Singapore imposed sanctions on Russia

On 5 March 2022 the Ministry of Foreign Affairs of Singapore announced the imposition of sanctions against Russia.¹

Scope of sanctions imposed

Singapore imposed the following sanctions against Russia:

1. a ban on the transfer (export, transit and transshipment) to Russia of all goods included in:

1.1. the Military Goods List;² and

1.2. the "Electronics," "Computers" and "Telecommunications and Information Security" categories of the Dual-Use Goods List of the Strategic Goods (Control) Order 2021.³

This ban applies to: (i) providing financing or financial services in relation to the export of such goods from Singapore or any other jurisdiction; and (ii) providing financial services in relation to designated Russian entities that are involved in activities listed in item (i) above. The list of such entities will be determined later.

2. financial sanctions that will prohibit all financial institutions in Singapore, including banks, finance companies, insurers, capital markets intermediaries, securities exchanges, and payment service providers from the following:

2.1. entering into transactions or establishing business relationships with the following Russian banks: (i) VTB Bank Public Joint Stock Company; (ii) VTB Bank Public Joint Stock Company; (iii) Promsvyazbank Public Joint Stock Company; (iv) Bank Rossiya. Where there are existing business relationships, financial institutions will "freeze" any assets and funds of these banks;

2.2. providing financing or financial services in relation to the export from Singapore or any other jurisdiction of goods listed in paragraphs 1.1 and 1.2 above;

2.3. entering into transactions or arrangements or providing financial services that facilitate fund-raising by the Russian government, the Central Bank of the Russian Federation, any entity owned or controlled by them or acting on their direction or behalf. This prohibition applies to buying and selling new securities, providing financial services that facilitate new fund-raising by, and making or participating in the making of any new loan to the above entities. The Singapore government and Monetary Authority of Singapore will also cease investing in newly issued securities of the above entities;

2.4. entering into transactions or providing financial services in relation to the following sectors, in the breakaway regions of Donetsk and Luhansk: transport; telecommunications; energy; and prospecting, exploration and production of oil, gas and mineral resources; and

2.5. entering into or facilitating any transactions involving cryptocurrencies, to circumvent any of the above prohibitions in this paragraph 2. This prohibition applies to transactions that relate to digital assets such as NFTs.

According to information from the Singapore Ministry of Foreign Affairs, the Monetary Authority of Singapore will issue directions to all financial institutions shortly, setting out the details of the above measures.

Impact on currency transactions between Russia and Singapore

On 1 March 2022 the President of Russia signed Decree No. 81 "On additional temporary economic measures aimed at ensuring financial stability of Russia" (Decree).⁴ The Decree imposes a number of restrictions on transactions with individuals and legal entities with a connection with foreign states engaged in hostile acts. "Connection" includes being a national of such state, being registered in or conducting primary business in, or deriving primary profit from, such states. The restrictions also apply to individuals and legal entities controlled by such foreign individuals and legal entities regardless of where they are registered or where they conduct their primary business activities.

"Hostile actions" include issuing political and economic sanctions against Russian nationals and legal entities. Singapore has been listed as a foreign state engaged in hostile actions.⁵ This means, inter alia, the following restrictions for individuals and legal entities connected with Singapore (collectively, Singaporean Parties):

1. Entering into and completing certain transactions with Singaporean Parties are subject to permit by the Government Commission controlling foreign investments in Russia, namely providing credits and loans to Singaporean Parties in Russian rubles, entering into and completing transactions that give rise to the ownership title to securities and real estate (including transactions with any foreign party if they are made with respect to securities or real estate that has been acquired by such foreign party from a Singaporean Party after 22 February 2022);

2. Transactions with the Singaporean Parties that give rise to the ownership title to the publicly traded securities may be made at the stock exchange if permitted by the Central Bank of Russia subject to the consent from the Ministry of Finance of Russia.

Validity of the arbitration clauses with the seat of arbitration in the Singapore International Arbitration Centre (SIAC)

Since 19 June 2020, the Arbitrazh Procedure Code of the Russian Federation has been amended with articles 248.1 and 248.2⁶ aimed at protecting sanctioned individuals and legal entities (Sanctioned Persons) from judicial and arbitral proceedings in foreign jurisdictions. Under these amendments, Sanctioned Persons may initiate proceedings in a Russian state court if, inter alia, an arbitration clause providing for arbitration in a foreign country has become "unenforceable" as a result of sanctions that prevent the Sanctioned Person from accessing justice.⁷

A Sanctioned Person may also apply to a Russian state court for an injunction prohibiting its counterparty from initiating or continuing proceedings against the Sanctioned Person in a foreign court or arbitral institution.⁸

In line with the position of the Supreme Court of the Russian Federation in the Uraltransmash case,⁹ for the arbitration clause to be considered "unenforceable" and an injunction against the continuation of the arbitration proceedings to be granted, it is sufficient to determine that the sanctions have been imposed by a foreign state of the location of arbitration tribunal.

Consequently, the imposition of sanctions by Singapore on Russia creates risks that Russian individuals and legal entities may initiate proceedings in the Russian state courts in respect of obligations that are subject to the SIAC arbitration clauses.

¹ https://www.mfa.gov.sg/Newsroom/Press-Statements-Transcripts-and-Photos/2022/03/20220305-sanctions.
² https://www.customs.gov.sg/businesses/strategic-goods-control/strategic-goods-control-list/list-of-military-goods.
³ https://www.customs.gov.sg/businesses/strategic-goods-control/strategic-goods-control-list/list-of-dual-use-goods.
⁴ https://www.kremlin.ru/events/president/news/67881.
⁵ Order No 430-r of the Russian Government of 5 March 2022
⁶ Federal Law No. 171-FZ "On amendments to the Arbitrazh Procedure Code of the Russian Federation for the purpose of protecting the rights of individuals and legal entities in connection with restrictive measures imposed by a foreign state, state association and/or union and/or state (interstate) institution of a foreign state and/or state association and/or union."
⁷ Part 4 of the Article 248.1 of the Arbitrazh Procedure Code of the Russian Federation.
⁸ Part 10 of the Article 248.2 of the Arbitrazh Procedure Code of the Russian Federation.
⁹Ruling No. 309-ЭС21-6955 of the Supreme Court of the Russian Federation, case No. A60-36897/2020 of 9 December 2021.