Arbitration Provisions and the Ukraine War

Arbitration Provisions and the Ukraine War

With the sudden worldwide sanction regime imposed against Russia due to its war on Ukraine, coupled with the immediate cessation of Ukraine’s economy from the attack, arbitration could play a major role in contract disputes in numerous industries around the world.

Russia is currently one of the top exporters of oil, gas, aluminum, gold, coal, wheat, nickel, and fertilizers, just to name a few industries. Ukraine is a large exporter of sunflower-seed and safflower oil, corn, iron ore, and wheat. The economic implications of the Ukraine war cannot be overstated because the cessation of the supply chain has already led to huge increases in pricing for commodities, which will ultimately result in further increases to inflation and a reduction in economic activity. Indeed, Germany has had to close auto plants because it could not obtain components from Ukraine.

While the humanitarian impact unfolding on live tv in the Ukraine is incredibly tragic, the economic and geopolitical impact will start to filter into courtrooms and arbitration centers as parties are unable to fulfill contracts.

Because arbitration is a tool used by multinational companies engaged in cross-border business, cases should start to increase rapidly with the performing parties seeking to collect and the non-performing parties seeking to raise defenses including force majeure and impossibility of performance. While war typically fits within the confines of force majeure provisions and can bolster an impossibility defense, the added worldwide sanctions against Russia are an added and complicated consideration for arbitrators and the parties.

The historical sanctions, including the unprecedented decision of the United States to sanction a central bank of a country whose economy plays a key role in numerous and critical worldwide commodities, will have a reverberating impact on contracts in various industries involving some of the largest corporations in the world and a cascading effect on the downstream companies. That is because even if supplies can be shipped by Russia, which in some cases even the products are sanctioned, U.S. companies and most European companies have the added issue of being unable to pay the suppliers using dollars or euros. Thus, arbitrators will be faced with issuing orders that parties simply cannot comply with without the risk of violating criminal laws. Arbitral panels will likely look to prior award decisions involving contract disputes, including sanctioned countries such as Iran, to guide them through this process, but these cases will likely take years to resolve themselves.

Florida Legislative Update

The Florida Legislature ended its session on March 14, 2022, with a record $112 billion spending plan that includes pay raises for state workers, including prosecutors and public defenders.Florida Governor Ron DeSantis veto power is the last obstacle for a bill extending Covid-19 protections on limitations of liability for healthcare providers.

The Florida Legislature ended its session on March 14, 2022, with a record $112 billion spending plan that includes pay raises for state workers, including prosecutors and public defenders. The increase in pay for prosecutors and public defenders was a big issue in Miami as both local offices were facing hiring difficulties and losing attorneys with the rapid increase in the cost of living, particularly the rental market that has made Miami among the highest cities to live in the United States. The legislature wisely increased pay, which will hopefully assist with hiring and retaining attorneys in both offices and prevent a rapid increase in crime that has recently been seen in other cities and which endangers public safety. Undoubtedly the legislature considered that any increase in crime could impact the tourism industry, which is a major economic factor for the state, and particularly, South Florida.