Sanctions have become an increasingly significant consideration in international arbitration. Where they arise, sanctions issues can touch every stage of the arbitral process, from the decision to file a claim through to enforcement, and they can no longer be treated as a niche specialism.

Sanctions increasingly intersect with international arbitration. From your perspective, what are the most significant ways in which sanctions affect arbitral proceedings today?

In today’s ever meandering geopolitical context, sanctions permeate every stage of the arbitral process, from commencement to enforcement. They interfere at the earliest stage, when clients consider whether to pursue or respond to a claim. This is especially true in the EU, where legal advisors are prevented from advising certain parties on non-contentious matters, which may deter support for the initial stages of contentious issues.

The most significant impact when sanctions are in issue, whether because a party is formally designated or there is suspicion of ownership or control, is the compliance burden falling upon all participants: arbitrators, counsel, institutions and service providers. Each must assess their sanctions exposure, creating layered obligations that complicate even simple disputes. There is also a chilling effect on access to justice, as parties impacted by restrictive measures may struggle to participate effectively.

When a dispute involves a sanctioned party, what challenges does this raise for arbitral tribunals and institutions in terms of jurisdiction, procedure, and the conduct of the arbitration?

Despite the fact leading sanctions regimes generally agree sanctions should not hinder access to justice, in practice designated persons face a multitude of obstacles. In the EU, a designated person’s opportunity to obtain preliminary advice is limited, raising questions of equality of bargaining power.

Despite the reassuring joint note by the SCC and other leading arbitral institutions published as early as 2015, before 2022 it was unclear in the EU whether an EU lawyer or arbitrator could accept instructions involving a designated person. Ambiguity persists where the arbitration is not seated in a Member State, with a similar kind of uncertainty existing under the US sanctions regime. The introduction of the EU access-to-justice caveat was lobbied for by arbitral institutions including the SCC, underscoring its importance to the multinational justice system.

Jurisdictionally, tribunals must consider whether the underlying contract is void due to sanctions-related illegality, affecting both the merits and the arbitration agreement’s validity. Institutions must also determine whether they can lawfully administer a case and receive payments under the applicable regime. Procedurally, sanctions can impact tribunal composition when accepting an appointment would breach an arbitrator’s domestic sanctions laws, and may restrict legal services, fund transfers or financial infrastructure. Early identification and clear procedural frameworks, including seeking licences, are therefore essential.

Issues of nexus are of key importance. Not every designation is problematic if there is no proven nexus. Where there is a nexus, available licences should be explored. For instance, the UK regulator OFSI offers several useful general licences, including a comprehensive Legal Services General Licence and an Arbitration Costs General Licence.

Sanctions can create practical obstacles, including in relation to payments, representation, and enforcement. How should arbitral tribunals approach these issues while safeguarding due process?

Sanctions restrict parties’ ability to process payments related to arbitral proceedings: registration fees, tribunal and institutional costs, counsel fees, disbursements and award amounts, with knock-on effects on representation and enforcement. In the UK, OFSI has addressed this by introducing, in 2025, the Arbitration Costs General Licence, which allows parties to spend up to £500,000 per set of arbitral proceedings, in addition to counsel fees, on assorted arbitral costs.

In the EU however, there is no centralised general licence to similar effect. Member States regulate these issues individually. The SCC advises designated parties to apply for relevant licences prior to filing a request for arbitration, which naturally causes issues for respondent designated parties. In the US, a carve-out exists for domestic arbitration; however, the status of international arbitration remains unclear.

As for representation, counsels’ willingness to accept fees from designated persons is largely dictated by their interpretation of applicable rules and their risk appetite. It is not uncommon for counsel to insist on a specific licence before acting, limiting parties’ access to legal advice and choice of counsel.

As for enforcement, both the UK and the EU impose restrictions on contractual claims where a party was reasonably prevented from performance by sanctions (Article 11(1) Regulation 833/2014 and Section 44 SAMLA).

In the US, judges consider on a case-by-case basis whether enforcement would be contrary to public policy. There are increasing signs of jurisdictions beyond the seat declining enforcement under the New York Convention, which tribunals should consider when rendering enforceable awards. Even when an award is recognised and enforced, the designated person may not receive the funds, rather, they will be credited to a frozen account, with release subject to licencing.

It is imperative for tribunals to balance procedural fairness with compliance obligations. On payments, they should help identify lawful funding mechanisms, including general and special licences, and grant extensions of time when necessary. On representation, tribunals should address inequality of arms through measures such as tribunal-appointed experts or adapted procedures. On enforcement, clearly reasoned, procedurally sound awards attentive to public policy maximise enforcement prospects. The guiding principle must be that sanctions should not deny justice. Tribunals must approach sanctions issues with an open mind: blocking sanctions tend to have drastic impact on targeted persons, while sectoral sanctions restrict wide areas of finance and trade.

Looking ahead, if sanctions remain a persistent feature of international commerce, what do you see as the key implications for parties, practitioners, and arbitral institutions?

If sanctions remain a long-term feature of international legal frameworks, parties should address sanctions risks from the outset, including careful drafting of dispute resolution clauses, ongoing monitoring of sanctions developments and, potentially, designating a secondary arbitral seat for use when a party is sanctioned.

For practitioners, sanctions law is no longer a niche specialism but an essential component of international arbitration practice. All parties must be ready to navigate compliance and licencing regimes. Arbitral institutions face the challenge of developing robust policies, establishing dedicated support for tribunals and engaging with regulators to preserve access to justice. Most importantly, practitioners and institutions should unite to provide informational support to regulators and advocate for regulations which make arbitration technically and logistically possible, upholding the rule of law.

Further information from the SCC on sanctions is available here.