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Unilateral Option Clauses Unenforceable in Russia

05 September 2012
The Supreme Commercial Court of Russia has issued its full judgment in the case of RTC v Sony Ericsson. It held that an arbitration clause that gave one party an additional, unilateral option to bring a claim before the courts was invalid under Russian law.

The Russian courts reasoned that a clause which gave one party the right to go to court to the exclusion of the other party breached the balance of interest of the parties. There is a risk that this judgment may be used to support an argument that the arbitration provision in the unilateral option clause is invalid, which will therefore create a "route" for a challenge of any arbitral award issued pursuant to an arbitration conducted on the basis of an arbitration agreement which contains an invalid unilateral option clause.

With the risk that unilateral option clauses in other contracts may also not be enforced by Russian courts, the safest reaction to this judgment is to avoid including unilateral option clauses in any contracts where Russian parties are involved and/or where enforcement in Russia may be required.

Unilateral option clauses are particularly common in finance agreements, where lenders may wish to enforce their rights by way of the court, for example, by obtaining a swift remedy such as summary judgment or judgment in default. The decision underscores that care will need to be taken when drafting disputes clauses in finance agreements with Russian parties or governed by Russian law.

Alexander Scard

Michael Pugh

Simon Nesbitt

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