The EU's 20th Sanctions Package: Levelling The Chessboard Against The Lugovoy Law

The EU's 20th Sanctions Package: Levelling the Chessboard Against the Lugovoy Law

Introduction

The geopolitical and legal fallout from the Russia-Ukraine conflict has undeniably reshaped cross-border dispute resolution. What began in 2014 and sharply accelerated after 2022 has evolved into a complex economic and legal standoff.

As both the European Union and Russia introduced sweeping legal measures to counter one another, the landscape turned into a high-stakes legal chess match, often at the expense of traditional legal certainty. On one side, Russia overhauled its procedural codes to bypass foreign arbitration clauses and pull European counterparties into its domestic courts. In response, the EU systematically built a legal shield through its sanction packages. Because this regulatory framework was introduced gradually, European companies and Western courts initially had to rely on their own domestic tools to manage Russian procedural tactics that were not yet covered by EU legislation.

The 20th sanctions package<¹, however, marks a clear shift in this dynamic. With this package, the EU appears to have completed its regulatory shield, moving from reactive, ad-hoc measures to a unified, bloc-wide legal framework. This effectively removes the need for domestic judicial workarounds—a highly significant development for civil law jurisdictions like France.

This article maps out this shifting legal landscape. First, it traces the historical background of the friction, analysing the opening moves on this legal chessboard by both Russia and the EU. Finally, it examines the significance of the 20th sanctions package and its possible effects.

Opening Moves

We all know how the friction between Russia and the West emerged: it traces back to Russian Crimea crisis in 2014. At that time, the EU introduced its first wave of sanctions against Russia, focusing on targeted asset freezes and specific sectoral restrictions.² This initial wave considerably disrupted the performance of cross-border commercial contracts. The fallout, however was manageable, as these disputes were contained within the traditional boundaries of international commercial law.

However, the escalation of the conflict in February 2022 fundamentally shifted this dynamic. As a response, the EU drastically expanded the scope of its sanctions framework: it enacted sweeping prohibitions on commercial dealings with Russia and disconnected Russian banks from the SWIFT system.³

As a countermove, Russia enacted Presidential Decree 172, attempting to force European gas buyers to pay in Rubles. These measures caused the already fragile contractual relationships between European and Russian counterparties to collapse, triggering a wave of contract terminations.

Consequently, Russian entities began seeking legal recourse. To minimize the risk of unfavourable outcomes, they aimed to bypass their arbitration agreements and litigate directly before Russian state courts.

The necessary material for achieving this goal were already present in Russian legislation through the so-called “Lugovoy Law”.⁴ Introduced into the Russian Arbitrazh Procedure Code in 2020, this law established a two-step mechanism to override foreign arbitration clauses and anchor the disputes within the Russian judicial system:

• First, it granted Russian Arbitrazh courts to claim exclusive jurisdiction over disputes where they deem that sanctioned Russian parties are impeded from accessing justice in foreign forums.⁵
• Second, it allowed Russian parties to block the foreign arbitration proceedings from moving forward by seeking anti-suit injunctions before Russian courts.⁶

More importantly, the Lugovoy Law had already been promoted to a versatile, all-purpose piece on the board by the Russian Supreme Court’s landmark Uraltransmash v. PESA decision in December 2021⁷. In this ruling, the Court had established a rigid, blanket rule: the mere existence of sanctions against a Russian party was sufficient to trigger the exclusive jurisdiction of Russian courts.

The judicial logic dictated that sanctions inherently damage the reputation and legal standing of Russian entities, thereby rendering a fair trial in a Western forum impossible by default. What followed was a flood of Russian court decisions declaring exclusive jurisdiction over cross-border commercial disputes.

Going a step further, Russian courts weaponized the Lugovoy Law to also impose massive punitive fines on European businesses that defied these rulings. A prime example is the Commerzbank v. RusChemAlliance case, where the St. Petersburg Commercial Court ordered Germany's Commerzbank to withdraw a €95 million ICC arbitration against RusChemAlliance. To force compliance, the court set a penalty of precisely €95 million—perfectly mirroring the value of the original claim.⁸

Early EU Defences

Faced with this judicial offensive, the EU did not remain passive. It sought to neutralize the Lugovoy Law through a series of incremental countermeasures, rather than immediately arriving at a comprehensive structural solution. These initial steps focused primarily on isolating the economic benefits of Russia's parallel litigation tactics:

• The 14th Sanctions Package (June 2024): This package introduced a targeted transaction ban to directly counter the Lugovoy Law. Specifically, it prohibited European companies from engaging in any business with Russian entities that bypassed their arbitration agreements to file lawsuits in Russia. The primary goal was to economically isolate these Russian parties. Additionally, the package created a statutory mechanism that gave affected European businesses the direct right to claim compensation for any damages (or penalties) caused by these parallel Russian proceedings.⁹ 
• The 15th Sanctions Package (December 2024): While transaction bans created a strong economic deterrent, they had a clear blind spot. They offered no real leverage against Russian entities that had already severed ties with the EU. To address this vulnerability, the 15th sanctions package restricted the recognition and enforcement of Russian court decisions that were based on Lugovoy Law. With this ban, the EU ensured that financial penalties imposed by Russian courts could not be executed against assets located within Member States.¹⁰
• The 18th Sanctions Package (July 2025): Expanding the regulatory scope beyond traditional commercial litigation, this package addressed Investor-State Dispute Settlement. It restricted EU Member States from recognizing or enforcing arbitral awards obtained by sanctioned Russian parties against European states, effectively preventing these investors from utilizing bilateral investment treaties to claim damages within the European Union.¹¹

EU Courts Promoted to Knights

As these packages rolled out step-by-step, the EU’s legislative response took time to materialize. More importantly, even as these sanctions expanded in scope, they still lacked a proactive procedural mechanism—such as a statutory equivalent to an anti-suit injunction—capable of preventing Russian parties from initiating claims before Russian courts. Thus, European judiciaries were forced to look to their own national laws to engineer a solution. Consequently, the burden of protecting arbitration agreements fell on the shoulders of the EU domestic courts, and they were compelled to exercise highly innovative legal countermeasures.

We saw the first example of this in Germany, with the Berlin Higher Court’s approach in the Russian Railways (RZD) v. Siemens case.¹² After Siemens terminated a train maintenance contract due to EU sanctions, RZD utilized the Lugovoy Law to secure a ruling from the Moscow Courts invalidating the termination, alongside a Russian anti suit injunction forbidding Siemens from initiating arbitration at the Vienna International Arbitral Centre. In response, Siemens turned to the Higher Regional Court of Berlin. Operating within the confines of German civil procedure, the court boldly issued a declaratory judgment confirming the admissibility of the Vienna arbitration proceedings, directly contradicting the Russian court's injunction.

Meanwhile, common law jurisdictions such as the United Kingdom adopted a distinctly more coercive approach. This was first illustrated in the UniCredit Bank GmbH v. RusChemAlliance LLC case.¹³ Relying on the Lugovoy Law, RusChemAlliance initiated proceedings against UniCredit before Russian courts, in direct breach of the arbitration agreement stipulated in their contract. Consequently, UniCredit sought an anti-suit injunction to counter the Russian proceedings. Despite Paris being the arbitral seat, UniCredit was aware of the French courts’ fundamental aversion to anti-suit injunctions, and it applied for relief in London. Their argument in doing so was that the underlying relationship (and consequently the arbitration agreement) was governed by English law. The UK Supreme Court ultimately affirmed UK courts’ jurisdiction by ruling that the governing law of the underlying relationship extended to the arbitration agreement. On this basis, the Court also unanimously upheld an anti-suit injunction, which restrained RusChemAlliance from continuing the Russian proceedings and confirmed that English courts can grant such relief in support of a foreign-seated arbitration, provided the arbitration agreement is governed by English law.

The reality that UniCredit had to seek jurisdictional refuge in London to protect a Paris-seated ICC arbitration sharply exposes the critical structural vulnerability that plagued the EU prior to the 20th sanctions package: civil law jurisdictions like France fundamentally reject the concept of anti-suit injunctions. As firmly established in Stolzenberg v. CIBC Mellon Trust Co.—long before the Ukraine conflict—French courts view anti-suit injunctions as an impermissible interference with foreign judicial sovereignty and simply lack the domestic procedural mechanisms to issue them.¹⁴

Ultimately, this fractured landscape meant that relying on domestic courts was an unsustainable strategy. It worked for common law jurisdictions and adaptable systems like Germany but left many other civil law countries exposed. Consequently, European companies were forced to engage in desperate forum-shopping simply to safeguard their contracts.

The EU’s Latest Move

This era of patching together national legal workarounds officially ended on April 2026 with the enactment of the EU's 20th sanctions package.¹⁵ Through amendments to Regulation 833/2014—specifically the introduction of the new Article 11ca—the EU finally provided a bloc-wide anti-suit injunction mechanism.

Under this new framework, EU courts are now explicitly empowered to order Russian parties to refrain from initiating, or to actively discontinue, retaliatory proceedings brought in Russia in breach of an arbitration or exclusive jurisdiction clause. Additionally, the EU courts may also impose financial penalties payable directly to the affected European party if the Russian entity fails to comply with the anti-suit injunctions. This effectively neutralizes the financial threats deployed by Russian courts. The package also establishes a safety net jurisdiction, allowing EU parties to seek these penalties even if an EU court wouldn't traditionally have jurisdiction, provided there is a sufficient connection.

To conclude, the 20th Sanctions Package has levelled the chessboard, equipping the entire European Union with a standardized, proactive framework to preserve the integrity of arbitration agreements and neutralize Russia's litigation tactics—at least for now. Its practical impact will undoubtedly be felt most profoundly in civil law jurisdictions like France. Parties whose arbitration agreements are governed by French law no longer need to worry about obtaining anti-suit injunctions, nor are their courts constrained by traditional objections to restraining foreign proceedings. However, we have yet to see if, and how, the Russian judiciary will make its next move.

Footnotes

^{1 Council Regulation (EU) 2026/506 amending Regulation (EU) No 833/2014 dated 23 April 2026.}

^{2 Regulation (EU) No 833/2014 dated 31 July 2014.}

^{3 Council Regulation (EU) 2022/262 amending Regulation (EU) No 833/2014, dated 23 February 2022.}

^{4 Federal Law No. 171-FZ dated 8 June 2020, which amended the Russian Arbitrazh (Commercial) Procedure Code by introducing Articles 248.1 and 248.2. The name "Lugovoy Law" comes from its primary legislative sponsor, Andrey Lugovoy.}

^{5 Article 248.1 of the Russian Arbitrazh (Commercial) Procedure Code.}

^{6 Article 248.2 of the Russian Arbitrazh (Commercial) Procedure Code.}

^{7 Russian Supreme Court, Case No. А60-36897/2020, dated 9 December 2021.}

^{8 St. Petersburg and the Leningrad Region Arbitrazh Court, Case No. А56-90947/2024, dated 5 Dec 2024.}

^{9 Council Regulation (EU) 2024/1745 amending Regulation (EU) No 833/2014, dated 24 June 2024. See specifically Article 5ab and Article 11a.}

^{10 Council Regulation (EU) 2024/3192 amending Regulation (EU) No 833/2014, dated 16 December 22024. See specifically Article 11c.}

^{11  Council Regulation (EU) 2025/1494 amending Regulation (EU) No 833/2014, dated 18 July 2025. See specifically Article 11 2a and 2b.}

^{12 Higher Regional Court of Berlin (Kammergericht), Case No. 12 SchH 5/22 dated 1 June 2023.}

^{13 UK Supreme Court Case No. [2024] UKSC 30 dated 18 September 2024.}

^{14 French Court of Cassation (Cour de Cassation) 1st Civil Chamber, Case No. 01-03.248, 01-15.452 dated 30 June 2004.}

^{15 Council Regulation (EU) 2026/506 amending Regulation (EU) No 833/2014 dated 23 April 2026. See specifically Article 11ca.}

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