The Singapore High Court in DRL v DRK [2026] SGHC 32 upheld an Award rendered by a SIAC-administered arbitral tribunal which had terminated an arbitration on the basis that it was impossible to proceed with the arbitration due to sanctions. The situation is nuanced. We say this because – different to Singapore – Courts in England & Wales, Hong Kong, and Canada have not held that an arbitration must automatically terminate when sanctions [1] impact a party or the procedure. Access to licenses to professional service providers to assist a sanctioned party is of course relevant, but DRL v DRK presents a hardening in judicial approach. Questions around sanctions imposed by a foreign jurisdiction relative to the Seat still remain. In our view, strategic thinking blending recent jurisprudence and commercial realities is essential. One can see respondents facing claims from sanctioned claimants now more readily expediting applications for security for costs.
Lord Neuberger puts the conundrum neatly:
“While the potential for sanctions having a real effect on arbitrations is self-evident, it is important to appreciate that things are not necessarily always as black and white as they are painted.” [2]
Context
The Claimant commenced an arbitration for recovery as a debt of a nine-figure sum. The arbitration was seated in Singapore and under the SIAC Rules, 2016. In 2022, while arbitral proceedings were extant, sanctions were imposed on the Claimant by several countries. As a result, the Claimant’s assets touching the US and Singapore were frozen, US persons were prohibited from dealing with the Claimant, and it was locked out of the SWIFT banking network. Consequently, it could not pay deposits to SIAC, could not pay its legal representatives, and, despite being the Claimant, if ordered, could not have satisfied an award made against it.
The arbitration was stayed. In July 2022, the Respondent made an application for Security for Costs (“SFC Application”). The Tribunal granted the SFC Application and ordered that in the event that the Claimant failed to provide security, the Respondent may apply to have the proceedings terminated. The Claimant failed to furnish security and sought to extend the stay. The Respondent made an application to terminate either on the basis that it was impossible to continue the arbitration under Article 32(2)(c) of the UNCITRAL Model Law on International Commercial Arbitration, or alternatively as the Claimant did not provide security for costs. The Tribunal rejected the Stay Application and issued the Termination Decision setting out that it was minded to terminate the proceedings pursuant to Article 32(2)(c) of the Model Law as it was satisfied that it was impossible to continue. The Tribunal explained that whilst it was minded to terminate the proceedings, it did not do so at that stage so as to not become functus officio before ruling on other matters including Costs. Ultimately, in March 2025, the Tribunal issued the Award annexing the Termination Decision, terminating the Respondent’s counterclaim, and addressing Costs. Put simply, the Tribunal’s position was that in this case the existence of sanctions meant that it was not possible for the arbitration to function properly and continue.
Key Issue
In the High Court, the Claimant sought to have the Award set-aside on the basis that the Award breached natural justice and that it was unable to present its case in the arbitration. The limitation period governing its debt claim had expired before the Award, meaning it could not commence a fresh arbitration if, and when, sanctions were lifted. This issue made no material difference to the Tribunal’s analysis under Article 32(2)(c) or to the Court’s wider considerations. The Court rejected the Claimant’s application and found that the prejudice caused to a party was irrelevant when considering set-aside of an arbitral award. Whether it was impossible to continue the arbitration or not was a question of fact which had already been decided by the Tribunal and could not be re-opened by the Court.
Impossibility in other Jurisdictions
Barclays Bank Plc v. VEB [3] was heard in the High Court of England & Wales. VEB Bank, a sanctioned entity, commenced proceedings in Russia against Barclays. Barclays obtained an anti-suit injunction and an anti-enforcement injunction on the basis that the contract between the parties contained an arbitration agreement administered by the London Court of International Arbitration (“LCIA”). VEB Bank argued that sanctions made the arbitration agreement between the parties inoperative or incapable of performance. The practical effect of the sanctions was similar to DRL v DRK, namely, VEB Bank was locked out of the SWIFT banking network. The High Court disagreed and held that, whilst sanctions made the arbitration “difficult or onerous”, it was not made impossible. The Court remarked that VEB Bank was able to find solicitors and counsel. The availability of Office of Financial Sanctions Implementation (“OFSI”) license made it at least possible for an arbitration to continue amidst sanctions.
The approach of the English Court suggests that sanctions do not automatically translate to impossibility. Hong Kong Courts have taken a similar approach. In Linde Gmbh and Linde Plc V. Ruschemalliance [4] an EPC contractor was forced to suspend works due to sanctions which imposed restrictions on the design, export, and construction of LNG plants to Russian entities. The Russian entity sought reimbursement of an advance payment of EUR 900 million and damages and approached the Russian Courts to obtain a freezing order against the contractor’s assets in Russia. The contractor commenced arbitration seeking a declaration that the defendant’s termination notice was invalid and approached the Hong Kong Court seeking an injunction against the Russian proceedings. The Hong Kong Court rejected arguments that difficulties in paying fees and costs connected with the Hong Kong arbitration and a reduced pool of arbitrators made the arbitration agreement inoperable or otherwise unenforceable.
Another example is the Court of Appeal of Quebec’s decision in Air France v Libyan Airlines, [5] where the Court found against an argument that an arbitration agreement was unenforceable due to UN resolutions incorporated into Canadian law, and held that the effect of the UN regulations was a matter to be determined by the arbitral tribunal.
Thoughts
DRL v DRK appears to be an outlier (perhaps the overall time between the commencement of the arbitration and final award was a relevant factor). Sanctions impacting commercial entities is an arbitral risk. A sanctioned party with a sound claim may find itself without recourse to legal remedies – not because its claim lacks merit – but due to the approach likely to be taken at the Seat. Lord Leggatt’s powerful dissent in Shvidler v Secretary of State for Foreign, Commonwealth and Development Affairs [6] is also relevant. Lord Leggatt considered that the sanctions imposed on Mr Shvidler to be “unjust and disproportionate”. Commencing and staying an arbitration may be the only pragmatic solution for a sanctioned party, especially when limitation periods are tight.
[1] These include sanctions under the so-called Magnitsky Act; US Executive Orders 13873, 13942 and 13943; and the so-called 263 Sanctions.
[2] Lord Neuberger of Abbotsbury, Sanctions in International Arbitrations: Pros, Cons and Implications, Singapore Arbitration Journal (Vol 1, May 2022) p 62, at [33].
[3] Barclays Bank plc v VEB.RF [2024] EWHC 1074 (Comm).
[4] Linde Gmbh and Linde Plc V. Ruschemalliance [2023] HKCFI 2409.
[5] Air France v Libyan Airlines [2003] Cour d’appel du Quebec (31 March 2003), at [89-91].
[6] Shvidler v Secretary of State for Foreign, Commonwealth and Development Affairs [2025] UKSC 30, at para. 324.
