When Sanctions Meet English Contracts: Enforcing Arbitration & Choice-of-Law Clauses

The Fieldfisher analysis, supplemented by recent cases, reveals a pattern: banks and financial institutions affected by sanctions—especially those imposed after Russia’s 2022 invasion of Ukraine—are increasingly being embroiled in litigation where Russian courts are invoked to recover assets or damages. These attempts often clash with existing arbitration and jurisdiction clauses in contracts governed by English law. English courts are responding by protecting these contractual rights via anti-suit injunctions (ASIs) and anti-enforcement injunctions (AEIs). [1][3]

In JP Morgan Securities Plc v. VTB Bank PJSC (2025), the Commercial Court determined that VTB’s use of Russian courts to pursue claims under contracts which provided for arbitration before English or London institutions was ‘vexatious and oppressive’. VTB had brought claims under RS Russian tort law and under concepts like “de-facto representation,” arguing that damage took place in Russia and that foreign law should not be applied. The court rejected that, holding the claims to be in substance contractual and bound by arbitration and choice-of-law clauses. [1]

Further, sanctions have complicated, but not nullified, arbitration agreements. In English High Court v. VEB.RF, for example, although VEB was under sanctions, the court found that the arbitration agreement under an ISDA Master Agreement, amended in 2019 to include sanctions events, remained valid. Although the sanctioned entity suffered increased procedural burdens (on representation, travel, forums), that did not equate to frustration of the arbitration clause. [1]

Similarly, in UniCredit v. RusChemAlliance LLC UK Supreme Court, the court upheld the power of English courts to issue anti-suit injunctions in support of foreign-seated arbitration when the arbitration agreement was governed by English law. The case involved a €448 million bond guarantee dispute, bonds governed by English law with ICC arbitration seated in Paris; yet RusChem commenced proceedings in Russian courts under Article 248.1, to which the English courts responded with ultimate injunctions. [3][2]

From a strategic investment banking perspective, these developments serve as strong indicators of legal risk for cross-border financial contracts involving sanctioned entities. Contracts must be drafted with clarity on choice-of‐law, seat of arbitration, governing law of ancillary documents, and express recognition of potential sanctions events. Financial institutions must also be prepared to act swiftly—delays can be tolerated but require justification—and maintain their rights under arbitration agreements even when counter-parties attempt to litigate in Russian courts to avoid foreign law obligations. There is also potential risk from enforcement of foreign judgements, and uncertainty remains on whether Russian courts will respect or ignore English injunctions and whether cross-border recognition of such injunctions will be upheld in practice.

Open questions include: how will Russian courts respond to the growing number of injunctions imposed by English courts? Will there be retaliatory legislation in jurisdictions like Russia to enforce judgments against foreign institutions despite injunctions? Could reforms in UK, EU or multilateral sanctions or arbitration law change how Article 248.1 is interpreted or enforced? Finally, what effect will this have on insurance, derivative markets, and banks’ liabilities where foreign entities are counter-parties? The evolving jurisprudence around Braganza duty in the context of sanctions, and the treatment of ancillary or subsidiary contracts, will be especially important.