The Case
In 2021, a German machinery manufacturer entered into contracts with a Russian buyer for the supply of machinery for three aluminium-can production lines, together with a service contract for commissioning. An arbitration clause referred any disputes to the MKAS, the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation in Moscow. After Russia’s invasion of Ukraine and the entry into force of the EU sanctions, the German manufacturer was no longer able – and no longer permitted – to complete the outstanding deliveries and remaining work. The Russian buyer did not accept this, declared the contracts terminated and claimed repayment of the sums already paid, as well as damages and a contractual penalty. In 2023, it obtained an arbitral award from the MKAS for a principal claim of around EUR 2.59 million, interest, a contractual penalty of EUR 566,666.66 and lost profits of around RUB 104 million, and applied to the Stuttgart court for a declaration of enforceability in Germany.
Background
Arbitral tribunals are independent adjudicative bodies recognised by nearly all major trading nations. Companies can agree that their disputes will not be heard by state courts but decided by arbitration instead. The basis for the subsequent recognition and enforcement of such awards is an agreement among more than 170 nations: the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958 (also referred to here as the “New York Convention” or “NYC”).
The Stuttgart Court’s Decision
The Stuttgart court refused the declaration of enforceability. Even the constitution of the arbitral tribunal did not withstand scrutiny. The arbitrator nominated by the Russian buyer had, just two days after his appointment in these proceedings, also been nominated in parallel proceedings against a different German company – concerning supply contracts for the very same production lines. Under the MKAS rules, he was obliged to disclose this multiple appointment; he failed to do so. The Stuttgart court held this to be a breach of the parties’ agreement on the constitution of the arbitral tribunal (Art. V(1)(d) NYC), with sufficient relevance for the outcome of the proceedings. This ground for refusal is final: it does not depend on how the sanctions situation develops further, but on the composition of the tribunal itself.
Independently of this, enforcement is currently also barred by ordre public (public policy). Article 11(1)(b) of Regulation (EU) No 833/2014 blocks the satisfaction of all claims arising from sanctioned transactions – expressly including damages, contractual penalties and the repayment of advance payments, regardless of whether the underlying contracts are legacy contracts or newly concluded ones. The production lines in question fall under CN code 8460 et seq. of Annex XXIII and are therefore covered by the supply ban under Art. 3k(1) of the same Regulation. In doing so, the Stuttgart court followed its own leading decision from May 2025 (1 Sch 3/24) as well as the Frankfurt Court of Appeal (26 Sch 12/24, June 2025): the EU’s Russia sanctions form part of ordre public. The qualifier “currently” is important here – unlike the procedural defect, this ground for refusing enforcement is tied to the sanctions regime as it currently stands and could change should the sanctions be eased or an individual exemption be granted in a given case.
What Companies Should Take Away
The case shows that any company acting as respondent in arbitration proceedings should actively scrutinise the disclosure obligations of the nominated arbitrator – an overlooked conflict of interest can permanently block enforcement, regardless of how the sanctions issue is resolved. At the same time, a company relying on EU sanctions as a defence should not assume that an individual exemption will be granted automatically – it must be applied for and evidenced. And with an eye to future contracts, the fundamental questions remain:
- Would I agree to an arbitration clause seated in a politically sensitive country today?
- Would a German arbitral award actually be enforced there if it came to that?
- What withdrawal and dispute-resolution mechanisms protect me against geopolitical shocks?
Conclusion
The decision confirms that German courts now reliably refuse to enforce foreign arbitral awards where EU sanctions stand in the way – a line of authority now established across two Courts of Appeal within a single year. Equally clearly, however, the case shows that procedural shortcomings in constituting the arbitral tribunal can provide an independent – and even more durable – ground for refusal. For exporting companies, this means reviewing arbitration clauses, choice of law and exit rights for geopolitical risk at an early stage – and, in the event of a dispute, keeping a close eye on both the conduct of the proceedings and the sanctions position.
Key points in brief
The Stuttgart Court of Appeal (case no. 21 Sch 5/25, decision of 28 April 2026) has again refused to enforce a Russian MKAS arbitral award – following its own leading decision (1 Sch 3/24, May 2025) as well as the Frankfurt Court of Appeal (26 Sch 12/24, June 2025).
The decision rests on two independent grounds: an undisclosed conflict of interest on the part of the arbitrator (a final ground for refusing enforcement) and the “no claims” rule under Art. 11 of Regulation (EU) No 833/2014, which also blocks repayments and legacy contracts (a ground that applies for the time being). Companies should actively review arbitrators’ disclosure obligations and tailor arbitration clauses, choice of law and exit rights specifically to geopolitical and sanctions-related risks.
