Lawfare’s New Frontier: Arbitration in the Shadow of Sanctions

International commercial arbitration has long been regarded as a depoliticized, private forum for resolving cross-border business disputes. In a recent article published in the Vanderbilt Journal of Transnational Law, we argue that this presumed neutrality is now under strain. Drawing on Orde Kittrie’s framework of ‘lawfare’, the strategic use of law as a substitute for traditional coercive tools, we show how sanctions and countermeasures have turned arbitration into both a target and a host of geopolitical contestation. States deploy legal instruments to displace arbitral authority or raise the costs of participation, while private parties adapt to, and at times exploit, the resulting legal asymmetries for commercial advantage.

Sanctions regimes are among the clearest manifestations of lawfare in contemporary international relations. Since Russia’s annexation of Crimea in 2014, and dramatically so after the full-scale invasion of Ukraine in 2022, the US, the EU, the UK, and other economies have built an intricate web of primary and secondary sanctions, export controls, and financial restrictions, including the removal of major Russian banks from SWIFT. These measures disrupt supply chains, complicate contractual relationships, and channel disputes into arbitration. Kittrie’s typology helps make sense of what follows. ‘Instrumental lawfare’ uses law directly as a substitute for force; ‘compliance-leverage’ lawfare exploits disparities in legal obligations to raise the costs and risks of an adversary’s conduct. Both modalities are now visible in arbitral practice.

The starkest example of instrumental lawfare is Russia’s Article 248 of the Arbitrazh Procedure Code, introduced in 2020 (“Article 248”). It grants Russian courts exclusive jurisdiction over disputes involving sanctioned parties, notwithstanding valid arbitration agreements, and empowers them to enjoin foreign proceedings and impose fines up to the amount in dispute. The Russian Supreme Court’s decision in JSC Uraltransmash v PESA lowered the threshold further: the mere existence of a sanction suffices, without proof of impaired access to justice. In Linde v RusChemAlliance, the Russian court extended this logic to arbitrations seated in Hong Kong, a non-sanctioning jurisdiction, on the ground of its historical ties to the UK.

These moves have triggered an escalating cycle of counter-lawfare. Common law courts responded with anti-suit injunctions, most prominently the UK Supreme Court in UniCredit Bank GmbH v RusChemAlliance LLC, which compelled discontinuance of Russian proceedings brought in breach of an ICC arbitration clause. The EU responded legislatively: amendments to Regulation 833/2014 prohibit any direct or indirect transaction with parties, as listed in Annex XLIII, that have brought claims under Article 248 or equivalent Russian legislation in connection with contracts or transactions affected by EU sanctions, rendering Article 248 recourse economically self-defeating. As of the time of writing, however, no parties have been listed in Annex XLIII. Arbitration retains defensive capacity, but these remain reactive measures dependent on geopolitical alignment rather than coordinated institutional reform.

Post-award battlegrounds reveal similar pressures. Most courts have upheld the arbitrability of sanctions-related disputes, treating sanctions as merits issues and deferring public policy scrutiny to annulment or enforcement. Yet the picture is fragmenting. The pending CJEU reference in NV Reibel v JSC VO Stankoimport may test whether EU sanctions convert into a threshold bar to arbitration. On public policy, the Paris Court of Appeal in Sofregaz v NGSC assimilated UN and EU sanctions into French international public policy while refusing that status to unilateral US measures, and a German court recently refused recognition of a Moscow-seated award on EU sanctions grounds. Russia’s Thywissen decision, presuming bias from arbitrators of ‘unfriendly’ states, shows how the exception can be geopoliticized, although subsequent Russian case law suggests internal judicial contestation. An award involving sanctioned parties may thus meet vastly different fates depending on the enforcing forum's geopolitical alignment.

States are only half the story. The same sanctions pressure spills into the substance of disputes, generating what this article calls a ‘privatized’ variant of lawfare: not lawfare in Kittrie’s state-centric sense, but firms strategically navigating and leveraging sovereign legal asymmetries. Courts diverge sharply in how they treat sanctions in contract disputes. Common law courts, as in RTI v MUR Shipping and Lamesa v Cynergy in the UK or Kuvera v JPMorgan in Singapore, treat sanctions as factual background and focus on contractual language. Continental European courts assess the legitimacy of foreign sanctions, as Sofregaz and the Dutch PAM International decision illustrate. Blocking statutes sharpen the conflict: the CJEU’s Bank Melli Iran v Telekom Deutschland judgment confirmed that the EU Blocking Statute can be invoked in civil proceedings with a reversed burden of proof, while China’s Anti-Foreign Sanctions Law and its 2025 Implementation Regulations create mirror-image compliance conflicts. The result is a landscape in which parties can forum-shop among competing legal orders, invoking blocking statutes as both shield and sword.

This article’s central claim is that international commercial arbitration remains sturdier than other adjudicatory regimes in the context of sanctions and countermeasures sustained by the New York Convention, supportive national courts, and institutional adaptability, but it is not immune. Jurisdictional displacement, enforcement uncertainty, barriers to payment and representation, and divergent contractual interpretation are recursive dynamics in which state measures, private responses, and countermeasures continually reshape one another. Arbitration’s endurance will hinge on preserving procedural neutrality while accommodating a world in which law has become a weapon of competition as much as a mechanism of resolution.

This full article is available here.

Sophie Yue Zhao is a Ph.D. holder from the University of Geneva. 

Han-Wei Liu is an Associate Professor of Law at Singapore Management University and Deputy Director of its Centre for Digital Law.