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On 21 July 2022, the Council of the EU (the “Council”) adopted a seventh package of sanctions against Russia.

In a previous package of EU sanctions from March 2022, transactions with certain “publicly controlled or owned” Russian entities were prohibited. Various voices within the International Arbitration community expressed concerns around the impact of this prohibition on the administration of arbitrations involving sanctioned entities. As part of the latest package of EU sanctions against Russia, the Council expressly carved out from that prohibition transactions with sanctioned entities if they are “…strictly necessary to ensure access to judicial, administrative or arbitral proceedings in a Member State, as well as for the recognition or enforcement of a judgment or an arbitration award rendered in a Member State…”. The exemption further states that transactions under this carve-out must be consistent with the objectives of the sanctions regime.

It is important to note that this carve-out is yet to be tested and that there are a number of related questions that arise. For example, what is the threshold of strict necessity for transactions to fall within the carve-out? Further, will the carve-out extend to transactions relating to potential disputes as well as active proceedings? The clarification provided by the Council has however been welcomed by a number of arbitral institutions administering Russia-related disputes.

Author

Ben Ko is a Senior Associate in the London office of Baker McKenzie. His practice covers complex commercial litigation and arbitration, with particular interest and experience in cases involving civil fraud. He is a member of the LCIA Young International Arbitration Group and the Commercial Fraud Lawyers Association. Ben can be reached at [email protected] and + 852 2846 1888.

Author

Fouad Ajawi is a trainee solicitor and a member of the Dispute Resolution team at Baker McKenzie in London. Fouad Ajawi can be reached at [email protected] and +44 782 165 2114.