Optional Disputes Clauses for Russian Deals—Spoilt for Choice?

June 2008
Euromoney Emerging Markets Handbook 2008/09
Jason Yardley, Charlie Lightfoot

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"Where are the defendant's assets?" In the context of international disputes, this is perhaps the single most important question that a claimant needs to address before pursuing a "litigation" strategy. In the great majority of cases, there will be scant benefit in obtaining an order from a national court which cannot be enforced in the country where the defendant has its assets. Whilst, for example, a judgment from the English Court will be readily enforceable in a great many countries, including throughout Europe and the Commonwealth, there are notable exceptions. For example, there has only been one reported case of the Russian Federation enforcing a judgment from a UK court. That was a judgment in favour of creditors of the former oil major, Yukos and is considered by most commentators to have been politically motivated and anomalous.

In the context of disputes arising out of emerging markets deals, the problem of where to sue is all the more acute. The experience and independence of the judiciary in certain emerging economies is still a work in progress and the prospect of bringing a substantial claim against an entity based in such a state, particularly an entity with political affiliations, is unappealing. One solution increasingly adopted in international transactions is arbitration. Pursuant to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (commonly referred to as the "New York Convention") international arbitral awards are, subject to limited defences, enforceable through local courts in signatory states via what is (at least in theory) a straightforward procedure. There are currently 142 state signatories to the New York Convention, including Russia, most of the other CIS states and a large number of other emerging markets where an international arbitral award is, as a result, often more valuable than a foreign national judgment.