German court rejects Russian arbitration award over EU sanctions compliance
A German appeals court has refused to recognise and enforce a Russian arbitration award, ruling that compliance would violate EU sanctions against Russia, according to a decision by the Higher Regional Court of Stuttgart.
The case arose from a February 2021 contract between a Russian company and a German machinery manufacturer for the supply of three machines and equipment. The German company ceased deliveries after Russia’s invasion of Ukraine, having completed only the first two phases of delivery while receiving full payment from the Russian buyer.
The application to declare the arbitration award enforceable ‘is rejected as currently unfounded’, the court stated in its decision, adding that the arbitration award ‘cannot currently be recognized in Germany’.
The Russian company had sought recovery of overpayments through the International Commercial Arbitration Court at the Russian Chamber of Commerce and Industry in Moscow, which awarded them monetary damages in November 2023.
However, the Stuttgart court found that enforcing the award would violate German public policy due to EU sanctions that prohibit selling goods ‘that could contribute to strengthening Russia’s industrial capacities’.
Additionally, the court found that repaying the advance payments would violate Article 11(1)(b) of the same regulation, which prohibits fulfilling claims in connection with contracts or transactions whose fulfilment or implementation ‘is directly or indirectly, wholly or partially affected by the measures’.
The court referenced guidance from the German Federal Ministry for Economic Affairs clarifying that such repayments are prohibited, stating ‘the repayment of a down payment that aims to restore a legal relationship to the state before sanctions were imposed is legally inadmissible in this context’.
