Balancing Public and Private Interests Amidst Mutual Limitations

Key conclusions

Preserving the balance among different groups’ interests under sanctions 

“International legal instruments frequently include or introduce clauses on humanitarian activity despite the existing sanctions. <…> We see a positive trend. We see that all the restrictions imposed by the European Union or the United States have special clauses or special legal regimes for humanitarian organizations, including the International Committee of the Red Cros,” Andrei Kozik, Regional Legal Coordinator, International Committee of the Red Cross. 

Russian companies face difficulties in defending their interests 

“We are basically facing an embargo against us. A real embargo. Any agreements or operational relations between us and our foreign counterparts are cut off. We face a wall. At the same time, our foreign partners lose more these sanctions than we do. This is a paradox for us,” Alexey Vasiliev, Deputy Head of the Legal Department, Russian Railways. 

“At this point, over a thousand foreign companies have made statements on limitations of different sorts. Some of them ceased their operations. Some suspended their operations. Others limited their activity, etc. What do statistics show us? Statistics show that as of today we see a maximum of 5% of real transactions, maybe a little over 5%. There is about 2% of deals with the management of the companies that are present in Russia. Over 46% of companies just suspended their operations,” Ivan Gulin, Partner, RKT Law Company. 

“Russian companies practically do not have an opportunity to go to court abroad. I am not even talking about the companies that are under sanctions. The ones that were not sanctioned are experiencing huge difficulties with access to justice,” Valery Eremenko, Partner, Co-Head of Litigation Practice, Egorov Puginsky Afanasiev & Partners. 

PROBLEMS

Unilateral termination of contracts 

“At this point, these two foreign companies – Siemens from Germany and Talgo from Spain – have terminated all possible contracts with us. They terminated supply and maintenance agreements. Each of the companies has sent us about 3–4 fairly big letters. All of them address the same things. They refer to the sanctions that were imposed in February of this year. They state that all contracts are terminated due to the sanctions. They demand that we return all spare parts and we do not touch the equipment needed for the trains to function. They say all of it is force-majeure. So, our foreign counterparts do not want to bear any responsibility for any of this,” Alexey Vasiliev, Deputy Head of the Legal Department, Russian Railways.  

“Let’s not forget about the single IT system. It means that if it is hosted somewhere abroad, it ties you to a certain jurisdiction. How do you break the single IT system? How do you rebuild it and make it fast and painless for business? It is a major question,” Vladimir Efremov, Partner, Baker McKenzie Moscow Office. 

Sanctions paralyzed companies’ economic activity 

“We see a risk of economic activity being completely paralyzed. Such a violent termination of existing agreements,” Vladislav Starzhenetsky, Associate Professor, Faculty of Law, National Research University Higher School of Economics.

“As for the board of directors being paralyzed, it cannot fully exercise its authority, while it keeps getting approval of energy company deals on the agenda. <…> In this situation, the public and private interests collide. The private interest is about getting profit on selling electric and heat energy and power through ensuring regular repairs of energy equipment. The public interest lies in ensuring reliable uninterrupted operation of the electric energy system for satisfying the users’ demand for electric energy,” Zhanna Sedova, General Director, Enel Russia. 

SOLUTIONS

Looking for new approaches to interacting with partners 

“There is an approach that says that if a company can exist independently without the headquarters’ services or technological support, if it does not need technologies, if it does not have a director who must make decisions that contradict German law, for example, then this company can make this decision and become isolated,” Vladimir Efremov, Partner, Baker McKenzie Moscow Office.

“We see that many clients are interested in swapping businesses. It means that if a Russian businessman owns a plant in Europe, why not help him exchange it for a Russian business?” Ivan Gulin, Partner, RKT Law Company.

Using the anti-suit injunction 

“We went to the Arbitration Court of Moscow asking to ban Siemens and Talgo from suing Russian Railways in other jurisdictions. It means that we applied for an anti-suit injunction. The thing is that all our agreements with foreign partners provide for foreign jurisdiction courts. It is either the Arbitration Court in Paris or the Arbitration Court in Vienna. <…> Nevertheless, we went to the Arbitration Court of Moscow. Those cases are being reviewed now,” Alexey Vasiliev, Deputy Head of the Legal Department, Russian Railways.

For more information, visit the Roscongress Foundation’s Information and Analytical System roscongress.org.

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