⚖️ The Moscow Circuit Arbitrazh (Commercial) Court confirms the jurisdiction of Russian commercial courts to hear an application to set aside an arbitral award against an individual guarantor of a German bankrupt company

German clothing manufacturer Ahlers AG (the Company) and its affiliated German entities had for many years supplied goods to Russian retailer Jeans Symphony LLC under import and supply agreements entered into in 2015.

In 2018, the parties recorded the Russian retailer’s outstanding debt in an Acknowledgment of Debt and Deferral Agreement. Performance of the contractual obligations was secured by guarantees provided by the beneficial owners of the German manufacturer’s business. One of the guarantors was a Russian citizen permanently residing in the United States (the applicant). The applicant also held a 10% interest in the Company’s Russian subsidiary, Ahlers Rus LLC. The guarantee issued by the applicant contained an arbitration clause in favor of the ICAC at the Chamber of Commerce and Industry of the Russian Federation.

In 2023, the Company was declared bankrupt in Germany due to adverse market conditions and the COVID-19 pandemic. The Bielefeld Local Court appointed Dr. Biner Bähr, a partner at the German office of White & Case, as insolvency administrator.

Following the failure to pay the debt under the guarantee, the insolvency administrator commenced arbitration before the ICAC at the Chamber of Commerce and Industry of the Russian Federation. In February 2026, the arbitral tribunal rendered an award in favor of the foreign creditor, ordering the applicant to pay more than EUR 500,000 in principal, interest at 7.5% per annum, as well as arbitration fees and legal costs exceeding EUR 83,000. Notably, two of the three arbitrators were nationals of “unfriendly” states.

The applicant applied to the Moscow Commercial Court to set aside the ICAC award. However, the court returned the application, finding that a dispute involving an individual who was not registered as an individual entrepreneur did not fall within the jurisdiction of Russian commercial courts.

The applicant appealed the first-instance ruling to the Moscow District Commercial Court. The insolvency administrator of the Company also supported the cassation appeal.

The Moscow Circuit Arbitrazh (Commercial) Court disagreed with the first-instance court and adopted the following legal position:

🔘Russian commercial courts have jurisdiction over disputes arising from business activities;

🔘Since the parties’ disputed relationship is commercial in nature and involves a foreign element, an application to set aside the arbitral award falls within the jurisdiction of the commercial courts. The applicant’s lack of individual entrepreneur status and permanent residence in the United States should not prevent the case from being heard by such courts.

🔘At the same time, proceedings concerning issuance of a writ of execution for enforcement of the ICAC award were pending before the Moscow Arbitrazh (Commercial) Court (Case No. A40-171524/2026), having been initiated by the insolvency administrator. The district court recommended that the first-instance court consider consolidating the two cases.

The courts did not examine the fact that the arbitration had been commenced by the insolvency administrator of a foreign company or that the dispute was connected with its insolvency proceedings.

Ultimately, the circuit court remitted the case to the first-instance court for reconsideration.

📎The judicial act is available at the link.

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