Circumstances

VMT LLC (the claimant) filed a claim with the Commercial Court of Saint Petersburg and Leningrad Region against Ocean Network Express Pte. Ltd. (the defendant) for recovery of RUB 6,714,850.50 of container storage costs as damages, RUB 659,535.70 of interest, for specific performance of the loading and transportation of the containers according to the agreement between the parties.

The claimant stated that to transport cargoes on the defendant’s sea line, the claimant through the defendant’s Russian agent – had ordered bookings. However, the containers were not loaded onboard the ship. As a result of the failed carriage, the claimant incurred storage costs for the containers.

The defendant responded to the claim, where it was pointed out that the claimant had applied to the commercial court in violation of the jurisdiction rules. The parties had agreed on the place of dispute resolution – the High Court of Singapore, the applicable law – Singapore law.

Position of the Court of first instance

The claimant justified the competence of the Russian court to consider the dispute by reference to Art 248.1 of the Commercial Procedure Code of the Russian Federation (CPC RF). The Court of first instance found this position erroneous since, per para 4 of Art 248.1 of the CPC RF, the exclusive competence of commercial courts in Russia covers cases involving disputes involving persons who are subject to restrictive measures imposed by foreign states that impede their access to justice.

At the same time, the jurisdictional grounds for the claimant’s application to the commercial court were general. The claimant did not provide evidence that it was subject to restrictive measures by a foreign state. Based on the above, the court left the claim without consideration.

Position of the Court of Appeal

Within the meaning of para 4 of Art 248.1 of the CPC RF, the application of restrictive measures against Russian entities already creates obstacles for Russian persons in access to justice. So, the unilateral expression of will made by the Russian party in the procedural form is sufficient to find the exclusive jurisdiction of the Russian court to consider the dispute¹.

The Russian Government’s Decree No. 430-r dated 5 March 2022 establishes a list of “unfriendly” states. This list includes all states of the European Union, which also includes Singapore².

In such circumstances, it is doubtful whether a dispute involving a person located in the state, applying restrictive measures, against Russian entities may be heard in the state, that has also applied restrictive measures, fairly and impartially, while impartiality constitutes an element of access to justice.

Based on the above, the Court of Appeal concluded that leaving the claim without consideration effectively deprived the claimant of the opportunity to exercise its right to justice. The judgment of the Court of first instance was revised, and the case was sent for reconsideration.

Conclusion

Currently, the Russian courts have exclusive jurisdiction over disputes where one of the parties is a person located in an unfriendly state and the other is a Russian person. At the same time, an arbitration agreement in which the place of consideration is in a country unfriendly to Russia is also considered unenforceable. This position of the Court of Appeal is a ‘drop in the bucket’ of established similar practice.

Such legal regulation is of great importance for the maritime sphere, where it is customary to submit disputes to arbitration. In this regard, entrepreneurs may agree on the place of arbitration in countries that are not included in the list of unfriendly states (for example, China, Kazakhstan, or Hong Kong). ■

Notes