Russia vs international sanctions: action!

As I mentioned previously, on June 08, 2020, the Russian President signed a new law amending the Russian Arbitrage (Commercial) Procedure Code  (APC) in effect  to secure protection of rights of legal entities and individuals subject to international sanctions (by setting relating competence of the Russian arbitrage (commercial) courts)[1].

It did not take long for the Russian “sanctioned” persons to seek its implementation.

As of the date, the proceedings are ongoing under the claim filed to the Moscow Arbitrage (Commercial) Court by TsarGrad Media against Google to recognize Google’s “waiver of a contract-account of 30.12.2019” null and void and to oblige Google to grant TsarGrad Media access to its YouTube account[2].

In July 2020 YouTube has permanently blocked the plaintiff’s account, Tsargrad TV, with Google referring to “violation of legislation on sanctions and trade rules” as the reason behind the decision[3].

In the course of proceedings Google Ireland Limited (Ireland), Google LLC (USA) each individually challenged Russian court jurisdiction under APC art. 148 (1(5)).

The latter states the Russian commercial court leaves a statement of claim without consideration if, after its acceptance for judicial proceedings, it establishes that there is an agreement between the parties on the consideration of the given case by an arbitration tribunal, if one of the parties, no later than on the day of filing its first application on the merit of the dispute with a commercial court of the first instance, raises an objection on this ground against the consideration of the case in a commercial court, save for the instances, when the commercial court establishes, that this agreement is invalid, has lost effect or cannot be executed.

As such Google referred to the effective agreement of the parties (14.6 Terms and conditions of Google platform services) according to which any plaintiff’s claim for the provision of Google services must be considered by the courts of the defendants’ residence (English court for Google Ireland Limited (Ireland) and the California State Court for Google LLC (USA)).

TzarGrad Media objected, seeking exclusive jurisdiction of Russian Commercial Courts by implementation of the newly introduced APC art. 248.1.

According to the plaintiff:

  •  Google blocked its access to account (including YouTube channel) to be compliant with U.S. and European Union sanctions, due to its UBO, Konstantin Malofeyev, being subject thereto;
  • as a result, the arbitration clauses of the Google contracts are unenforceable, since neither the plaintiff or its UBO can receive qualified legal assistance in the United States or in the United Kingdom, due to the risk of its being in violation of the applicable sanctions regime;

To state the case TzarGrad Media provided the court with a letter from Steptoe & Johnson UK LLP stating that their court representation services, and any related legal fees are subject to prior approvals from OFAC and OFSI.

Such answer evidenced the restriction of plaintiff’s access to justice, due to the impossibility for the plaintiff to obtain timely legal aid from US and UK law companies.

This was confirmed sufficient by Russian commercial courts of first and appellate instances to state their exclusive jurisdiction of the dispute, despite the effective Google TC arbitration clauses.

Google filed the cassation appeal, stay tuned.




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