Breaking Patterns: Russian Court Favors International Arbitration over Domestic Jurisdiction

THE AUTHOR:
Rinat Gareev, Legal Counsel at Whitecliff Management

Since the enactment of the so-called Lugovoy Law in 2020, Russian courts have been increasingly assertive in retaining jurisdiction over disputes involving Russian parties. The Lugovoy Law (Federal Law No. 297-FZ “On Jurisdiction of the Courts of the Russian Federation”) was introduced as part of Russia’s legislative response to international sanctions. It grants Russian commercial courts exclusive jurisdiction over disputes where a Russian party is subject to restrictive measures, where foreign proceedings are deemed “unfriendly,” or where a foreign jurisdiction or arbitral forum is considered inaccessible to Russian litigants due to sanctions. In effect, the law allows Russian parties to bypass foreign dispute resolution clauses and bring proceedings before domestic courts, even if the contract provides otherwise.

In practice, the Lugovoy Law has often been used to justify refusing enforcement of foreign jurisdiction or arbitral clauses in disputes involving Russian parties, particularly where they appear as defendants and seek to avoid foreign proceedings. Over the past years, several rulings demonstrated a pro-Russian stance: courts have held that arbitration agreements with foreign institutions are unenforceable if they “deprive” Russian parties of judicial protection or if the arbitration is deemed inaccessible due to sanctions.

Yet, despite this trend, Russian courts still sometimes take a balanced approach where the parties’ contractual intent is clear. The recent ruling of the Arbitrazh Court of Primorsky Krai in Case No. А51-22733/2024 delivered on September 16, 2025, is a notable example. The court, faced with ambiguous wording in the arbitration clause, nevertheless upheld the arbitration agreement and referred the parties to arbitration in South Korea.

Background of the Dispute

The claimant Renal TMT Inc., a South Korean company, filed a debt recovery claim against AO RK Primorez, a Russian respondent, before a Russian commercial (arbitrazh) court. The underlying contract contained a dispute resolution clause providing that disputes would be referred to “an arbitration court at the claimant’s place of location.”

The wording was problematic for several reasons:

In Russia, the phrase “arbitration court” (arbitrazh) commonly refers to state commercial (arbitrazh) courts, not arbitral tribunals. By contrast, “arbitration” in the sense of private dispute resolution is expressed as “treteiskii sud.”
The claimant’s place of location was the Republic of Korea, not Russia. Thus, if the clause were taken literally, the dispute should not have been filed before a Russian state commercial court.
The Republic of Korea has a well-established arbitral institution — the KCAB (Korean Commercial Arbitration Board). However, the clause did not expressly name KCAB, referring instead to “arbitration court” in a general way.

The respondent raised an objection to jurisdiction, arguing that the dispute was subject to arbitration under the contract and therefore could not be heard by the Russian court.

The Court’s Reasoning

The Arbitrazh Court acknowledged the interpretative difficulties but placed emphasis on the parties’ common intention to submit disputes to arbitration rather than litigation.

Korean legal framework. The court noted that since the claimant itself was domiciled in the Republic of Korea, it must have known that there is no system of “arbitration courts” as state bodies in South Korea. Korea has ordinary courts for litigation, but arbitration is administered by the KCAB.
Doctrine of “effective interpretation.” Errors in the designation of the arbitral institution do not necessarily invalidate the arbitration clause, provided that the institution can be clearly identified from the circumstances. Here, the only plausible arbitral institution at the claimant’s place of business was KCAB.
Rejection of claimant’s interpretation. If the claimant genuinely believed that “arbitration court” meant a Russian state arbitrazh court, it is unclear why the clause would have referred to “the claimant’s place of location,” which is abroad. The court emphasized that the more consistent interpretation was arbitration before KCAB.

In reaching its conclusion, the Arbitrazh Court expressly relied on the guidance of the Supreme Court of the Russian Federation in Plenum Resolution No. 53 of 10 December 2019 (“On the performance by Russian courts of functions of assistance and control in relation to arbitral proceedings and international commercial arbitration”). As the court recalled, under paragraph 16 of Plenum No. 53, when determining whether to leave a claim without consideration on the basis of an arbitration agreement, a Russian court must examine whether there are clear indications that the agreement is invalid, unenforceable, or has ceased to be in force, or that the dispute is not capable of being resolved by arbitration.

The court further referred to paragraph 30 of the same Resolution, which provides that an arbitration agreement may be considered unenforceable only if it is impossible to establish the parties’ true intention — for example, where two or more arbitral institutions exist with similar names, and the defect cannot be remedied through the mechanisms set out in Article IV of the European Convention on International Commercial Arbitration (1961).

Applying this guidance, the court concluded that the defective wording of the clause — specifically, the reference to “an arbitration court at the claimant’s place of location” — did not render the agreement unenforceable. Since no state “arbitration courts” exist in Korea and the only relevant arbitral institution is the KCAB, the parties’ intention could still be clearly determined. The arbitration clause was therefore upheld as valid and enforceable.

Departure from the “Pro-Russian” Trend

This ruling is particularly noteworthy given the broader trend of Russian courts limiting the effect of foreign dispute resolution clauses in recent years. Under the Lugovoy Law framework, courts have sometimes invalidated or disregarded arbitration agreements where enforcement was deemed contrary to Russian public policy.

Here, however, the court resisted the temptation to retain jurisdiction, even though one party was Russian. Instead, it gave effect to the arbitration clause and directed the parties to proceed before a foreign arbitral institution.

This approach signals that Russian courts may still respect arbitration agreements in cases where there is no direct conflict with sanctions or state interests, especially where the contractual language, though flawed, points clearly toward foreign jurisdiction.

Importance of Accurate Drafting in Arbitration Clauses

The case illustrates the risks of imprecise drafting. The phrase “an arbitration court at the claimant’s place of location” was ambiguous, especially when translated into Russian legal terminology.

The court adopted a functional interpretation, treating the error as non-fatal. Had there been multiple arbitral institutions in Korea, or had the clause referred to a jurisdiction with competing arbitral bodies, the ambiguity could have rendered the clause unenforceable.

Boilerplate or vague wording can lead to costly jurisdictional disputes. While the Russian court in this case chose to give effect to the parties’ apparent intent and directed them to KCAB arbitration, it remains to be seen how such clauses will be treated in South Korea if enforcement or further proceedings arise there. Moreover, the Russian court’s ruling of September 16, 2025, is subject to appeal, and higher courts could still take a stricter view of the defective wording. The practical significance of this case will therefore depend not only on the willingness of arbitral institutions to proceed under such clauses but also on how appellate courts and foreign jurisdictions address their enforceability. Moreover, the Russian judiciary remains unpredictable when broader political or sanctions-related considerations are at play.

Implications for Cross-border Disputes

The ruling has practical significance for foreign investors and companies contracting with Russian counterparts:

Russian courts may still enforce arbitration clauses pointing to neutral forums, even when Russian parties are involved.
Foreign companies domiciled in jurisdictions with a single well-known arbitral institution (such as KCAB in Korea) may benefit from clearer judicial recognition.
The Lugovoy Law, though influential, does not automatically override all foreign arbitration agreements.

Concluding Remarks

The Russian Arbitrazh Court’s ruling of 16 September 2025 in Case No. А51-22733/2024 demonstrates a nuanced approach to arbitration clauses with drafting errors. By referring the parties to arbitration in South Korea, the court underscored the principle that minor inaccuracies in naming an arbitral institution should not invalidate the parties’ agreement to arbitrate.

Against the backdrop of the Lugovoy Law and recent tendencies of Russian courts to protect domestic parties, this decision stands out as a pragmatic and arbitration-friendly outcome. For practitioners, it highlights both the continuing importance of precise drafting and the possibility that Russian courts, under certain conditions, will still enforce foreign dispute resolution clauses.

ABOUT THE AUTHOR

Rinat Gareev is a dual-qualified U.S. attorney and English solicitor who advises clients on the full spectrum of corporate and cross-border matters. At Whitecliff Management, based in the firm’s Dubai office, Rinat’s practice encompasses the structuring and negotiation of mergers and acquisitions, joint ventures, and the management of multi-jurisdictional disputes.

*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.