LawFlash

London Court of International Arbitration Is Granted Exemption from Russia and Belarus Sanctions

October 28, 2022

The United Kingdom’s Office of Financial Sanctions Implementation (OFSI) has granted the London Court of International Arbitration (LCIA) a General Licence allowing it to process payments from designated parties (DPs) who are subject to the United Kingdom’s recent financial sanctions against Russia and Belarus.

The General Licence took effect on 17 October 2022 (see notice of publication) and applies indefinitely.

Terms and Scope of General Licence

  • DPs (as well as companies owned and controlled by DPs, and their legal representatives) may directly pay funds to the LCIA to cover arbitral fees, including in respect of registration fees, deposits, arbitrator fees and expenses, LCIA charges, and fees and expenses of tribunal secretaries and experts appointed by the tribunal.
  • The LCIA may receive substitute deposit(s) from non‑DPs who are party to the arbitral proceedings to allow the arbitration to proceed where a DP or company owned or controlled by a DP fails to make the payment for arbitration costs.
  • Banks engaged by the LCIA are allowed to charge interest on funds being held by the LCIA on trust for sanctioned parties and the General Licence allows the relevant financial institutions to process payments.
  • The General Licence extends to cases administered pursuant to the 2020 LCIA Arbitration Rules, as well as the 2014 and 1998 LCIA Arbitration Rules. United Nations Commission on International Trade Law (UNCITRAL) cases administered by the LCIA, and cases in which the LCIA merely acts as fundholder, will still require an individual licence from OFSI.
  • While the LCIA is not required to have an individual licence to return funds to non‑designated parties, the General Licence does not extend to restitution payments to DPs (which will require individual licences). Equally, the General Licence does not cover a DP’s other payment obligations such as payments to their legal representatives or third parties for services related to the arbitration.

Any parties conducting activities that are permitted by the General Licence should note the obligation to keep accurate, complete, and readable records of any such activity for a minimum of six years.

The General Licence is a positive development for the LCIA, which has seen a number of arbitrations interrupted by the sanctions on Russia and Belarus. It also aligns the United Kingdom’s position with that of the European Union, which confirmed on 21 July that transactions with Russian state-owned entities are exempt from its sanctions regime where they are strictly necessary to ensure access to arbitral proceedings.

In a press release concerning the General Licence, the LCIA emphasised that it “recognises and supports the use of sanctions as a legitimate tool to address the consequences of the war against Ukraine.” The LCIA added that it will reach out to parties and arbitrators in potentially affected cases, who “will need to satisfy themselves that they can receive payments after considering the impact, if any, of the sanctions of any relevant jurisdiction other than the UK.”

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Trainee solicitor Alasdair Johnston contributed to this LawFlash.