DGP Secures European Arbitral Award for SIBUR in Sanctions-Related Supply Dispute

Tribunal awards damages after finding that the events of February 2022 did not, in themselves, excuse the supplier from performing its contractual obligations.

Dyakin, Gortsunyan & Partners (DGP) has successfully represented a SIBUR Holding group company in an international commercial arbitration in Europe against the European subsidiary of an international group headquartered in the United States. The tribunal upheld SIBUR’s claim and awarded damages arising from the supplier’s failure to perform a supply contract following the outbreak of hostilities in Ukraine in February 2022.

The dispute

The supplier declined to perform the contract in the changed sanctions and regulatory environment following February 2022. SIBUR was required to source replacement goods from alternative suppliers at higher cost and sought recovery of the resulting losses in arbitration.

The proceedings were administered under the rules of a European arbitral institution. The contract was governed by the substantive law of a European state and the United Nations Convention on Contracts for the International Sale of Goods (CISG), and all members of the tribunal were European nationals. The award was rendered in summer 2026. For reasons of confidentiality, the respondent, the arbitral institution and the amount of damages awarded are not disclosed.

Key findings

In awarding damages, the tribunal made a number of findings relevant to contractual performance in a sanctions context:

• Force majeure. The events of 24 February 2022 did not, in themselves, constitute force majeure or release the supplier from its contractual obligations. The supplier had to establish specific circumstances that prevented performance of the particular contract, including by alternative means.
• Sanctions status. The tribunal rejected the respondent’s contention that SIBUR was subject to EU blocking sanctions.
• Evidence of non-sanctioned status. The tribunal accepted company documents, including information on ownership and control, as evidence that the relevant restrictions did not apply. A counterparty asserting otherwise needed specific and compelling evidence rather than assumptions.
• Duty to seek authorization. The supplier’s obligations included applying to the competent local authorities for any permission required to make the delivery.

Why the award matters

The award illustrates that general references to geopolitical developments or a changing sanctions environment may not, in themselves, excuse contractual non-performance. A party relying on sanctions-related obstacles may need to identify the specific legal impediment, substantiate why performance was not possible and show what steps it took to perform lawfully, including seeking any necessary authorisations.

The decision also provides useful guidance on sanctions due diligence. The fact that a company is not named on a sanctions list does not end the analysis, as ownership and control may also need to be considered. At the same time, the tribunal’s approach in this case indicates that a counterparty should have a proper evidentiary basis before rejecting corporate information provided to establish non-sanctioned status.

Dmitry Dyakin, Partner and Head of Dispute Resolution, DGP:

“This is an important result for our client and a useful illustration of how tribunals may approach contractual non-performance in a sanctions context. The award shows that a general reference to geopolitical events or sanctions is not necessarily enough: the party refusing to perform must establish the specific legal obstacle and demonstrate the steps it took to overcome it. The fact that these conclusions were reached in proceedings administered by a European institution, under European substantive law and before a tribunal composed entirely of European nationals is also notable.”

DGP team

The DGP team was led by partners Dmitry Dyakin, Head of Dispute Resolution, and Vsevolod Taraskin, and included counsel Tatiana Polevshchikova, senior associate Ilya Simon Goldstein, associates Matvey Tarasov and Elena Murashko, and junior associate Denis Zholob.

DGP’s dispute resolution practice represents clients in complex international arbitration, including sanctions-related disputes before foreign arbitral institutions.

Dyakin, Gortsunyan & Partners (DGP) is a Russian law firm with an international presence, founded in 2018. It specialises in dispute resolution, including international arbitration, and advises on M&A transactions and complex projects.

Website: https://dgpartners.legal/ 

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