Recovering a contractual penalty for improper performance of obligations to pay for agency services.
A foreign company (the claimant) provided a Russian company (the defendant) with services supporting the acquisition of a stake in the capital of a target company. The defendant evaded paying part of the fee, citing claims by an unrelated third party (an individual entrepreneur) and foreign banks' refusals to process payments. The contract provided for foreign governing law and the exclusive jurisdiction of an international arbitration center located abroad.
The defendant and the third party involved filed a motion to leave the claim without consideration under Art. 148(1)(5) of the Commercial Procedure Code. They insisted the forum-selection agreement was valid, arguing the dispute could only be resolved in the agreed foreign arbitration, and that the circumstances did not give rise to the exclusive jurisdiction of Russian commercial (arbitrazh) courts.
We built the position that the dispute should be heard in Russia, based on the unenforceability of the arbitration clause due to sanctions restrictions obstructing access to justice and cross-border banking transactions (in the context of Art. 248.1 of the Commercial Procedure Code). We also emphasized that the agency mandate had been partly performed in Russia, that there was no contractual relationship with the third party, and that there was no international treaty on mutual recognition of judgments between the states of the parties to the dispute.
The claim was left without consideration. The court found the forum-selection agreement referring the dispute to international commercial arbitration valid, enforceable, and not in breach of the exclusive jurisdiction of Russian commercial (arbitrazh) courts under Articles 248 and 248.1 of the Commercial Procedure Code.
This case clearly illustrates the conservative approach Russian courts take to applying Art. 248.1 of the Commercial Procedure Code.
Disputes complicated by a foreign element; recovering debt under foreign-trade contracts; overcoming arbitration clauses; applying Art. 248.1 of the Commercial Procedure Code and establishing jurisdiction amid sanctions restrictions.
