Arbitration clause with unilateral option to litigate held to be invalid by Russian Court

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The Russian Supreme Commercial Court has held that an arbitration clause granting one party a unilateral option to litigate is invalid under Russian law. In its recent decision in CJSC Russian Telephone Company v. Sony Ericsson Mobile Telecommunications Rus LLC, the Court stated that a clause granting a unilateral option to litigate was invalid because it would unfairly disadvantage one party. The decision means that there is a risk of Russian litigation for the many foreign parties who have been using such clauses in their deals for a number of years and that parties should carefully evaluate the use of such clauses going forward.

Background -

Arbitration clauses with a unilateral option to litigate have, for a number of years, been commonplace for Russian and CIS deals involving international parties. Judgments of the English courts – and all other EU courts, as well as those of many other jurisdictions – are generally not enforceable in Russia and the CIS. However, parties with a strong bargaining position have tended to want an option to litigate in England or elsewhere for cases where enforcement in Russia and the CIS might not be necessary.

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