Siemens Mobility continues to try to challenge the ban on consideration of disputes under contracts with Russian Railways at the International Court of Arbitration in Vienna. The concern filed complaints with the Supreme Court of the Russian Federation under the contracts of 2007 and 2014. Previously, in similar cases, complaints were rejected. Lawyers believe that Siemens has a hypothetical prospect in the Supreme Court, however, taking into account previous decisions in favor of Russian Railways, it is small, and it makes little sense for the concern to sue in Vienna, since in Russia, where the disputed property is located, this decision is not recognized.
On March 10, Siemens Mobility filed a complaint with the Supreme Court of the Russian Federation against decisions of lower courts prohibiting it from initiating proceedings with Russian Railways in the International Arbitration Court at the Austrian Economic Chamber in Vienna under a 2007 agreement on the maintenance and repair of high-speed trains. Siemens refused to fulfill the contract, and in February a Russian court imposed penalties on Siemens for each day of non-performance in the amount of 16 million rubles. On March 6, Siemens filed a similar cassation appeal under another contract with Russian Railways JSC dated 2014 for the maintenance and repair of the hydraulic system for braking, sorting and controlling the marshalling yard at the Luzhskaya marshalling yard.
Siemens in May, 2022 announced leaving Russia. Since May 13, the concern has terminated all service contracts with Russian Railways, including maintenance of Sapanov (see Kommersant dated May 12, 2022). The refusal to perform provoked a whole wave of lawsuits from Russian Railways against a partner under a variety of contracts with Siemens Mobility – in particular, from 2007, from 2011 on the maintenance and adjustment of 294 electric trains, from 2014 at Luzhskaya station, from 2019 on delivery of 13 Sapsan and their maintenance worth €1.1 billion (see Kommersant dated June 5, 2019).
The claims of JSC Russian Railways are divided into two categories: on the prohibition to initiate legal proceedings in arbitration in Vienna and other foreign instances and on the invalidation of the unilateral termination of the contract and the obligation to fulfill it.
JSC Russian Railways is simultaneously enlisting interim measures that enable it to use the equipment and spare parts necessary for the execution of contracts. Disputes are in different instances, but for some claims – for example, the ban on litigation in Vienna under the contract of 2011 or the obligation to fulfill the contract at the Luzhskaya station – there is already a refusal to transfer the cassation complaint to the Supreme Court.
As a rule, cases on a ban on litigation in Vienna develop according to the following algorithm: following a notification from Siemens Mobility about unilateral termination of the contract, Russian Railways applies to the Russian court with a claim to invalidate the termination and oblige Siemens to fulfill the contract. Siemens objects to the consideration in the Russian court and notifies of its intention to litigate in Vienna, backing this up with a decision of a foreign court on the admissibility of such arbitration. The Russian court decides that under the EU sanctions against Russian Railways, a dispute involving a person located in the state that applied restrictive measures (Austria) “will be considered on the territory of a foreign state without observing the guarantees of a fair trial, including those relating to the impartiality of the court” ( wording from the 2011 treaty decision). Subsequent court instances in the Russian Federation confirm the decision to prohibit the initiation or continuation of proceedings in a foreign court.
It is rather difficult to judge the prospects for overturning decisions of lower courts by the Supreme Court, since such situations are not uncommon, says Yury Fedyukin, managing partner of Enterprise Legal Solutions. “But in a specific case, given that Russian courts take the side of Russian Railways in related disputes, as well as the presence of political factors that led to the conflict (we are talking about Siemens withdrawing from the contract as a result of the decision to leave Russia), I would said that the likelihood of overturning the decisions of lower instances is low,” he says. At the same time, the lawyer notes, in any case, Siemens, in violation of the ban, can apply to the arbitration court of Vienna authorized by the agreement, which can even satisfy the requirements, “but this will be of little use, since the disputed property is located in Russia, and Russian Railways will have injunction to initiate proceedings in Vienna”. Simply put, he concludes, even if the Austrian court takes the side of Siemens, this decision will most likely not be recognized in Russia.