of Lugovy injunctions. This has created a shield for arbitrations seated in the EU and Switzerland, allowing parties to keep proceedings moving despite any Russian ruling.

The combination of anti-suit injunctions and the recent EU and Swiss legislation has proven effective in allowing parties with no realistic enforcement exposure in Russia to pursue and defend claims in arbitration.¹⁶ But for parties with assets or business presence in Russia (or in other jurisdictions that may enforce Russian decisions¹⁷), penalties for non-compliance with Russian injunctions can be so severe that they have little choice but to submit - it was in those circumstances that in February 2025, the English courts accepted UniCredit’s request to vary an anti-suit injunction previously awarded.¹⁸

Diverging Sanction Regimes and Public Policy

Parties can reduce the impact of sanctions on their dispute resolution processes by choosing a seat in a jurisdiction with a favourable sanctions regime. This may have directed parties eastward, where regimes are less stringent than in Europe and the US. Data shows that the number of Russian parties in SIAC arbitrations has increased from 3 in 2020 to 26 in 2024,¹⁹ and the Dubai International Arbitration Centre is now recognised as a permanent arbitral institution by the Russian Ministry of Justice.

While Western sanctions regimes targeting Russia serve the same policy objective, the tools and structure of each regime are evolving in different directions. For example, as mentioned above, the EU and Switzerland have introduced no-claims provisions. By contrast, there are no such measures in the UK and the US.

Jurisdictions also diverge with respect to licensing grounds – a matter that determines how smoothly an arbitration can proceed but also how “easily” an award will be enforced against frozen assets and whether it is enforceable at all. In the EU, there are no general licences which authorize arbitration proceedings and enforcement of arbitral awards, so specific authorizations must be obtained at every stage of an arbitration. To date, this requirement appears to have been applied strictly.²⁰ Under the UK sanctions regime, by contrast, the Office of Financial Sanctions Implementation (“OFSI”) can grant general exemptions – a power that OFSI appears increasingly willing to use, as evidenced in March 2025 with the issuance of a general license for arbitration costs, covering both institutional and legal fees.²¹ This however does not apply at enforcement stage where specific licences must also be granted. The approach in the US is similar to the UK in that general licences can be (and have been) granted for arbitrations to proceed smoothly but enforcement requires specific licences. Yet, in the context of the sanctions imposed by the US against Venezuela, several enforcement proceedings directed against Venezuelan state assets in the US have advanced to judgment without the need for a licence – an approach that is unlikely to apply with respect to the Russian sanctions.

Choosing a seat in a jurisdiction with a favourable sanctions regime may initially facilitate the conduct of arbitral proceedings, but does not reduce the impact of sanctions at the enforcement stage. Local courts in jurisdictions where enforcement is sought, will apply sanctions even where the arbitral tribunal disregarded them in the arbitration. Importantly, from an EU perspective, it remains to be seen whether an arbitral award made outside of the EU, but refusing to apply EU sanctions law, is contrary to public policy and therefore unenforceable within the EU. This is a question that the Court of Justice of the European Union is expected to rule on in 2026 in Axpo Nordic²²- a decision that will likely shape the impact of sanctions on international arbitration going forward.

^{1 A very recent example being a SIAC arbitration that had to be terminated on the basis that continuing with the arbitration had become “impossible” due to sanctions – see DRL v DRK [2026] SGHC 32.} 

^{2 Igor Viktorovich Makarov v. Canada, ICSID Case No. ARB/26/6}

^{3 Gulnara Kerimova v Switzerland}

^{4 Optim Holding GmbH v. Ukraine, ICSID Case No. ARB/25/47}

^{5 Jack Ballantyne, ‘Belgium faces more claims over frozen Euroclear assets’ (Global Arbitration Review, 14 November 2025).}

^{6 Council Regulation (EU) 2025/1494 of 18 July 2025 amending Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia’s actions destabilising the situation in Ukraine; Ordinance on Measures in Connection with the Situation in Ukraine (SR. 946.231.176.72), Amendment of October 29, 2025.}

^{7 Case T-655/25: Shelkov v Council.}

^{8 See, for example, UniCredit Bank GmbH v RusChemAlliance LLC [2024] UKSC 30 and Tecnimont SpA v LLC Eurochem North-West-2 [2025] EWHC 3151 (Comm), and SIAC claim Samsung Heavy Industries v Zvezda Shipbuilding Complex.}

^{9 Case C‑802/24, NV Reibel v JSC VO Stankoimport, Opinion of Advocate General Biondi, delivered on 26 February 2026, ECLI:EU:C:2026:110.}

^{10 Ost-West Handelsbank SE i.l. (OWH SE former VTB Bank Europe) v PJSC VTB Bank (No. 2269/15-01/2025); and Deutsche Bank AG v RusChemAlliance LLC, In the Russian Constitutional Court.}

^{11 Ost-West Handelsbank SE i.l. (OWH SE former VTB Bank Europe) v PJSC VTB Bank, In the Russian Constitutional Court (No. 2269/15-01/2025).}

^{12 For example, in the USA - Google Ireland Limited v OOO Google, No. 5:2025cv00851, Google LLC v. NAO Tsargrad Media, No. 5:2024cv05423; in Hong Kong -  Bank A v Bank B [2024] HKCFI 2529 and Linde PLC v RusChemAlliance LLC [2025] HKCFI 3720; and in England & Wales - JP Morgan Securities PLC & Others v VTB Bank PJSC [2025] EWHC 1368 (Comm) and Google LLC v NAO Tsargrad Media [2025] EWHC 94 (Comm).}

^{13 RusChemAlliance LLC v UniCredit Bank GmbH [2024] UKSC 30.}

^{14 Council Regulation (EU) 2024/3192 of 16 December 2024 amending Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia’s actions destabilising the situation in Ukraine.}

^{15 Ordinance on Measures in Connection with the Situation in Ukraine (SR. 946.231.176.72), Amendment of February 12, 2025.}

^{16 See for example: Wintershall Dea v Russia under the Energy Charter Treaty PCA case no. 2024-42; and ICC claim NJSC Naftogaz v PJSC Gazprom (III).}

^{17 For example, this might be the case in certain CIS member states operating under the Convention on Legal Assistance and Legal Relations in Civil, Family and Criminal Matters signed at Minsk (1993) and the later Chişinău Convention on mutual recognition/enforcement of civil judgments (2002).}

^{18 UniCredit Bank GmbH v RusChemAlliance LLC [2025] EWCA Civ 99.}

^{19 SIAC Year in Review Annual Reports 2020-2024.}

^{20 Assets frozen by EU sanctions can only be enforced against where an arbitral award was rendered before their owner was designated (there is no such distinction in respect of court judgments), and pursuant to a licence granted by the local competent authority. Although not in the context of sanctions against Russia, the French Supreme Court recently confirmed the need for a specific licence for enforcement against frozen assets – see Mohamed Abdulmohsen Al‐Kharafi & Sons v the Libyan Investment Authority Cour de Cassation Pourvoi n° 23-15.936.}

^{21 OFSI General licence INT/2025/5787748, granted under regulation 64 of the Russia (Sanctions) (EU Exit) Regulations 2019 and regulation 32 of the Republic of Belarus (Sanctions) (EU Exit) Regulations 2019.}

^{22 CJEU Case No C-635/25.}