The EU’s evolving Russian sanctions framework: What the 20th sanctions package means for international arbitration
On 23 April 2026, the European Union adopted its 20th sanctions package against Russia, introducing further amendments to the existing framework of restrictive measures in response to Russia’s ongoing war against Ukraine. This package centres on two key legislative instruments: Regulation (EU) 2026/506, which introduces amendments to the existing framework under Regulation (EU) 833/2014 — the main regulation imposing restrictive measures in response to Russia's destabilising conduct in Ukraine — and Regulation (EU) 2026/511, which modifies Regulation (EU) 269/2014, the regime addressing actions that undermine or pose a threat to Ukraine's territorial integrity, sovereignty, and independence.
Alongside a range of measures concerning Russia’s energy revenues, military-industrial complex, and trade and financial services, the package introduces two sets of provisions of particular relevance to international arbitration and investor-State dispute settlement, namely:
- EU Member States’ authorities may release sanctioned assets to satisfy an award on costs favourable to a non-sanctioned party arising from arbitrations initiated by sanctioned entities or individuals; and
- EU companies may seek anti-suit injunctions before EU courts in response to claims of exclusive jurisdiction by Russian courts, including claims for monetary compensation that could offset the penalties imposed by Russian courts on European parties.
This latest sanctions package continues the steady expansion and refining of the EU’s legal toolkit to protect European investors and deter arbitration claims from sanctioned Russian parties. Previous arbitration-related provisions adopted in the 14th, 15th and 18th EU sanctions packages, had already introduced protections against the expropriation of European assets in Russia, as well as against anti-arbitration injunctions issued by Russian courts and investment arbitration claims raised by sanctioned individuals, respectively.
Background
The risk of arbitration claims by sanctioned Russian individuals and entities against EU Member States and EU-based companies has grown considerably in recent years. Sanctioned parties have turned to international arbitration to challenge the financial and operational consequences of sanctions imposed on Russian parties, with claims based on in investment treaties and commercial contracts. A high-profile example is the investment arbitration claim filed in 2024 by sanctioned individual Mikhail Fridman for up to USD 16 billion against Luxembourg.
In parallel, EU-based companies that have resorted to arbitration claims against Russian sanctioned entities have faced an escalating wave of proceedings before Russian courts. Russian courts have relied on Article 248 of the Russian Arbitrazh (Commercial) Procedure Code to disavow agreed arbitration clauses and assert exclusive jurisdiction over sanctions-related disputes on the basis that sanctions allegedly hinder access to justice in the contractual forum. Russian courts have repeatedly issued anti-suit injunctions ordering the EU party to halt arbitration proceedings on that basis, often imposing fines of up to the full amount in dispute claimed in the arbitration. To date, Russian courts have assumed exclusive jurisdiction or granted anti-arbitration injunctions under Article 248 more than 200 times, with European companies facing fines of up to EUR 14.3 billion.
The 20th EU sanctions package now addresses two gaps in earlier measures: the treatment of arbitration cost awards rendered against sanctioned Russian claimants, and the ability of EU companies to seek relief before EU courts in response to Russian court proceedings asserting extraterritorial jurisdiction.
The costs exception
The new sanctions package introduces Article 5c into Regulation 269/2014 by virtue of Regulation 2026/511, a targeted derogation from the general asset freeze, allowing the competent authorities of EU Member States to release frozen funds belonging to sanctioned persons or entities in order to satisfy an arbitral award on costs. The stated purpose of this measure is to discourage the initiation of arbitration proceedings by sanctioned individuals.
This costs exception applies where:
- The arbitration was initiated by the sanctioned party after the date of its sanctions designation; and
- The cost award is made in favour of a non-sanctioned respondent, i.e. a party that is neither listed, nor owned or controlled by a listed person, and is not a Russian national or entity subject to broader EU sanctions.
Eligible recoverable costs include tribunal fees and expenses, arbitral institution administrative fees, and reasonable legal and procedural costs awarded by the tribunal. The exception does not extend to principal amounts, damages, interest, or other substantive claims.
Anti-suit injunctions against Russian court proceedings
The second new arbitration-related safeguard targets the use by Russian courts of Article 248 of the Russian Arbitrazh Procedure Code. This measure complements the ban on the enforcement of Russian court decisions and penalties issued under Article 248 of the Russian Arbitrazh Procedure Code (discussed in an earlier blog post), which was introduced in the EU’s 15th sanctions package in December 2024.
Article 11ca of Regulation (EU) 833/2014 now enables EU companies to seek, before competent courts of a Member State, a court order:
- Upholding the exclusive jurisdiction or arbitration clause agreed between the parties; and
- Prohibiting the initiation, or demanding to discontinuation, of Russian court proceedings, potentially including financial penalties proportionate to the loss arising from non-compliance, payable to the affected party directly.
To ensure the effectiveness of this new remedy, the regulation amended Article 11d, which provides that if no court in the EU would otherwise have jurisdiction, the claim may be brought in any Member State with a “sufficient connection” to the dispute (so-called forum necessitatis), to include Article 11ca under its scope.
Unlike common law jurisdictions such as England and Wales or the United States where anti-suit injunctions are a well-established legal tool, civil law systems generally do not allow for orders to restrain proceedings before foreign courts. The new mechanism introduced by the 20th package therefore represents a meaningful development, although not an unprecedented one. In fact, Germany had already ventured into comparable territory. As we discussed in our earlier blog post, a landmark 2023 decision of the Berlin Higher Regional Court demonstrated that Section 1032(2) of the German Code of Civil Procedure — which allows parties to obtain a declaration that the arbitration agreement is valid and arbitration therefore the sole proper forum — can be deployed in an extra-territorial context in an attempt to bind a sanctioned Russian entity to an arbitration agreement it had sought to circumvent through Russian court proceedings. Although not tested yet in action, the 20th package may now provide an EU-wide legal basis for a functionally similar form of declaratory relief.
German courts, however, did not go beyond the declaratory stage. The introduction of a basis for a claim for compensation for losses arising from the enforcement of a Russian court penalty is therefore indeed a novelty within the EU framework, which essentially replicates the same penalty system applied by Russian courts. The EU, however, has left a key question unanswered, i.e. whether such penalties may be enforced against frozen assets of the penalised party. A targeted exception from the general asset freeze – such as the one on arbitration costs discussed above – would be necessary for that purpose.
Takeaways
By establishing a means for non-sanctioned respondents to recover costs awarded against sanctioned claimants, the EU removes an incentive for bringing speculative or pressure-driven arbitration claims. From a practical perspective, entities that find themselves as respondents in such proceedings, should develop an understanding of where the sanctioned claimant holds frozen assets within EU jurisdictions to be prepared to act promptly after receiving a favourable costs award.
On the anti-suit injunction front, EU companies that have already been subject to such Russian court proceedings — or that face the credible threat thereof — now have an additional legal mechanism to seek injunctive relief and request penalties against the sanctioned party. However, the practical effectiveness of such measure would depend on whether the relevant Russian party (or its owning or controlling entities) have any assets in the EU against which the penalty may be enforced. It remains to be seen whether the EU will subsequently issue another exception to the use of frozen fund
