Russian Courts respects ICC Arbitration Clause
The Russian court refused to consider itself competent to consider the dispute initiated by a Russian petrochemical company Nizhnekamskneftekhim (NKNH) against the German bank Bayerische Landesbank and a bailiff, holding that the dispute falls within a valid arbitration clause of the International Chamber of Commerce (ICC)[1].
The claimant asked the Russian court to declare invalid an instruction letter from the bank that served as the basis for seizure by the bailiff of the bank's receivables due from the company. The loan agreements contained ICC arbitration clauses with the seat in London. The first instance court dismissed the claim on the ground that the dispute was governed by the arbitration clauses and that the bailiff was not a party to the legal relationship.
During the appeal, the claimant argued that sanctions made the clause unenforceable and that Russian courts should have exclusive jurisdiction over the case under Article 248.1 of the Russian Arbitrazh Procedural Code. This article, sometimes referred to as an anti-arbitration injunction, was introduced in 2020 but was rarely used by Russian courts before 2022. In the discussed case the appeal court left judgment of the court of first instance unchanged, noting that no evidence was submitted that the claimant was actually subject to sanctions or faced real difficulties accessing the ICC forum – speculation about paying fees or obtaining visas was insufficient. The court also noted that the Russian Ministry of Justice included ICC in the list of recognized permanent arbitral institutions in 2021, confirming its impartiality, and that the status had not been revoked.
The decision confirms that Russian arbitrazh courts respect international arbitration clauses unless there is concrete evidence of both sanctions and/or evidence that the party faced with some sort of restrictive measures related to the agreed foreign arbitration. The case will be considered by the cassation court and GRS Legal will prepare a relevant update after new facts.
Contracts with Self-Employed or Employment: Courts Continue to Look at Substance Over Form
Russian courts continue to apply a substantive approach when assessing the validity of civil law contracts with self-employed individuals. In particular, the absence of clear scope, timing and payment terms, combined with the contractor's involvement into the business process and control by the customer, may indicate that such contracts in fact disguise employment relationships.
In a recent case[2], an entrepreneur engaged individuals under civil law contracts. Tax authorities qualified these agreements as employment contracts and assessed additional personal income tax and social contributions to be paid by the entrepreneur. The regulator pointed to several factors: the individuals were integrated into the production process, performed labour functions under the entrepreneur's control, worked according to a schedule, used the entrepreneur's equipment and materials, received monthly remuneration regardless of results, and derived all or nearly all their income from this source. The contracts themselves lacked specific scope, timing and payment terms, and were standardised regardless of the type of work.
The Arbitrazh Court of the Central District has upheld the tax authorities' position, holding that the outlined facts evidenced actual employment relationships. A similar position was recently taken by the Arbitrazh Court of the West-Siberian District.
The actual case law confirms that courts will look beyond the formal classification of contracts to the substance of the relationship, and that businesses using self-employed individuals must be accurate and ensure the arrangements genuinely reflect independent contracting to avoid the risk of qualification of such relations as employment.
Why Would a Debtor Go to Court to Pay Its Creditor? - RUSAL's Creative Strategy to Terminate LCIA arbitration award
The Arbitrazh Court of the Kaliningrad Region has refused to recognise and enforce two LCIA awards of September 2024 and August 2025, which ordered RUSAL (a major Russian aluminium producer) and its Jersey-based affiliate RTI Limited to pay the German company OWH SE i.L. over €247 million plus costs[3].
The dispute arose from financial transactions entered into in 2019 between RTI (a RUSAL affiliate) and OWH SE (then a VTB (major Russian bank) subsidiary). The contracts required RTI to post collateral if the dollar rose sharply against the rouble - a condition was not approved by RUSAL's board of directors. In February 2022, following sanctions against VTB, the German regulator BaFin took control of OWH SE, removed Russian shareholders, and appointed liquidators. OWH SE then demanded collateral, terminated the contracts, and obtained LCIA awards against RUSAL. RUSAL and RTI challenged the awards, but the tribunal ruled in favour of OWH SE, awarding over €247 million plus costs.
RUSAL faced a difficult position. Under Russian sanctions rules, payments to creditors from unfriendly countries require permission from the Government Commission on Foreign Investment, which can only be obtained if a Russian court confirms enforcement does not contradict Russian law. OWH SE refused to apply to Russian courts. RUSAL argued that if it paid through the special procedure, foreign courts might not recognise that payment as proper, exposing it to paying the same debt twice. To escape this trap, RUSAL itself applied to the Arbitrazh Court of the Kaliningrad Region.
OWH SE challenged the application, arguing lack of jurisdiction and that only the award creditor could seek recognition. The court rejected both arguments, holding that any party to the arbitration may apply.
On the merits, however, the court refused enforcement on public policy grounds. It found that OWH SE was under German control through BaFin, and that enforcement would leave funds under German control indefinitely, amounting to expropriation. The court also noted procedural defects in the notice process and OWH's bad faith.
While RUSAL formally cited the risk of double payment as its reason for applying, it seems that the rationale behind RUSAL's move is that the true strategic objective was to obtain a formal court refusal, which could then be used as a shield in foreign enforcement proceedings. The ruling has been appealed; the hearing is scheduled for 30 July 2026. GRS Legal will prepare a relevant update after new facts.
Liability for Late Filing of "Zero" and "Non-Zero" Returns Revised
A Federal Law signed on 26 June 2026 has amended Part 1 of the Tax Code, introducing significant changes to liability for late filing of tax returns/insurance contribution calculations as well as procedural aspects of liability imposition[4].
Effective from 26 June, 2026 taxpayers are no longer subject to the minimum RUB 1,000 fine under Article 119 of the Tax Code for late filing of "zero" returns or calculations where no tax or contributions are due. This applies to all organisations and individual entrepreneurs. The obligation to submit zero returns remains; failure to do so may still result in bank account blocking.
From 26 July, 2026 a new simplified procedure takes effect for late filing of "non-zero" returns. If a desk audit reveals no violations other than the late submission, tax authorities will no longer draw up an audit report. The materials will be reviewed without the taxpayer's participation, and a decision on liability (or waiver thereof) must be issued within five working days. If the taxpayer submits an amended return before the decision is issued, the decision will be based on the amended filing. Taxpayers may also submit documents confirming mitigating/excluding liability circumstances together with a late return. The right to appeal the tax authority's decision under a simplified procedure remains available.
The amendments also exempt individuals from fines for late filing of 3-NDFL returns on income from the sale or donation of real estate where the tax authority already has the relevant transaction data.
Overtime Work Limit Raised to 240 Hours per Year
From 1 September 2026, the annual overtime limit may be increased from 120 to 240 hours under new Labour Code amendments[5]. The increase is possible, if provided for in a collective or sectoral agreement, and does not apply to certain categories of employees (e.g., those in harmful working conditions). For pensioners, pre-pensioners and employees in harmful conditions, overtime work exceeding 120 hours requires written consent.
The law also sets uniform pay rules: overtime within 120 hours is paid at one and a half times for the first two hours and double thereafter; from the 121st hour onwards, each hour is paid at double rate. Employees may choose additional rest time instead of higher pay. Additionally, employees working beyond 120 hours of overtime per year will be entitled to one paid day off annually for medical check-ups.
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[1] Ruling of the Ninth Arbitrazh Court of Appeal dated 27 May 2026 No. 09АП-1156/2026 in case No. А40-251326/2025
[2] Ruling of the Arbitrazh Court of the Central District dated 27 April 2026 in case No. А85-2081/2024
[3] Ruling of the Arbitrazh Court of the Kaliningrad Region dated 28 May 2026 in case No. А21-4252/2026
[4] Federal Law No. 201-FZ of 26 June 2026 “On Amendments to Part One of the Tax Code of the Russian Federation”
[5] Federal Law No. 144-FZ of 25 May 2026 “On Amendments to the Labour Code of the Russian Federation”
The Russian court refused to consider itself competent to consider the dispute initiated by a Russian petrochemical company Nizhnekamskneftekhim (NKNH) against the German bank Bayerische Landesbank and a bailiff, holding that the dispute falls within a valid arbitration clause of the International Chamber of Commerce (ICC)[1].
The claimant asked the Russian court to declare invalid an instruction letter from the bank that served as the basis for seizure by the bailiff of the bank's receivables due from the company. The loan agreements contained ICC arbitration clauses with the seat in London. The first instance court dismissed the claim on the ground that the dispute was governed by the arbitration clauses and that the bailiff was not a party to the legal relationship.
During the appeal, the claimant argued that sanctions made the clause unenforceable and that Russian courts should have exclusive jurisdiction over the case under Article 248.1 of the Russian Arbitrazh Procedural Code. This article, sometimes referred to as an anti-arbitration injunction, was introduced in 2020 but was rarely used by Russian courts before 2022. In the discussed case the appeal court left judgment of the court of first instance unchanged, noting that no evidence was submitted that the claimant was actually subject to sanctions or faced real difficulties accessing the ICC forum – speculation about paying fees or obtaining visas was insufficient. The court also noted that the Russian Ministry of Justice included ICC in the list of recognized permanent arbitral institutions in 2021, confirming its impartiality, and that the status had not been revoked.
The decision confirms that Russian arbitrazh courts respect international arbitration clauses unless there is concrete evidence of both sanctions and/or evidence that the party faced with some sort of restrictive measures related to the agreed foreign arbitration. The case will be considered by the cassation court and GRS Legal will prepare a relevant update after new facts.
Contracts with Self-Employed or Employment: Courts Continue to Look at Substance Over Form
Russian courts continue to apply a substantive approach when assessing the validity of civil law contracts with self-employed individuals. In particular, the absence of clear scope, timing and payment terms, combined with the contractor's involvement into the business process and control by the customer, may indicate that such contracts in fact disguise employment relationships.
In a recent case[2], an entrepreneur engaged individuals under civil law contracts. Tax authorities qualified these agreements as employment contracts and assessed additional personal income tax and social contributions to be paid by the entrepreneur. The regulator pointed to several factors: the individuals were integrated into the production process, performed labour functions under the entrepreneur's control, worked according to a schedule, used the entrepreneur's equipment and materials, received monthly remuneration regardless of results, and derived all or nearly all their income from this source. The contracts themselves lacked specific scope, timing and payment terms, and were standardised regardless of the type of work.
The Arbitrazh Court of the Central District has upheld the tax authorities' position, holding that the outlined facts evidenced actual employment relationships. A similar position was recently taken by the Arbitrazh Court of the West-Siberian District.
The actual case law confirms that courts will look beyond the formal classification of contracts to the substance of the relationship, and that businesses using self-employed individuals must be accurate and ensure the arrangements genuinely reflect independent contracting to avoid the risk of qualification of such relations as employment.
Why Would a Debtor Go to Court to Pay Its Creditor? - RUSAL's Creative Strategy to Terminate LCIA arbitration award
The Arbitrazh Court of the Kaliningrad Region has refused to recognise and enforce two LCIA awards of September 2024 and August 2025, which ordered RUSAL (a major Russian aluminium producer) and its Jersey-based affiliate RTI Limited to pay the German company OWH SE i.L. over €247 million plus costs[3].
The dispute arose from financial transactions entered into in 2019 between RTI (a RUSAL affiliate) and OWH SE (then a VTB (major Russian bank) subsidiary). The contracts required RTI to post collateral if the dollar rose sharply against the rouble - a condition was not approved by RUSAL's board of directors. In February 2022, following sanctions against VTB, the German regulator BaFin took control of OWH SE, removed Russian shareholders, and appointed liquidators. OWH SE then demanded collateral, terminated the contracts, and obtained LCIA awards against RUSAL. RUSAL and RTI challenged the awards, but the tribunal ruled in favour of OWH SE, awarding over €247 million plus costs.
RUSAL faced a difficult position. Under Russian sanctions rules, payments to creditors from unfriendly countries require permission from the Government Commission on Foreign Investment, which can only be obtained if a Russian court confirms enforcement does not contradict Russian law. OWH SE refused to apply to Russian courts. RUSAL argued that if it paid through the special procedure, foreign courts might not recognise that payment as proper, exposing it to paying the same debt twice. To escape this trap, RUSAL itself applied to the Arbitrazh Court of the Kaliningrad Region.
OWH SE challenged the application, arguing lack of jurisdiction and that only the award creditor could seek recognition. The court rejected both arguments, holding that any party to the arbitration may apply.
On the merits, however, the court refused enforcement on public policy grounds. It found that OWH SE was under German control through BaFin, and that enforcement would leave funds under German control indefinitely, amounting to expropriation. The court also noted procedural defects in the notice process and OWH's bad faith.
While RUSAL formally cited the risk of double payment as its reason for applying, it seems that the rationale behind RUSAL's move is that the true strategic objective was to obtain a formal court refusal, which could then be used as a shield in foreign enforcement proceedings. The ruling has been appealed; the hearing is scheduled for 30 July 2026. GRS Legal will prepare a relevant update after new facts.
Liability for Late Filing of "Zero" and "Non-Zero" Returns Revised
A Federal Law signed on 26 June 2026 has amended Part 1 of the Tax Code, introducing significant changes to liability for late filing of tax returns/insurance contribution calculations as well as procedural aspects of liability imposition[4].
Effective from 26 June, 2026 taxpayers are no longer subject to the minimum RUB 1,000 fine under Article 119 of the Tax Code for late filing of "zero" returns or calculations where no tax or contributions are due. This applies to all organisations and individual entrepreneurs. The obligation to submit zero returns remains; failure to do so may still result in bank account blocking.
From 26 July, 2026 a new simplified procedure takes effect for late filing of "non-zero" returns. If a desk audit reveals no violations other than the late submission, tax authorities will no longer draw up an audit report. The materials will be reviewed without the taxpayer's participation, and a decision on liability (or waiver thereof) must be issued within five working days. If the taxpayer submits an amended return before the decision is issued, the decision will be based on the amended filing. Taxpayers may also submit documents confirming mitigating/excluding liability circumstances together with a late return. The right to appeal the tax authority's decision under a simplified procedure remains available.
The amendments also exempt individuals from fines for late filing of 3-NDFL returns on income from the sale or donation of real estate where the tax authority already has the relevant transaction data.
Overtime Work Limit Raised to 240 Hours per Year
From 1 September 2026, the annual overtime limit may be increased from 120 to 240 hours under new Labour Code amendments[5]. The increase is possible, if provided for in a collective or sectoral agreement, and does not apply to certain categories of employees (e.g., those in harmful working conditions). For pensioners, pre-pensioners and employees in harmful conditions, overtime work exceeding 120 hours requires written consent.
The law also sets uniform pay rules: overtime within 120 hours is paid at one and a half times for the first two hours and double thereafter; from the 121st hour onwards, each hour is paid at double rate. Employees may choose additional rest time instead of higher pay. Additionally, employees working beyond 120 hours of overtime per year will be entitled to one paid day off annually for medical check-ups.
***
[1] Ruling of the Ninth Arbitrazh Court of Appeal dated 27 May 2026 No. 09АП-1156/2026 in case No. А40-251326/2025
[2] Ruling of the Arbitrazh Court of the Central District dated 27 April 2026 in case No. А85-2081/2024
[3] Ruling of the Arbitrazh Court of the Kaliningrad Region dated 28 May 2026 in case No. А21-4252/2026
[4] Federal Law No. 201-FZ of 26 June 2026 “On Amendments to Part One of the Tax Code of the Russian Federation”
[5] Federal Law No. 144-FZ of 25 May 2026 “On Amendments to the Labour Code of the Russian Federation”