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


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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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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