‘The Impacts Can Be Substantive’: Arbitrating in a Sanctions Led Environment

Why It Matters

Sanctions now dictate both the strategy and viability of cross‑border arbitrations, impacting costs, timelines, and enforceability for global businesses.

Key Takeaways

• Sanctions shape arbitration clause drafting
• Seat choice influences sanctions enforcement severity
• Payments to sanctioned parties may be blocked
• Anti‑suit injunctions face Russian counter‑sanctions risk
• Award enforcement can be denied on public policy

Pulse Analysis

The resurgence of economic sanctions, from ancient Athens to the 13,000 coordinated measures against Russia, has reshaped the arbitration landscape. Practitioners now embed sanctions compliance language directly into contracts, specifying warranties, delay allocations, and termination triggers. Selecting the arbitration seat is no longer a neutral technicality; jurisdictions differ in how strictly they enforce sanctions and interpret public policy, making the seat a strategic lever for risk mitigation.

Procedurally, sanctions introduce new friction points. Parties must anticipate blocked advances on costs, obtain OFAC or equivalent licences for counsel, and verify that arbitrators themselves are not restricted from participation. Anti‑suit injunctions, once a reliable tool to enforce arbitration clauses, can backfire when Russian courts invoke counter‑sanctions statutes, exposing assets to fines. These dynamics demand meticulous planning around payment channels, witness availability, and document disclosure to preserve due‑process rights for designated parties.

On the merits, sanctions can serve as force‑majeure or supervening illegality defenses, varying by governing law. Enforcement of awards faces heightened scrutiny; courts may refuse recognition if compliance would breach UN, EU, or US sanctions, invoking the New York Convention’s public‑policy exception. Consequently, counsel must coordinate sanctions specialists with arbitration teams, treating risk assessment as an ongoing process rather than a checklist item. This integrated approach helps clients navigate licensing hurdles, protect assets, and secure enforceable outcomes in an increasingly sanctions‑driven world.