Sanctions and counter-sanctions have transformed routine cross-border litigation into a challenging, strategic minefield. What can defendants do to protect their cost exposure when they find themselves being sued by Russian claimants?

The Procedural Headwinds
Practitioners facing Russian counterparties increasingly encounter systemic obstacles. Beyond the complexity of the sanctions framework (see this helpful overview by Kirstin Wilhelm), counter-sanctions have become a part of court practice:

• Access to Russian courts curtailed: Russian arbitrazh (commercial) courts routinely deny access to parties from “unfriendly” states, often labelling their filings an “abuse of rights.”
• Service blockages: Formal service on Russian entities can easily stall, where Russian authorities are engaged, despite existing treaty obligations providing for such service.
• Injunctions on autopilot: Anti-suit and anti-anti-suit injunctions are issued as a matter of course, in disregard of the New York Convention. While tribunals outside Russia generally do not recognise such orders, their existence makes successful enforcement of foreign awards exceedingly unlikely in Russia.

Meanwhile, Russian entities continue to pursue their own claims across multiple jurisdictions.

The Cost-Recovery Problem
When sued by a foreign plaintiff, defendants are provided protection  in many jurisdictions through security for costs: where the plaintiff lacks domicile or assets locally, courts can require an upfront deposit to safeguard the defendant’s recoverable costs if the claim fails. This is a proven safeguard against frivolous litigation, and it ensures that local defendants can recover the costs of their defense if they prevail.

The 1954 Hague Convention Paradox
In order to facilitate cross-border litigation, the 1954 Hague Convention provides mutual enforcement of cost awards and bars security for costs among member states:

     -Article 17 of the 1954 Hague Convention on Civil Procedure restricts member states (including most EU states, Switzerland, Japan, Egypt – and, significantly, Russia) from requiring security for costs from plaintiffs who are nationals of another member state.
    -In exchange, Article 18 commits each member state to enforce adverse cost orders from the others.
Formally, the Convention remains in force. Practically, Russia has de facto suspended or frustrated various litigation and arbitration-related treaties with “unfriendly” states. No seasoned observer expects Russian courts to enforce a foreign cost order in such cases. Yet other Convention parties have not formally suspended or terminated the 1954 framework, so the Article 17 assurance, on its face, survives in favour of Russian plaintiffs.

The result is asymmetry: strict adherence to Article 17 would mean defendants sued by Russian plaintiffs must fund their defense without a realistic prospects of recovery, even when they prevail. That opens the door to high-value, low-merit claims designed to impose settlement pressure through spiralling defense costs.

A Principled Path for Courts
Courts in Convention jurisdictions are not powerless. A legally coherent approach is found in reading Article 17 in conjunction with Article 18:

• Article 17’s bar on security for costs was given in return for Article 18’s promise to enforce costs awards issued by other members states.
• Where a member state manifestly refuses to honour Article 18 obligations, the reciprocal basis collapses.
• In those circumstances, courts should be free to order security for costs against plaintiffs from that non-complying state, to prevent the Convention from being used as a one-way shield.

This interpretation preserves the Convention’s reciprocity and prevents abuse, while remaining narrowly tailored to situations of clear, systematic non-enforcement.

Sanctions-Based Counterarguments
Russian plaintiffs may assert that sanctions make it “impossible” to post security for costs. That submission is self-defeating: if sanctions genuinely impede payment of the security for costs now, they will likewise frustrate satisfaction of any future costs order. The argument therefore confirms the very risk security is meant to address and justifies staying the proceedings unless and until adequate security is provided.

Practical Takeaways

• Raise security early: When facing a Russian plaintiff, move promptly for security for costs and put the Article 17/18 reciprocity argument squarely before the court.
• Evidence matters: Substantiate the practical non-enforcement risk (recent practice, official measures, expert evidence).

This note provides a general overview and does not constitute legal advice. For case-specific guidance, please contact Katrin Hanschitz or other members of the KNOETZL disputes resolution and asset recovery team.