Clarifying the impact of EU sanctions in international arbitration: the role of the Court of Justice of the European Union

Introduction

Sanctions pose a range of challenges for resolving international disputes. In particular, the impact of sanctions imposed by the European Union ('EU') on international arbitration proceedings is a growing concern for arbitration institutions, potential parties, courts and arbitrators alike. Against this backdrop, the Court of Justice of the European Union ('CJEU')'s interpretation of sanctions regulations will be key to determining their impact on arbitration proceedings connected with the EU.

This article examines the two requests for preliminary rulings currently pending before the CJEU concerning sanctions and their impact on international arbitration proceedings. First, it addresses the request from the Svea Court of Appeal in Sweden, which concerns whether sanctioned parties are permitted to bring claims in arbitration, and whether the EU sanctions regime forms part of the European ordre public. Second, it analyses the French courts' prolific jurisprudence on sanctions and international arbitration and the role that the Cour de Cassation's request to the CJEU may play in that jurisprudence. Finally, it considers how these requests may shape the future of arbitration proceedings in the EU.

Arbitral awards concerning the performance of contractual obligations with persons or entities from sanctioned States: the Swedish request for a preliminary ruling

When dealing with arbitrations involving sanctioned parties, the Stockholm Chamber of Commerce Arbitration Institute ('SCC') stands out due to the prevalence of Russian parties in its caseload. According to the SCC's official statistics, with the exception of 2020 to 2023, Russian nationals have been the second most common party nationality, consistently surpassed only by Swedish nationals.^[1] For this reason, it has addressed how sanctions affect parties in SCC arbitrations, including whether the advances on costs required to commence arbitration proceedings can be processed:^[2]

(i)         For parties specifically designated under Council Regulation (EC) No 765/2006 of 18 May 2006 concerning restrictive measures against President Lukashenko and certain officials of Belarus, or Council Regulation (EU) No 269/2014 of 17 March 2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine, a specific authorisation from the National Board of Trade of Sweden is required.

(ii)        For parties more broadly targeted by sanctions on the basis of their nationality alone, such as Russian parties targeted by Council Regulation (EU) No 833/2014 of 31 July 2014 concerning restrictive measures in view of Russia's actions destabilising the situation in Ukraine ('Regulation 833/2014'), the SCC can process the funds necessary to administer the arbitration proceedings under Article 5aa 1(a).

In both scenarios, as the SCC warns, it may be unable to refund surplus advance amounts in application of those EU regulations.^[3]

The Svea Court of Appeal's request for a preliminary ruling to the CJEU (Case C-802/24)

The EU sanctions regime's impact on arbitration proceedings is not limited to advances on costs; it may also dictate what the parties can claim during the proceedings, and whether awards benefitting sanctioned parties are enforceable. Article 11 of Regulation 833/2014, for example, provides that:

1.         No claims in connection with any contract or transaction the performance of which has been affected, directly or indirectly, in whole or in part, by the measures imposed under this Regulation, including claims for indemnity or any other claim of this type, such as a claim for compensation or a claim under a guarantee, notably a claim for extension or payment of a bond, guarantee or indemnity, particularly a financial guarantee or financial indemnity, of whatever form, shall be satisfied, if they are made by:

(a)       entities referred to in points (b) or (c) of Article 5, or listed in Annex III;

(b)       any other Russian person, entity or body;

(c)       any person, entity or body acting through or on behalf of one of the persons, entities or bodies referred to in points (a) or (b) of this paragraph.

2.         In any proceedings for the enforcement of a claim, the onus of proving that satisfying the claim is not prohibited by paragraph 1 shall be on the person seeking the enforcement of that claim.

3.         This Article is without prejudice to the right of the persons, entities and bodies referred to in paragraph 1 to judicial review of the legality of the non-performance of contractual obligations in accordance with this Regulation.

It was Article 11 that prompted the Svea Court of Appeal to lodge a request for a preliminary ruling on 20 November 2024,^[4] asking the CJEU to rule on specific aspects of the EU sanctions regime and its interaction with arbitration proceedings. More specifically, the Svea Court of Appeal's request concerns a contractual dispute between NV Reibel, a Belgian company ('Reibel') and JSC VO Stankoimport, a Russian company ('Stankoimport'). Under the contract between Reibel and Stankoimport, Reibel was obliged to export goods and provide services to Stankoimport relating to the production of helicopter parts. The contract also provided that EU sanctions against Russia did not constitute force majeure.

Although there was no indication that the contract involved helicopters for military use, the Belgian Conseil d'État refused to grant an export licence on the basis that it could not rule out Stankoimport's connection to the military-vehicle industry, which was prohibited by EU sanctions against Russia.^[5] Reibel was therefore unable to fulfil the contract, and arbitration proceedings ensued.

In its statement of claim, Stankoimport requested that Reibel be ordered to (i) repay the advance payment made by Stankoimport, as Reibel had not performed its contractual obligations; (ii) pay interest on the advance payment; (iii) pay damages for breach of contract and other losses, with interest; and (iv) bear Stankoimport's costs of the proceedings. The arbitral tribunal ruled that repayment and interest were payable under the contract, and that such relief was compatible with Regulation 833/2014.

In the arbitral tribunal's view, applying the proportionality test set out by the CJEU in Rosneft 2,^[6] Article 11 does not preclude the repayment of sums paid for goods or services that were not supplied, which forms part of the right to restitution under the United Nations Convention on Contracts for the International Sale of Goods of 11 April 1980. The same reasoning applies to interest on that advance payment, as the aim is to restore the parties to their pre-contractual positions. Conversely, the tribunal found that it could not grant the other claims advanced by Stankoimport as they were barred by Article 11.

Reibel challenged the award alleging, inter alia, that it was contrary to ordre public. When considering that challenge, the Svea Court of Appeal assessed whether Regulation 833/2014 forms part of the European Union's ordre public. It then referred the following questions to the CJEU:

(i)         Whether Regulation 833/2014 precludes parties from reaching an out-of-court agreement to settle claims where such claims are covered by Article 11 and, if so, whether such agreements are void.

(ii)        Whether Article 11 requires national courts to examine of their own motion whether the arbitral tribunal's application of the law is compatible with Regulation 833/2014 and, if so, whether they must annul or set aside an award whose application of the law is contrary to the regulation.

(iii)       Whether Article 11(1) precludes or allows the repayment of an advance for goods or services that were not provided owing to the EU sanctions regime, and interest on that advance payment.

The Russian Arbitration Association's amicus curiae in CJEU Case C-802/24

Although the case is still ongoing and there is no indication yet as to when a ruling will take place, the Russian Arbitration Association filed an amicus curiae brief addressed to the CJEU.^[7]

In brief, according to the Russian Arbitration Association, arbitration should be considered to fall outside the scope of Article 11, which it considers to apply only to intra-EU judicial proceedings. In the alternative, if the CJEU were to deem it applicable to arbitration proceedings, the Association argues that this does not prevent arbitrators from adjudicating claims, nor does it preclude the recognition of awards, and that the prohibition of 'satisfaction' of claims is limited to the enforcement of the award, which should, in such a case, be suspended. Finally, the Russian Arbitration Association asserts that Article 11 cannot be construed as preventing restitution of sums for contractual non-performance, which merely aims to restore the parties to their pre-contractual position.

The Russian Arbitration Association further argues that a broader application of Article 11 would adversely affect EU Member States' role in international arbitration proceedings, as parties would avoid agreeing to EU-seated arbitration or choosing the law of EU Member States as the law governing the arbitration. In addition, the Association asserts that this would also deter parties from choosing arbitrators who are nationals of EU Member States, citing a fear of 'the imposition of Article 11 as mandatory law.'

Lastly, it cites the risk of 'countermeasures' by parties seated in non-EU Member States (particularly Russia), including anti-suit injunctions, demands for exclusive jurisdiction in foreign fora that override arbitration clauses, and even investment claims against EU Member States for the expropriation of claims that a broad interpretation of Article 11 would entail.

Enforcement of awards that would benefit a sanctioned person or entity: the French approach

Of the jurisdictions that have examined the interaction between sanctions and arbitration proceedings, the French courts have been among the most prolific.

One of the main questions that the French judiciary has been asked to address is whether it is possible to enforce an award where the ultimate beneficiary is a sanctioned person or entity. Notably, the Paris Court of Appeal (Cour d'Appel) has ruled on this issue on several occasions, including in the cases of TCM FR S.A. v Natural Gas Storage Company (NGSC), Paris Court of Appeal, No 19/07261, 3 June 2020 ('TCM FR v Natural Gas Storage Company') and DNO Yemen AS; Petrolin Trading Limited; MOE Oil & Gas Yemen Limited v The Ministry of Oil and Minerals of the Republic of Yemen; Yemen Oil & Gas Corporation; Dove Energy Limited, Paris Court of Appeal, No 19/16601, 5 October 2021 ('DNO and others v Ministry of Oil and Minerals of Yemen').

These cases are similar in that the content of the awards - both monetary - was not challenged by the losing party. In fact, the applicants for annulment argued, among other reasons, that the enforcement of such awards would make funds available to sanctioned persons or entities, in violation of public policy.

In TCM FR v Natural Gas Storage Company, the Cour d'Appel addressed the issue of whether the enforcement of the arbitral award would violate French international public policy by making funds available to an Iranian entity allegedly subject to international sanctions. The Cour d'Appel recognised that international sanctions, particularly those emanating from United Nations Security Council ('UNSC') resolutions and European Union ('EU') regulations, may form part of French international public policy. Such sanctions could, in principle, justify refusal of enforcement if enforcing the award would result in their violation. However, the Paris court found that the specific sanctions invoked by the applicant - including UNSC and EU measures - were either not applicable to the gas-sector contract at issue or did not apply retroactively to the contract, which predated the relevant regulations. The Cour d'Appel also clarified that sanctions imposed by third countries - in this case, the US - being unilateral and lacking international consensus, did not form part of French international public policy. As a result, the Paris Court dismissed the annulment request, finding no effective violation of public policy.

In DNO and others v Ministry of Oil and Minerals of Yemen, the Cour d'Appel - as it had in TCM FR v Natural Gas Storage Company - left the door open to the refusal of enforcement on the grounds of violation of public policy when the recipient of the funds is a sanctioned person or entity under UNSC resolutions and EU regulations. However, the Cour d'Appel emphasised that there must be consistent evidence to support a finding that sanctions would be breached if the arbitral award were enforced, as funds would be directly or indirectly made available to a sanctioned party.

Consequently, the request for annulment was dismissed by the Paris court on the grounds that (i) the Yemeni Ministry of Petroleum and Mineral Resources was not a sanctioned entity - i.e., there was no direct benefit for a sanctioned party -; and (ii) there was no 'serious, specific and consistent' evidence that it acted 'on behalf, under the control, or on the instructions' of sanctioned entities or persons, or that the funds would be used for the benefit of such persons - thus, no indirect benefit. The Cour d'Appel clarified that mere hypothetical or speculative risks were insufficient; there must be concrete proof of a direct or indirect benefit to a sanctioned party.

On this basis, the Cour d'Appel concluded that the enforcement of the award would not breach sanctions, as the entity was not a sanctioned party and there was no concrete evidence that funds would be made indirectly available to sanctioned individuals or entities.

Questions posed by the French Cour de Cassation in its request to the CJEU for a preliminary ruling

The decision by the Cour d'Appel in DNO and others v Ministry of Oil and Minerals of Yemen was appealed to the French Cour de Cassation. On appeal, the Cour de Cassation identified uncertainty as to the interpretation of 'indirectly' making funds available under Article 2(2) of Council Regulation (EU) No 1352/2014 of 18 December 2014 concerning restrictive measures in view of the situation in Yemen, particularly in complex cases where control of - or influence over - a public entity is disputed or shared. The Cour de Cassation referred the following key questions to the CJEU:^[8]

(i)         Whether 'indirectly making available' includes situations where funds are paid to public entities that are not themselves listed, but where sanctioned persons exercise competing influence or control over those entities.

(ii)        If such competing influence is established, whether there is a presumption that the entity is controlled by sanctioned persons, and if so, whether this presumption can be rebutted (for example, by showing that the non-sanctioned person or entity exercising the competing influence, in this case the legitimate Government of Yemen, does not cooperate with sanctioned persons).

(iii)       If the evidence does not allow the national court to determine who has decisive influence within the entity, whether a reasonable risk alone that sanctioned persons might ultimately benefit from the funds is sufficient to trigger the sanctions framework.

These questions arise from the Cour de Cassation's concern that the existing legal framework and EU guidelines may not clearly define criteria for situations in which control or influence is contested or shared, and that the standard of proof for establishing an 'indirect' benefit to sanctioned persons remains unclear. The Cour de Cassation seeks clarification from the CJEU to ensure consistent application of EU sanctions law in such complex factual scenarios. As with the Svea Court of Appeal's request, Case C-842/24 is still pending before the CJEU.

Conclusion

As a result of the various sanctions regimes that may apply to parties to arbitration, particularly in the EU, there is increasing tension between property rights and access to justice, on the one hand, and the potential public order implications of allowing sanctioned parties to exercise those rights, on the other. The forthcoming CJEU rulings will be key to determining the extent to which arbitration involving sanctioned parties is possible, which claims parties may bring, and when successful sanctioned parties can enforce favourable awards.

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^[1] Institute of Arbitration of the Stockholm Chamber of Commerce, 'SCC Statistics' <https://sccarbitrationinstitute.se/en/about-scc/scc-statistics/> accessed 8 October 2025. Between 2020 and 2023, Russian consistently ranked among the top five nationalities for parties in SCC arbitrations.

^[2] Ibid.; Institute of Arbitration of the Stockholm Chamber of Commerce, 'General Information for Parties Covered by the EU Sanctions' <https://sccarbitrationinstitute.se/wp-content/uploads/2024/12/general-information-for-parties-covered-by-the-eu-sanctions.pdf> accessed 8 October 2025.

^[3] Ibid.

^[4] CJEU, Case C-802/24, NV Reibel v JSC VO Stankoimport, request for a preliminary ruling from the Svea Hövratt (Working Paper).

^[5] At the time the export licence was refused, the EU sanctions regime did not yet prohibit the export of goods or the provision of services for a non-military use. During the course of the arbitration, however, the EU sanctions regime was progressively expanded to cover certain goods and services for non-military use.

^[6] CJEU, Case C-732/18, Rosneft and Others v Council, of 7 September 2020, Rosneft and Others v Council (C-732/18 P, EU:C:2020:727; 'Rosneft 2'), paras 107 to 109.

^[7] CJEU, Case C-802/24, NV Reibel v JSC VO Stankoimport, Amicus Curiae Brief to the CJEU Regarding the Interpretation of Article 11 of Regulation 833/2014, Russian Arbitration Association, 14 March 2025 <arbitration.ru/upload/medialibrary/46a/s986k88t8o6m8xv813gawgnbkz2tc3va/RAA-Amicus-Reibel-Case-C_802-24-dated-14-May-2025.pdf>, accessed 8 October 2025.

^[8] CJEU, Case C-842/24, DNO Yemen AS v Petrolin Trading Limited, Moe Oil & Gas Yemen Limited, The Ministry of Oil and Minerals of the Republic of Yemen, Yemen Oil & Gas Corporation, and Dove Energy Limited (liquidated), Request for a Preliminary Ruling from the French Cour de Cassation (Working Paper).