Barclays v. VEB.RF

In May 2023, VEB.RF brought a claim in the Moscow Arbitrazh Court against Barclays to recover amounts owed under financial instruments, despite an arbitration clause providing for LCIA arbitration. Barclays sought an injunction restraining the Russian proceedings. On May 10, 2024, the Commercial Court of the High Court of England and Wales granted a final injunction against the continuation of the Russian proceedings and against enforcement of any Russian judgment that might be issued, rejecting VEB’s argument that the arbitration agreement had been “frustrated” by sanctions. The court held that sanctions do not release a sanctioned party from its contractual obligations and that VEB had genuine access to justice through the OFSI mechanism (the use of frozen assets to pay LCIA arbitration costs).

The first known case in which an English court rejected the argument that sanctions had “frustrated” an arbitration agreement and granted an injunction restraining proceedings in favor of LCIA arbitration involving a sanctioned state creditor.