Sanctions & Arbitration: views from the LCIA and leading KCs

The London Branch of the Chartered Institute of Arbitrators (Ciarb) hosted a panel of Saima Hanif KC, Shantanu Majumdar KC, Maya Lester KC, and Marina Tarnovskaia (managing counsel at the LCIA) focusing on sanctions and arbitration. The seminar was held at Cooke, Young & Keidan LLP on 10 July 2025.

Introduction to Sanctions

After welcomes from Robert Price (Chair, London Branch) and introductions of the panellists by the moderator, Mikhail Vishnyakov (Committee Member of the London Branch), Maya Lester KC opened the discussion by contextualising sanctions as tools of foreign policy, sometimes intended to respond quickly to geopolitical events, and (in the case of Russia) subsequently amended and added to many times.

Maya Lester explained that sanctions typically fall into two categories, being “smart sanctions”, targeting specific individuals or entities, or broader sanctions aimed at encompassing all entities within or activities concerning entities within the jurisdiction of a particular regime.

Ms Lester highlighted three key areas of dispute arising from sanctions:

1. Claims involving non-payment or contractual non-performance due to real or perceived sanctions issues.
2. The use of frustration or illegality defences in light of sanctions.
3. Challenges surrounding the identification of sanctioned parties, especially regarding issues of ownership and control, which often crystallise at the enforcement stage.

Ms Lester concluded her remarks by noting that since 2022, both sanctions and licensing schemes (general and specific) have proliferated, with institutions such as the LCIA adapting through the licencing regime to maintain access of parties to effective dispute resolution.

The Statistical Picture from the LCIA

Marina Tarnovskaia provided insight into the LCIA’s sanctions-related caseload, noting over 100 sanctions related arbitrations had been administered since 2022. In response to the increasing impact of sanctions, she noted that the LCIA had obtained a general licence in October 2022 (which was replaced by the Arbitration Costs General Licence in March 2025), which has since been applied to facilitate payment and effective administration of disputes.

Ms Tarnovskaia went on to outline the three archetypes of sanctions-linked arbitration seen by the LCIA:

1. Disputes with a sanctioned party but not concerning the issues of contractual performance (e.g., where the domicile of the parties does not have any nexus with jurisdictions where sanctions are in place such as the UK / US), those disputes may touch on questions of arbitrability arising due to sanctions, and / or raise issues with payment to arbitrators (which in respect of the UK sanctions are managed on the basis of the general licence).
2. Picking up on Maya Lester’s highlights above, cases where one party is sanctioned, and claims arise from issues of contract performance or non-payment.
3. Contracts where neither party is sanctioned but performance is impacted by trade sanctions prohibiting the movement of goods, performance by third-parties (e.g., in commodities trading).

However, despite the challenges posed by sanctions, Ms Tarnovskaia reassured the panel that on the whole, proceedings continue smoothly under the general licence, with few administrative disruptions.

Enforcement: OWH SE i.L v RTI Ltd [2025] JRC137 (“OWH v RTI”)

Saima Hanif KC then dissected the OWH v RTI case, which involved the enforcement of an arbitral award challenged on the grounds that it contravened the public policy in Jersey, and that performance was excused by Article 46A of the Sanctions and Asset-Freezing (Jersey) Law 2019, which (broadly speaking) excuses non-performance of contractual obligations where that is reasonably believed to be necessary to comply with sanctions.

In 2019, RTI, based in Jersey, entered into a USD/rouble currency swap contract with OWH (a German Bank at that time known as VTB Bank (Europe) SE). In 2022, OWH issued margin calls under the currency swap contract, demanding payment from RTI. OWH’s parent company, VTB Russia also became a sanctioned entity. RTI refused payment of the margin calls on the basis that it would breach Jersey sanctions due to VTB Russia’s designated status.

It fell to the Jersey court to consider: (i) whether Article 46A had retrospective effect given that the margin calls were issued (and refused) in February to March 2022 but Article 46A was not introduced until 8 June 2022; and (ii) whether RTI held a genuine belief that payment was unlawful, and that such a belief was reasonable.

Despite acknowledging RTI’s responsible conduct, the court ultimately found that Article 46A did not apply retrospectively, and that when viewed objectively, steps taken by OWH at the behest of the German sanctions authority to prevent any payment to VTB Russia or to the VTB Group, weighed against RTI’s reasonable belief that payment of the margin calls was unlawful. The court allowed enforcement of the award.

Following her analysis, Ms Hanif emphasised that while sanctions-related public policy issues can be raised during arbitration, they are often best addressed at the enforcement stage, albeit subject to the parties’ strategic considerations.

Battle of the Anti-Suit Injunctions (“ASIs”)

Shantanu Majumdar KC then explored the battlefield of ASIs, reiterating that they operate as in personam remedies typically used to restrain the commencement or pursuit of proceedings in foreign courts when they breach a jurisdiction or arbitration agreement. Mr Majumdar noted that with the rise of sanctions, particularly concerning Russia, tensions have escalated, and the use of ASIs has exploded.

Russia’s “Sanctions Protection Law” (Article 248 of the Arbitrazh Procedure Code) allows Russian courts to assume exclusive jurisdiction in disputes involving sanctioned parties, effectively nullifying foreign arbitration agreements. This shift, especially post-2022, has led to a surge in ASIs and countermeasures. By December 2023, over 120 such cases had emerged in the Russian courts.

While typically considerations of comity were integral to the decision whether to grant ASIs given the intrusion by the courts of one state into the affairs of another, the expansion of Russian ASIs (or indeed, anti- anti-suit injunctions (“AASIs”)) granted in respect of foreign arbitration, often accompanied by penalties or threats of penalties, has led to increased intervention by the English courts, as highlighted in the landmark decision in UniCredit Bank GmbH v RusChemAlliance LLC [2024] UKSC 30.

Although, Mr Majumdar noted that even after obtaining the ASI before the English courts, Unicredit ultimately bowed to the commercial pressures of potential penalties being levied against its subsidiary in Russia following RusChemAlliance obtaining AASI orders before the Russian court. Accordingly, the discussion revealed how sanctions intersect with commercial risks, quite aside from the remedies available through the courts.

Impact of Art 11 of the EU Sanctions Regime

Noting that clients are often concerned about the application of EU regimes to their disputes, Maya Lester went on to discuss the impact of Article 11 of Council Regulation (EU) No. 833/2014 (“Art 11”) which prohibits the satisfaction of certain claims. While Art 11 is similar in some ways to the sanctions-based defences set out in section 44 of the UK Sanctions and Anti-Money Laundering Act 2018, Ms Lester explained that the language of Art 11 introduces considerable uncertainty around its scope.

In particular, questions have arisen about whether Art 11 applies to voluntary settlements or to enforcement of awards involving sanctioned parties. If it does apply, it could potentially justify the refusal of enforcement or lead to the setting aside of awards. While several preliminary questions have been referred by national EU courts to the European Court of Justice, there is no definitive guidance yet.

Overlapping Sanctions Issues

Marina Tarnovskaia concluded the panel by highlighting the complications arising from overlapping sanctions regimes. In particular Ms Tarnovskaia noted the complexities arising from the LCIA’s international book of arbitrators and parties, and the commensurate need to monitor factors such as payment currencies, arbitrator nationality, and domicile of parties to the dispute.

Typically, issues arise from UK (Post-Brexit), US, and EU sanctions. Where these regimes overlap creates challenges when dealing with differing licensing requirements and potential liability for counsel or arbitrators. Coordination and expert advice as to the application of specific sanctions regimes are crucial.

Ms Hanif and Mr Majumdar agreed, stressing the importance of identifying all applicable sanctions regimes early, as enforcement may depend on the interplay of several jurisdictions’ rules.