THE EXCLUSIVE COMPETENCE OF BELARUSIAN COURTS IN DISPUTES WITH SUB-SANCTIONED PERSONS HAS BEEN ESTABLISHEDThe exclusive competence of Belarusian courts in disputes with sub-sanctioned persons has been established.

31.07.2023

• WHICH DISPUTES ARE SUBJECT TO EXCLUSIVE JURISDICTION
• WHAT OPPORTUNITIES ARISE FOR THOSE UNDER SANCTIONS
• WHICH BELARUSIAN COURT TO APPLY TO
• WHAT ARE THE CONSEQUENCES OF THE LAW FOR THE RECOGNITION AND ENFORCEMENT OF FOREIGN COURT AND ARBITRATION AWARDS IN THE REPUBLIC OF BELARUS?
• COMMENT REVERA

As we have recently written, on 12 July 2023 the Law of the Republic of Belarus No. 280-Z "On the Application of Special Restrictive Measures" (hereinafter - the Law) was adopted, which establishes the general grounds, procedure, principles and types of restrictive measures taken by the Republic of Belarus in response to the commission of unfriendly actions by foreign states.

However, Chapter 3 of this Law, which establishes the exclusive jurisdiction of Belarusian courts over disputes involving sanctioned persons or related to sanctions, deserves special attention.

WHICH DISPUTES ARE SUBJECT TO EXCLUSIVE JURISDICTION

The provisions of the Law establishing exclusive jurisdiction of disputes by Belarusian courts apply to disputes in the sphere of entrepreneurship or economic activity if one of the conditions is met:

1. In the absence of an agreement between the parties to refer the dispute to a foreign court or arbitration:
   • involving the Republic of Belarus represented by the relevant state bodies, its legal entities, individual entrepreneurs and other citizens against whom hostile acts have been committed;
   • one Belarusian or foreign person with another Belarusian or foreign person, if the basis for such disputes is unfriendly actions against Belarusian persons;
2. Where there is an agreement between the parties to refer the dispute to a foreign court or arbitration:
   • if the agreement of the parties, under which disputes involving them are subject to the jurisdiction of a foreign court or foreign arbitration, cannot be enforced due to hostile acts committed against one of the parties, which create obstacles for it in the defence of its violated or disputed rights and freedoms or in the defence of its legitimate interests.

WHAT OPPORTUNITIES ARISE FOR THOSE UNDER SANCTIONS

The Law provides the following opportunities to persons who have become parties to a dispute subject to the exclusive jurisdiction of Belarusian courts:

If a dispute in a foreign court or arbitration has not yet commenced but there is evidence that it will commence in the near future,

• the person concerned is entitled to apply to the economic court of the region (Minsk city) for the resolution of the dispute

Regardless of whether the dispute started in a foreign court or arbitration,

• a subordinate person has the right to apply to a court of the Republic of Belarus with an application to prohibit the other party from initiating or continuing proceedings in a foreign court or a foreign arbitration court (arbitration).

WHICH BELARUSIAN COURT TO APPLY TO

A person against whom proceedings before a foreign court or arbitral tribunal have been initiated, or where there is evidence that such proceedings will be initiated, shall have the right to apply:

• to the economic court of the region (Minsk city) at its location or place of residence;
• in the absence of the applicant's location or place of residence in the territory of the Republic of Belarus - to the economic court of the region (city of Minsk) at the location or place of residence of the other party
• if the other party has no place of location or residence in the territory of the Republic of Belarus - to the Economic Court of Minsk.

WHAT ARE THE CONSEQUENCES OF THE LAW FOR THE RECOGNITION AND ENFORCEMENT OF FOREIGN COURT AND ARBITRATION AWARDS IN THE REPUBLIC OF BELARUS?

The Law introduces exclusive jurisdiction of Belarusian courts for certain categories of disputes related to sanctions. Taking into account the provisions of Article 248 of the Code of Economic Procedure, violation of exclusive jurisdiction is a ground for refusal to recognise and enforce foreign court decisions. In the case of foreign arbitral awards there is no similar ground, however, in our opinion, there is a high probability that courts will refuse to recognise and enforce such awards with reference to violation of public policy of the Republic of Belarus or other grounds provided for by the New York Convention.

At the same time, the Law explicitly establishes a number of cases where the provisions of the Law do not prevent the recognition and enforcement of foreign judgments and arbitral awards, where:

• the judgement is made in a dispute in which the sub-sanctioned person is the plaintiff;
• the decision is made in a dispute where the sanctioned person has not objected to their examination with their participation in a foreign court or arbitration, including by not filing an application for a prohibition to initiate or continue the proceedings.

COMMENT REVERA

The mechanism of exclusive jurisdiction introduced by the law is the Belarusian analogue of Articles 248.1-248.2 of the Arbitration Procedure Code of the Russian Federation, which also establish exclusive jurisdiction of Russian arbitration courts over disputes involving Russian substation entities.

This mechanism can be used not only by persons and organisations included in the sanctions lists, but also by other non-sanctioned Belarusian persons, if the dispute is related to the sanctions or the sanctions prevent the Belarusian party from representing its interests abroad, for example, the occurrence of a dispute or the ability of a person to represent its interests is affected by the presence of sectoral sanctions.

It is likely that the category of disputes related to sanctions will be interpreted by the courts quite broadly and include a fairly common category of disputes about non-performance of obligations by foreign companies under contracts with Belarusian persons due to their withdrawal from the market in connection with the imposed sanctions. Such contracts often provide for the consideration of disputes abroad, which is not always favourable and possible for the Belarusian party in the current circumstances.

It will be interesting to observe the development of the judicial practice of the Republic of Belarus in applying the mechanism of prohibition of initiation or continuation of proceedings in a foreign court or arbitration institution. The practice of applying a similar mechanism in the Russian Federation currently follows the approach that initiation/resolution of a dispute by a foreign court or international arbitration institution inherently blocks access to justice for Russian companies and prohibits initiation/continuation of such proceedings*.

Once the Law enters into force, Belarusian persons will be able to:

• seeking resolution of such disputes in a court of the Republic of Belarus, or
• applying to a court of the Republic of Belarus to obtain an injunction against initiation or continuation of a dispute against it abroad, which is very likely to make it impossible to further recognise and enforce the foreign judgment in the territory of the Republic of Belarus.

The consequence of not observing exclusive jurisdiction or continuing the proceedings even after the Belarusian person has received the injunction decision is likely to result in the impossibility to recognise and enforce such a decision in the territory of the Republic of Belarus.

 

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