Volkswagen lawyers asked the Arbitration Court of the Nizhny Novgorod Region to leave GAZ’s claim for 28 billion rubles without consideration. losses from the termination of the supply of engines under the contract assembly. The decision to leave the German automaker was made with the outbreak of hostilities in Ukraine due to US and EU sanctions. Volkswagen lawyers insist that the sanctions do not affect the plaintiff GAZ Automobile Plant LLC with a 0.1% stake in the GAZ Group, which fell under Western restrictions. Therefore, the dispute is subject to arbitration by the International Chamber of Commerce in Geneva. However, GAZ proved that the defendant contradicts himself, and the hearings will continue in Russia. During the disputes, Volkswagen sold Russian assets to the Avilon group, and GAZ will obviously have to demand compensation only from German companies.
The Arbitration Court of the Nizhny Novgorod Region considered the petition of the Volkswagen concern, which asked that GAZ’s application for the recovery of 28.4 billion rubles be left without consideration. losses from the termination of the agreement for the supply of diesel engines and spare parts to the automobile plant. VW representative Irina Likhacheva referred to the stipulation in the agreement that the parties, one of which is under sanctions, have the right to agree on resolving the dispute in arbitration by the International Chamber of Commerce in Geneva. The defendant believes that the plaintiff (the lawsuit was filed by GAZ Automobile Plant LLC) is not subject to Western sanctions as a legal entity with a 0.1% stake in the GAZ Group, which was included in the SDN list by the US Treasury in 2018.
While the US Treasury allowed the issuance of a general license for cooperation, VW worked with the GAZ Group on contract assembly of foreign cars in Nizhny Novgorod, but the ban followed with the outbreak of hostilities in Ukraine in February 2022.
In April, Volkswagen Group Rus notified its partner that it was curtailing car assembly and finally stopped deliveries and maintenance of diesel engines, the interruptions to which, according to GAZ, began as early as 2021.
Ms. Likhacheva stressed that, according to the Supreme Court of the Russian Federation, only those legal entities in respect of which restrictions were directly imposed, or companies controlled by them, are sanctioned. “Secondly, such sanctions must be imposed directly in the state to which the arbitration clause between the parties refers. In our case, the dispute is subject to resolution in an EU country, and, according to the plaintiff, only one person of the GAZ Group, Commercial Vehicles LLC, is included in the EU sanctions. This company is a subsidiary of only 1% in relation to GAZ Automobile Plant LLC, ”explained the representative of the defendant, emphasizing that the plaintiff is not under EU sanctions.
“No references to sanctions imposed by the United States are inapplicable, since it is not clear how, in such a case, sanctions imposed on another continent can affect the enforceability of the decisions of the arbitration clause between the parties. It is common practice for European countries to simply copy the US sanctions list. If the European Union has not done this here, then it has a favorable and positive attitude towards the GAZ Group,” said Irina Likhacheva.
She called GAZ’s arguments about the difficulties with paying fees and arbitration procedures, as well as the car plant’s suspicions of the bias of European arbitrators, speculation.
GAZ spokesman Denis Golubev responded by recalling that it was Western sanctions that caused VW to leave Russia.
“This is some kind of logical flaw! It is for this reason that the German Volkswagen has refused the contract in our country, and now it declares that in fact the sanctions do not apply to the car plant, and asks, on this basis, to leave the claim without consideration, ”he was indignant. The plaintiff added that the legal address of GAZ Group in the SDN list is identical to the address of the parent company GAZ PJSC as the sole founder of GAZ Automobile Plant LLC, which is automatically subject to restrictions.
“The specifics of European sanctions are such that both the legal entities themselves and organizations directly or indirectly associated with them fall under them,” summed up Mr. Golubev.
After hearing both sides, judge Alena Glavinskaya denied Volkswagen’s petition: the case will be considered on the merits in the Arbitration Court of the Nizhny Novgorod Region.
We add that VW unsuccessfully filed a similar petition as part of a parallel closed dispute on GAZ’s application for the recovery of 15.6 billion rubles. losses and lost profits from the early termination of the agreement on contract assembly of Volkswagen and Skoda models in Nizhny Novgorod. Also, the third claim of GAZ for another 15.6 billion rubles was submitted to the arbitration court, the date for its consideration has not yet been set. Since the Russian assets of Volkswagen Group Rus LLC, including the car plant in Kaluga, were sold to Avilon, the Russian subsidiary was not involved as a third party in the claim for the supply of engines.
Obviously, after the sale of the Russian assets of Volkswagen, GAZ will have to recover damages only from German companies, which the plaintiff was afraid of, noting the difficulties with working in international courts.