The New Cold War in Arbitration: Enforcement as a Political Weapon

Introduction

In the past the realm of international arbitration was seen as a quiet, technical process which was seen as a way for businesses and states to settle their disputes in a fair manner- away from politics. But today, the calm balance is seen to be breaking. The world is divided once again, but not by walls or weapons this time, but because of the growing mistrust and power struggles between major nations. As trade battles, sanctions and new alliances reshape global relations, even arbitration can feel the tension of the same. 

What was once a neutral bridge between countries is slowly turning into another tension in the global arena. What was once a neutral bridge between countries is slowly turning into another front in the global power game. The final step, enforcement of arbitration awards gives the decisions the real weight, is now being used as a political weapon. The governments at their discretion take a call on when and how to follow these rulings, who wins and what message it sends. The shift therefore marks the beginning of a “New Cold War” in arbitration, were law and politics cross paths in unexpected ways.

The Rise of the New Cold War

The idea of a “New Cold War” may sound dramatic, but it captures the reality of our times. The world is no longer working as one connected economic system. Instead, new lines of division are forming — not through old military alliances, but through competing political values, trade rules, and digital economies. On one side stand the Western powers, still rooted in established legal and financial systems. On the other, a growing bloc of non-Western nations is building its own trade networks, technology systems, and even rules for settling disputes.

Sanctions have become one of the main tools in this silent conflict. When countries use trade restrictions and financial cut-offs as a means of pressure, they push their rivals to find new ways to protect their interests. This has led to a wave of “decoupling” — economies slowly separating in supply chains, financial systems, and investment flows. In such an environment, even a legal matter like arbitration cannot remain neutral for long.

Political alignments now play a quiet but powerful role in cross-border dispute resolution. Where a case is heard, which institution manages it, and how its award is enforced — all these decisions are shaped by geopolitics. A company or state may think twice before choosing an arbitration seat in a country seen as hostile to its interests. Similarly, courts may hesitate to enforce decisions that go against their own national allies. What was once a system built purely on rules and mutual respect is now adjusting to the realities of strategic rivalry.

Arbitration in a fragmented world

In this fragmented world, arbitration is under pressure like never before. For decades, it was valued for its promise of neutrality a way for parties from any country to resolve their differences without fear of bias or interference. But today, as global divisions deepen and trust between nations drops, even arbitration has started to feel the strain.​

National interests and political loyalties are seeping into decisions about where disputes are settled and whose rules apply. Some countries now steer away from arbitration centers seen as too close to rival powers. Others question the fairness of established institutions, wondering if “neutrality” is just another word for influence by stronger economies. As a result, traditional arbitration hubs like London, Paris, Singapore, and Hong Kong are quietly competing for trust and relevance. London attracts parties who prefer the stability of English law. Paris offers its long history of supporting arbitration with minimal interference from courts. Singapore and Hong Kong stand out for those seeking “neutral ground” in Asia, though their appeal also shifts with changing politics and economic relationships.​

All these changes are making arbitration more complicated. Once a solution to avoid courts and unpredictability, arbitration now finds itself entangled in the very issues it was meant to escape. As new centers and systems emerge in response to global uncertainty, the challenge remains: can arbitration continue to live up to its promise of fairness, or will it be pulled apart by the world’s divisions?

Enforcement as the new battlefield

Enforcement has truly become the front line in arbitration today. With global politics spilling into legal spaces, getting an award enforced can feel just as tough, or even tougher, than winning the case itself. More countries now openly resist enforcing awards if they go against their national interests, or use enforcement as a way to send political messages. This means a business or investor might win a case in theory, but face endless obstacles trying to turn that decision into real-world results—especially if the losing party is backed by state power or protected assets.​

Complex strategies are popping up on all sides. Losing parties and states often launch appeals, claim sovereign immunity, or restructure assets to stay out of reach. In other cases, national courts — sometimes under political pressure — slow down enforcement or block it altogether, especially if sanctions or geopolitical rivalries are involved. This forces winners to coordinate across multiple countries, working with lawyers, investigators, and even funders to track down and secure assets.​

As these battles grow more complicated, enforcement is no longer just a technical issue. It is now a space where law, politics, and business collide, and where the true power of an arbitration award gets put to the test.​

Sanctions, sovereignty and strategic non-compliance

Sanctions are no longer just tools for global politics—they’re tangled deep within arbitration enforcement. When governments put up barriers through sanctions, they don’t just freeze assets or block trade; they also complicate how awards are enforced, especially across borders. For instance, if a business wins an award against a sanctioned company or a state in a hostile jurisdiction, local courts might refuse to honour the result, saying that enforcement would breach national policy or violate sanctions law.​

On top of this, sovereignty arguments are becoming a shield for non-compliance. When states or their entities lose, they often claim sovereign immunity or pass new laws to frustrate enforcement, insisting that only assets used for commercial purposes can be seized—if any at all. These manoeuvres mean some arbitration winners spend years chasing rewards they may never collect, as states strategically resist or ignore unfavourable outcomes, betting that international pressure will fade.

The Role of the Leading Hubs of Arbitration

Leading arbitration centers—London, Paris, Singapore, Hong Kong—were once seen as safe, neutral ground for settling disputes. Now, their role is under review as enforcement risks grow and politics intrude. Some parties worry that certain seats may align with powerful nations or be affected by their sanction’s regimes, which can put awards at risk if relations sour. As a result, these hubs race to update their rules, strengthen their courts, and maintain reputations for fairness.​

Arbitration institutions are adapting by making guidelines more transparent, training judges on the impact of global politics, and providing specialized help to navigate sanctions and sovereign claims. But trust is fragile: users increasingly want reassurance that their awards won’t be derailed by outside forces or enforcement bottlenecks.

Case Studies

Recent cases show just how challenging enforcement has become. For example, after the imposition of sanctions between Russia and the West, multiple awards have been blocked by national courts that cite public policy or government restrictions, leaving winners scrambling to find assets in friendlier jurisdictions. In energy sector disputes, winners have faced years of delays and hidden transfers as state or state-owned parties use complex legal structures to shield valuable assets. Likewise, some non-Western states have rewritten their domestic laws after losing large cases, leaving investors with little chance of collecting their awards.​

Another developing tactic is bankruptcy: losing parties—sometimes with state backing—may seek bankruptcy protection in their home jurisdictions to postpone or evade payment. For the investor, even years of legal effort and major costs may still result in a paper victory, not real money.

The Future: Towards a bipolar arbitration order

With enforcement so politicized, arbitration faces an uncertain future. The risk is that global dispute resolution will split into separate spheres—influenced by Western legal traditions on one side and more “sovereignty-protective” systems on the other. In this world, the effectiveness of an award can depend more on international alliances and economic blocs than on legal argument or fairness. Investors and businesses will have to plan for these risks, adapting their strategies and contracts according to shifting tides.​

Ultimately, the dream of a single, unified arbitration system for the global economy may be giving way to a more complex, divided reality. Enforcement will be dictated not just by law, but by geopolitics, networks, and national agendas.

Recommendations and Reflections

In this unpredictable climate, parties must prepare for enforcement challenges from day one. Contracts should include clear arbitration clauses, waivers of immunity, and mechanisms for securing assets or interim relief. Considerations for “seat shopping”—choosing the right arbitration center and supportive law—are now more important than ever. Parties may also need to track and identify assets from the outset, using specialized legal and investigative teams to outmanoeuvre strategic resistance.​

At the institutional level, arbitration centers and global bodies should push for greater transparency, more consistent enforcement standards, and new tools for dealing with sanctions and sovereignty claims. They should also encourage states to recommit to depoliticized enforcement and to respect their international commitments.​

Conclusion

International arbitration is at a crossroads, as enforcement shifts from a routine technical step to the main playing field of global disputes. Navigating this new landscape requires careful planning, strategic flexibility, and a deep understanding of both the law and the politics behind every transaction. Only with fresh ideas and a renewed commitment to fairness can arbitration remain a safeguard, not another casualty, in the new cold war.

Author: Saudamini Malladi, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney.

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