14 ASIAN LEGAL BUSINESS – SEPTEMBER 2023 WWW.LEGALBUSINESSONLINE.COM arbitration hub and boasts world-class legal infrastructure and a track record of delivering timely and commercially sound arbitral awards. Matsushima believes that Russian commercial arbitration is moving from London to Hong Kong as a result of Western sanctions. “In view of the UK’s strong support for the sanctions regime imposed on Russian entities since the invasion of Ukraine, we understand that increasingly Russian entities look to Hong Kong as an alternative, as it provides a similar common law framework but under a sanctions-neutral regime,” Matsushima says. Teh also says that the firm’s Hong Kong office has seen growing number of arbitrations with Russian parties being seated there. Other international arbitration lawyers also observe that sanctions-neutral Hong Kong, a mature arbitration market, will continue to see Russian arbitrations. Whether it will be at the cost of Singapore depends on the level of investment of the Russian business in Singapore and the view taken of the time that the Ukrainian hostilities will take to resolve. Singapore’s geographical centrality may lead Russian businesses to consider whether they should move their arbitrations elsewhere or remain in Singapore and live with the relative inconvenience of sanctions. “I put myself in the CEO ‘s chair. If the investment in Singapore, whether it’s in terms of infrastructure or assets, is extensive. And you believe the Ukrainian question will be resolved in the relative short term. Then you won’t want to pull everything out and start again in Hong Kong because once these questions get resolved, the sanctions will go away,” a Singapore-based international arbitration lawyer says on condition of anonymity. The lawyer also suggests that there are a lot more advantages to Singapore than Hong Kong economically, not least because Singapore is geographically more central: “The Russians do business with the Chinese, Indians and Central Asians. So, Singapore is quite geographically convenient. If you’re in Hong Kong, you’re kind of on the edge of North Asia and further away from the Indian subcontinent.” Matsushima, who represents Japanese clients in arbitration with Russian counterparties, also says that Japanese companies seem to show increased interest in SIAC arbitration except in mainland China disputes, for which HKIAC may be more attractive. A decision is often made based on the nature of the contract, Matsushima says. “In the current circumstances, some clients seem to be concerned that Singapore is formally recognised as an unfriendly country by Russia for the time being (though Russia does not seem so hostile to Singapore), while on the other hand, Hong Kong is perceived to be exposed to political uncertainty as part of China (infringement to independence of the judiciary) in the long term. So, the choice of arbitration may depend on the content of commercial contracts,” she adds. SEARCHING FOR FRIENDS So how does a Russian business or counterparty decide where to take its arbitration proceeding, in order to ensure least resistance to their ability to act and enforcement? The Singapore-based anonymous lawyer says that most companies are looking for applicable law that does not get in the way of enforcement. He offers an example: “Take an arbitration proceeding where the contract is governed by English law. The claimant is a Russian company, and the respondent can be from anywhere. The respondent can raise the argument that this contract is governed by English law, which will not come to the aid of a party that’s sanctioned under it. In fact, this contract may have no legal effect under English law. The Russian company will then find it hard to express its rights in the arbitration.” Teh, however, believes that Russian parties should not face issues with most governing laws in Asia. Despite sanctions, he says Singapore law continues to remain a potential choice as governing law among his Russian clients. Russia has also changed laws to allow its courts to prevent Russian companies from resolving disputes in “unfriendly” countries, making enforcement of awards from those countries tougher in Russia. Russian courts have been using a 2020 law to issue anti-suit injunctions to prevent sanctioned Russian companies from arbitrating their disputes outside Russia, even where there is an agreement in place, explains Matsushima. “Enforcement of such court orders outside of Russia may face obstacles, but that will be little comfort to foreign parties with assets in Russia that can be enforced against domestically,” he says. Matsushima adds that Russian courts have been selective about enforcing awards involving parties from countries with an unfriendly political relationship with Russia since the spring of 2022. She offers the example of two cases: An HKIAC award with a British Virgin Islands-based company and an ICC award in favour of a Japanese company, both sought to be enforced in Russia. “From these two cases, it is understood that Russian courts look at whether those parties enforcing awards are a company of an unfriendly country or a friendly country, and do not pay attention to whether seats are in an unfriendly country, or whether arbitration institutions are based in an unfriendly country,” Matsushima says. OTHER JURISDICTIONS Other Asian countries, including India, Turkey, UAE, Thailand and possibly China, may also be the beneficiaries of Russian movement to sanctions-light countries, experts say. Countries that have not imposed sanctions could see Russians move relevant disputes there, O’Melveny’s Brock notes. This includes India, China, and Thailand, Brock says. While arbitration in India might be attractive to Russian counterparties due to the perceived neutrality of India in relation to the Ukraine invasion, Matsushima believes India would be less attractive to Japanese companies than the traditional jurisdictions of Hong Kong and Singapore. “We note that Russian companies started looking at arbitration in Turkey or Dubai as well, but these options might not be preferable for Japanese companies, either,” Matsushima says. ARBITRATION
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